Tennessee residents can pay substantially different fees for the same basic act: using a card to pay a government bill online. The government often says it does not keep the extra money. So who does — and what exactly is the public buying?
By Brandon L. Burley
Systems Explained
The tax bill is $5,000.
Pay it by credit card online in Knox County and the published processing fee is 2.5%.
Hamilton County lists 2.39%.
Nashville’s Metropolitan Trustee lists 2.55%, with a $2 minimum.
Shelby County lists 2.6%.
On the same hypothetical $5,000 bill, those published rates would produce an additional charge ranging from $119.50 to $130.
The tax did not change.
The payment did.
And that difference opens a surprisingly large window into the private business operating between citizens and government.
Knox County says its processing fees are collected through its software provider. Hamilton County identifies LexisNexis as assessing its online-payment fees. Shelby County says its convenience fees are not retained by the county trustee. Nashville says the same thing: its property-tax processing fees are assessed by the electronic processing company, and no part goes to Metro government.
So the obvious explanation — government is simply adding another fee to make money — is often wrong.
The more interesting question is what happens after the extra charge leaves your account.
Who gets paid for helping you pay the government?
The fee changes depending on where you live — and how you pay
The differences become more interesting when debit cards and electronic checks enter the picture.
Knox County lists a $1 processing fee for an electronic check but charges 2.5% for a credit card.
Hamilton County lists $1.50 for an online check, $5 for a debit card and 2.39% for a credit card.
Shelby County charges $1.50 for an electronic check and 2.6% for credit or debit cards.
Nashville property-tax payments carry a $1 electronic-check fee and a 2.55% credit- or debit-card processing fee.
Same basic public function.
Different price structures.
That does not mean one government is necessarily getting a better or worse deal. The processors, contracts, card types, software systems and services can differ.
But those differences tell us something important.
There is no single inevitable price called “the online payment fee.”
Somebody made choices.
A government selected a system.
A vendor proposed a price.
A contract established who would pay.
The resident encounters the result at checkout.
Electronic payments really do cost money
There is a legitimate reason an extra charge can exist.
Electronic payments are not free to process.
Card transactions move through a financial network involving issuers, card networks, acquirers, processors and, in some government systems, specialized payment-platform vendors.
The government can absorb those costs into its operating budget.
It can indirectly spread those costs among taxpayers or ratepayers.
Or it can place some or all of the cost directly on the person choosing that payment method.
Tennessee law expressly recognizes that model in parts of state government. State law authorizes additional fees connected with online payments through Tennessee’s state portal to cover the cost of accepting those payments. Other Tennessee agencies also use electronic-payment convenience fees; for example, the Department of Labor and Workforce Development tells people paying TOSHA penalties by credit card that a convenience fee will be added.
There is a defensible policy argument behind that structure.
Why should someone mailing a check subsidize the higher cost created by somebody else choosing a credit card?
But that is only one way to frame the transaction.
There is another.
Why should the citizen bear the entire cost of a payment system that may also make government faster and cheaper to operate?
That is where the fee becomes a public-policy question rather than merely a payment-processing question.
The government gets something, too
Imagine thousands of property-tax payments arriving by mail.
Envelopes have to be received.
Checks have to be handled.
Payments have to be posted.
Deposits have to be reconciled.
Errors have to be corrected.
Receipts and records have to be maintained.
Cash creates its own security and accounting problems.
Electronic systems can move portions of that work into software.
Visa markets electronic government-payment systems on exactly those grounds, saying card acceptance can help governments improve on-time collections, automate recurring payments, reduce missed payments and increase operational efficiency.
Visa is selling a product, so its claims should be understood as the vendor side of the argument.
But the underlying point is important.
Online payment is not convenient only for the citizen.
It can be convenient for government, too.
The resident may avoid a drive downtown.
Government may avoid handling a check.
The resident may pay at 11:47 p.m.
Government may collect money before a deadline without keeping an office open.
The resident receives convenience.
Government can receive efficiency.
Yet depending on the contract, only one side may be explicitly charged for creating it.
“Convenience fee” is not actually a catch-all term
For consumers, the wording can look interchangeable.
Convenience fee.
Processing fee.
Service fee.
Credit-card fee.
But payment networks can attach different rules to different types of charges.
Visa, for example, says a traditional convenience fee in the United States generally must be a flat amount, clearly disclosed and associated with an alternative payment channel different from the merchant’s normal method of payment.
Visa separately permits certain government and education merchants in the United States to assess fixed or variable service fees on qualifying card transactions.
A credit-card surcharge is another category with another set of rules.
That distinction helps explain why a resident may encounter a percentage-based “processing” or “service” charge on a government website even though Visa’s ordinary convenience-fee rules describe a flat fee.
The words on the payment screen are not merely branding.
They can describe different payment arrangements governed by different rules.
For the person paying the bill, however, the question is much less technical.
Why does $100 owed become $102.55 paid?
A percentage can turn convenience into real money
Small fees are easy to ignore.
Percentages are easier.
A 2.5% charge does not sound dramatic.
On a $50 payment, it is $1.25.
On $500, it is $12.50.
On $5,000, it is $125.
The software did not necessarily perform 100 times as much work because the bill increased from $50 to $5,000.
But some payment costs, particularly those associated with card transactions, are themselves tied to transaction value.
That is why the contract matters.
A percentage fee is not automatically evidence of excessive profit.
A flat fee is not automatically fair.
