Processors, not independent sales organizations, likely will bear the brunt of a law that takes effect next January requiring acquirers to report merchant credit and debit card transactions to the Internal Revenue Service, says Henry Helgeson, co-CEO of Merchant Warehouse Inc., a Boston-based ISO.
Merchant acquirers will have to report their retailers’ credit and debit card transactions to the IRS effective Jan. 1, 2011, under the Housing and Economic Recovery Act President George W. Bush signed into law in July 2008.
Reporting merchants’ transaction data “really is something that falls to the processors,” contends Helgeson. “The ISOs aren’t necessarily dodging the bullet, but the real bullet goes to the processors.”
Processors will have to take the data in their merchant files, match the information to transaction revenue and submit it to the IRS, says Helgeson. “It’s not something you can expect the average ISO to do,” he says. “It’s easier to take the file from the processor and do it that way.”
However, ISOs likely will have to educate their merchant clients about the regulation and potentially will have to work with processors to gather accurate merchant data for reporting.
“I could see a couple of changes having to be made in the industry during the account-boarding process, notes Helgeson. ISOs may need to alter their merchant applications to ensure they are collecting necessary information that will meet IRS requirements.
Additionally, “ISOs are going to have to educate merchants,” Helgeson says. ISOs will be in a “precarious situation” because they are not tax experts, yet merchants likely will call them with questions regarding the IRS requirement, he says.
The regulations have the potential to affect many organizations, says Mary Bennett, director of government and industry relations at the Washington, D.C.-based Electronic Transactions Association. “Everyone will have a different role to play, but some are more prepared than others,” says Bennett.
Indeed, most ISOs are unaware of the regulations, says Helgeson.
