Driving Solutions with Jim Fitzpatrick, powered by CBT News

Amberly Allen on Surcharging, Taxes, and Payment Technology

• CBT News • Season 1 • Episode 18

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In this episode of Driving Solutions, Amberly Allen, founder and managing partner of Dealer Merchant Services (DMS), breaks down how evolving payment rules are reshaping dealership operations and compliance strategies. As credit card surcharging gains traction nationwide, Allen explains why dealers must understand state-specific regulations, disclosure requirements, and tax implications to protect revenue and avoid costly penalties.

She outlines why cash discounting can create risk in automotive transactions and how compliant surcharge programs, paired with modern payment technology, can help dealerships navigate growing regulatory complexity. Allen also discusses how updated processing tools and data requirements from card brands are changing dealer payment ecosystems.

Topics covered in the conversation include:

  • The expanding legality and limits of credit card surcharging
  • State-by-state sales tax treatment of surcharges
  • Risks associated with cash discounting in dealerships
  • The role of modern payment technology and BIN range tools
  • New card brand data requirements and rate optimization
  • Consumer demand for alternative digital payment methods

Allen emphasizes that compliance, technology, and training are now critical components of dealership financial operations.

Driving Solutions is the go-to podcast for dealership professionals who want to stay sharp, informed, and ahead of the curve. Hosted by Jim Fitzpatrick and powered by CBT News, each episode brings you real strategies, smart tools, and expert insights to help you run a more profitable operation.

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SPEAKER_00:

This is Driving Solutions exclusively on cptnews.com.

SPEAKER_02:

Hey everyone, Jim Fitzpatrick. Thanks so much for joining us this morning for another edition of Driving Solutions from new Visa and MasterCard regulations to shifting state sales tax rules. Dealers, now is the time to rethink payment strategies and the partners you rely on to protect your business. Joining us today to break it all down and to share what dealers need to know. Moving forward is Amberly Allen, founder and managing partner at Dealer Merchant Services. Thank you so much for joining us in the studio.

SPEAKER_01:

Jim, thanks for having me again. I appreciate it.

SPEAKER_02:

Great. So there are a lot of dealers out there that uh they're kind of like walking through a landmine right now because they don't know a lot of these different rules, what's compliant, what's not. So let's let's start with surcharging. Is this still gaining momentum out there?

SPEAKER_01:

It is. So JD Power said that they anticipate 35% of dealerships will be surcharging in the next 12 months. We just want to make sure that they're doing it the right way. And I've said this a lot with you on the show, but cash discounting is not the right model for automotive. That means that they are charging on debit cards. That's the cash discount model. So we don't want that. We want to make sure that they are doing a compliant surcharge program. And so just a couple of housekeeping items there. 3% is the max that you can charge on credit cards only. Okay. You cannot charge a surcharge on debit. Oklahoma just changed the regulations, so 2% is the max that you can charge in Oklahoma as well as Colorado, so that's still the same. New York and California have very specific rules as well. So New York and California, you want to communicate both prices up front to the customer. In California, you cannot surcharge in finance. It's still illegal in Massachusetts, Connecticut, and Maine. So it's legal in 47 states, still illegal in three. Okay. So if any dealers have any questions about that, um, based on our recent acquisition with priority, we have a legal team as well as 50 people on the compliance team. So this is very much black and white letter to the law. So if they want to work with a partner that understands that and can help protect them, we're gonna help insulate them from those from those issues. Yes, and so our compliance surcharge program, it's it's the priority, the DMS priority compliance surcharge program. It has been approved by the card brands, and so again, we will insulate them if they follow our program, we'll insulate them from many issues.

SPEAKER_02:

Okay, yeah, okay. Was surcharging now legal in states and states eager to get the sales tax revenue. How is that reshaping the way dealers think about their payment strategies?

SPEAKER_01:

Well, it's very common in most of the states that that surcharge is deemed sales taxable. Okay, so I'm not a CPA, I'm not an attorney, okay, but we have those very smart people on our staff to be able to help navigate this. But we also have a full treasury department to make sure that the dealers are doing it the right way and really navigating that from a technology standpoint to make sure that they are insulated again from any sales tax issues. But if any dealers have any questions about sales tax specifically, we've got it line item by state, so they can just reach out to me directly and I'd be happy to send them a list of all the states and what those exact sales tax statutes look like. But we we have a solution for that. Um it's sophisticated and really will help insulate the dealer from any issues. Yeah.

SPEAKER_02:

Great. For those few dealers out there that might not have heard the big news that you were acquired by priority, talk to us a little bit about that.

SPEAKER_01:

Well, it's so exciting. It's something we've been working on for quite some time. We knew that we had this great momentum with surcharging, but and and training our staff, making sure that they're following compliance, training their staff for the best customer experience. But now that surcharging's gained momentum, we really needed a more sophisticated payments partner. And so we looked to priority to really help us do that. They have 1.2 million customers across all segments. They're publicly held, so they're held to a higher standard. Sure. They're global, so it allows us to have processing in Canada as well. But more importantly, their$140 billion in processing volume is that we can leverage from a pricing perspective, from a technology perspective, all of it.

SPEAKER_02:

Wow, that's incredible.

