the problem is that when i buy an item subject to sales tax and put it on my credit card, everyone simply sees the entire transaction and no one really cares about the line items involved. if the charge is for $106, they just see it and process it as a $106 transaction. they don't know if it was all or partially tax-free items (prescriptions, e.g.) or one item or 5 items that added up to that amount, and they don't know or care how much of it is sales tax.
i see $106 on my credit card statement, that's the amount i have to pay, and that's the amount some entity in the credit card processing system had to advance to the merchant a few days after the transaction even though i pay my credit card bill a month or so later.
so what's really likely to happen is that the credit card fees would just go up by the amount of sales tax. The subtlety is that if they want to keep the fees exactly the same, they would have to now keep track of changing sales tax rates throughout the state and adjust fees accordingly. Alternatively, they could raise fees by the average rate, which would then slightly help merchants in high-tax locations at the expense of merchants in low-tax locations. I'm not sure this is the practical result they intended as a matter of policy.
moreover, this is the sort of thing that businesses like credit card processing companies use as an excuse to raise rates anyway. so my guess is that actually, fees would go up across the board and nearly everyone loses.
i think a better approach would be to find a way to not put sales tax on the swipe fees, perhaps require that swipe fee rates be reported to the state and then the state reimburses the merchant for the sales tax collected on those amounts. that doesn't require much extra work for the businesses and keeps the money going basically where it's intended.
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