SPEAKER_01:

You alluded to some of the Visa MasterCard changes. Those dealerships that have large wholesale parts departments or fleet accounts, there's some really important technology that just came down the pike. It's CEDP, and what that basically means is it requires a partner that's agile enough that understands they have to provide more data to get the best rates. Okay. It's just that simple. But if they don't have that, they probably just now got a huge hike in their payments. And this could lend to a lot of money they're leaving on the table. So our mission with DMS Powered by Priority is really to make sure that we are optimizing their cash flow efficiencies. And that comes in many different ways. It's not just surcharging anymore, it's making sure if they're not ready to surcharge that they have the best pricing from a credit card processing standpoint, that they are have the most efficiencies from a payables standpoint and receivables. So it's a real it's a full suite of solutions as it pertains to the to the office of the CFO.

SPEAKER_02:

Okay, okay. And and for the dealers that are out there, they're saying, why can't I just use my current providers for this? Talk to us about that.

SPEAKER_01:

It's a good question. We had a call with a very large dealer group and they asked the same question. Well, why can't we just use our current provider? Well, first, they'll probably need new technology. And what that means is they need credit card processing machines if they're going to surcharge. Okay. Those machines know the difference between credit cards and debit cards. It's called a bin range identifier. It reads those first eight digits on the card. What's important is that it will know if it's running on the credit card rails, it adds the surcharge. If it's running on the debit card rails, even if a customer doesn't put in their PIN code, it will know that it's a debit card and a surcharge won't be added. So first things first, they're going to need new machines, whether they like it or not. Right. Um, and a good partner will help them navigate that. They also want to make sure that they are communicating it the right way and and really navigating all of those pieces of it.

SPEAKER_02:

Yeah. So it could be that they think that they're all fine and they're protected and under their their current situation when in reality it couldn't be further from the truth in many cases.

SPEAKER_01:

That's right. So not all of their providers are going to offer a compliance surcharge program. Okay. So everybody can offer what's called a cash discount. I know I've touched on that a few times here, but cash discount and and compliance surcharge, although they feel very synonymous, there's just differences for our dealers. Okay. If you are a taco shop, nobody cares. Right. Right. If you are charging a thousand dollar RO, they they care. You are under a spotlight. Yeah. And so it's just really important that they do this the right way. And so there's just card brand regulations that we want them to follow. And as I mentioned before, the way that they have built Priority has built their surcharge program, it really is followed by Visa and MasterCard's rules. And again, we'll insulate them. If they follow our rules, then we'll make sure they are protected.

SPEAKER_02:

Yeah, well, actually, let's talk about that. The payment industry is going through major changes right now as well, especially with Visa and MasterCard. What should dealers know about what's coming?

SPEAKER_01:

Well, they they want to get into the modern age as it pertains to digital payments.

SPEAKER_02:

Okay.

SPEAKER_01:

So Venmo, Cash App, these are the ways that our consumers are asking for abilities to pay. There's four trillion dollars in crypto, and dealers are asking for ways in which they can navigate this. And so we are going to help them get into the modern age with their digital wallets.

SPEAKER_02:

Okay. Yeah. How does being partnered with priority payments uh with a you know with a full in-house legal team help navigate these these kind of these shifting regulations that we see?

SPEAKER_01:

Well, all the states have different rules. All they all have different sales tax rules. And so again, making sure that they're protected and doing this the right way. It's one thing if they're looking to their own legal counsel, but having the us also be able to navigate the payment side of things, as again, I mentioned with them being publicly held, they're just held to a higher standard. Right. And so choosing a partner like us will make sure that they're protected and doing it the right way. Yeah.

SPEAKER_02:

So it seems like there's so many different touch points that a dealer is very, very vulnerable, right? And and just putting it right out there, you've got all of these different, whether it be the collision center, the parts center, the the the uh cashier service, uh F and I taking deposits and such. I mean, you've got this happening throughout the day, every day, 365. If a dealer is not in tune with what's going on or compliant in these areas, they can really find themselves in some.

SPEAKER_01:

And that's just one piece of it, right? You you have these pillars of legislation and the state and the sales tax and all of that, but you also have the customer experience, making sure, I mean, that's never gonna change with our dealer merchant services mission is we're gonna train your staff. We've tain trained 25,000 dealership employees on surcharge so far. And then you also have the accounting departments with the integrations, making sure that it's making their life easier. So we are really looking to create a sophistication of the entire ecosystem of payments. And you really just want to understand all the pieces and frankly just lean on us to help you understand it. That's that's really what it boils down to.

SPEAKER_02:

For dealers that are watching who may feel overwhelmed by by all of the change, what's your advice for staying confident and proactive instead of instead of reactive on all of this?

SPEAKER_01:

That's right. So we would happily talk to them, have their legal counsel talk to our legal counsel. But I think it's always great to know your numbers. I think they all need to be aware. We have some dealers with very big fleet accounts. We are reaching out to them going, hey, we need to make sure that your technology is up to date. So there's it's not just surcharge, it's making sure you're not overpaying, making sure that the technology is up to date. Right. And really just take it one bite at a time. And so we can help them navigate each and every one of those things. That's fantastic. Yeah, absolutely. It would be a privilege to do so.

SPEAKER_02:

Yeah, fantastic. Thank you so much again for for stopping in. I know that our dealers get so much out of your visits with us. So and congratulations on the big news. Thank you.

SPEAKER_01:

Thank you so much.

SPEAKER_02:

Awesome, thank you.

SPEAKER_00:

Thanks for watching Driving Solutions exclusively on cptnews.com.