Either structure can distribute costs differently depending on the size of the payment and the customer using it.
A $3 charge on a $3,000 tax payment is barely noticeable as a percentage.
A $3 charge on a $25 court payment is something else.
The number may be small.
Its impact is not necessarily evenly distributed.
“Just use the free option” is not the whole answer
Most government agencies provide another method.
Knox County taxpayers, for example, can pay in person, online, by phone or by mail. Nashville and other jurisdictions similarly offer alternatives to card payments.
That matters.
An optional card-processing charge is different from a mandatory fee imposed on every citizen.
But calling the alternatives “free” can obscure their actual costs.
A mailed check requires a checking account, an envelope and postage.
An in-person payment may require gasoline, parking, time away from work or child care.
For someone who lives close to the courthouse and has flexible work hours, avoiding the fee may be simple.
For an elderly resident, someone without reliable transportation, a person working during government office hours or someone living far from the payment office, the calculation can be different.
Legally optional does not always mean practically equal.
That distinction deserves a place in the policy discussion.
The government may keep none of the fee
This is one place where the public record already answers an important question.
Nashville’s Trustee says its property-tax card fees are assessed by the electronic processing company and that no part of the fee goes to Metropolitan Government.
Shelby County likewise says its credit-card and electronic-check fees are not retained by the Trustee.
Knox County describes its fees as being collected through its software provider.
Hamilton County identifies LexisNexis as assessing its online-payment fees.
That prevents an easy but inaccurate conclusion.
The extra charge is not necessarily another tax disguised as a convenience fee.
In several of Tennessee’s largest counties, government says the processing charge goes elsewhere.
But “government does not keep it” is the beginning of the money trail.
Not the end.
The contract is where the story changes
A payment page tells the public what it costs to use the system.
A contract can explain why.
The important questions live there.
What did the processor bid?
What services are included?
Who pays interchange and network costs?
Who pays for fraud and chargebacks?
Does the vendor provide the payment portal?
Does it integrate with the government’s accounting system?
Who handles customer service?
Who pays for cybersecurity and compliance?
Does the government pay an annual software or maintenance fee in addition to what residents pay?
Does the vendor receive exclusive access to the government’s payment stream?
How long does the contract last?
Can the fee increase automatically?
Did another bidder offer residents a lower fee?
And perhaps the most basic question:
How many transactions generate these charges every year?
Without the contract and transaction volume, a 2.5% fee is just a percentage on a screen.
With them, it becomes a business model that can be measured.
Multiply the small fee
Suppose a payment system processes 100,000 transactions with an average user-paid fee of $3.
That is $300,000.
At 500,000 transactions, it is $1.5 million.
Those are illustrations, not estimates for any particular Tennessee jurisdiction.
But that is the scale journalists should be examining.
The meaningful question is not:
How much extra did one taxpayer pay?
It is:
How much did everybody pay?
Then comes the second question:
Where did it go?
Government payments are unusually valuable transactions
There is another feature separating this business from ordinary retail.
You can decide not to buy a television from a particular store.
You cannot generally decide that you would prefer to pay your property taxes to a competing county.
You cannot take court costs assessed in one court and shop them around.
A water customer may have one public utility.
A permit may come from one government.
A vehicle registration has to go through the authorized system.
Government payment processors therefore can receive something retailers cannot guarantee:
A stream of transactions created by obligations people are legally or practically required to pay.
That does not mean every resident must use the online processor. Other payment options may exist.
But once a jurisdiction channels electronic payments through a particular vendor, that vendor can gain access to predictable transaction volume.
That makes procurement important.
A payment-processing contract may look like a technology decision.
It is also a decision about who gets to stand between the government and thousands — sometimes hundreds of thousands — of people paying it.
The fee can buy government something without becoming government revenue
This is the distinction most likely to get lost.
Suppose a county never receives one penny of the 2.5% processing charge.
That does not mean the county receives no economic value from the arrangement.
If the vendor provides the portal, processes the transactions, automates reconciliation, maintains the system and reduces work the county would otherwise perform, the government has received something valuable.
The vendor is being paid by the resident to provide infrastructure used by both parties.
That can be a perfectly reasonable arrangement.
But it should be understood for what it is.
The government has made a policy decision about who finances part of its payment infrastructure.
Instead of paying all of the cost from public revenue, the cost follows the person using the electronic lane.
The technology did not eliminate the expense.
It decided where the expense would land.
Transparency does not have to be complicated
Nashville and Shelby County already provide part of the disclosure residents need by expressly saying the processing fees are not retained by government. Knox identifies the collection as occurring through its software provider, while Hamilton identifies LexisNexis by name.
The next level of transparency would be equally straightforward.
A payment page could tell residents their bill amount, the electronic-payment charge, who receives that charge and what lower-cost payment options are available.
Better still, governments could make the underlying processing contract easy to find.
Residents should not need procurement expertise to discover who is being paid when they pay the government.
This is not automatically a junk fee
Calling every government processing charge a junk fee would make for a simpler headline.
It would also make for weaker journalism.
Payment networks cost money.
Software costs money.
Cybersecurity costs money.
Processing costs money.
Governments have a legitimate argument that people choosing a more expensive payment method should bear the incremental cost rather than forcing every taxpayer or ratepayer to subsidize it.
There is an equally legitimate question on the other side.
If electronic payments also reduce government’s administrative burden, accelerate collections and shift work from public employees to private systems, how should those savings factor into the price residents are charged?
And if one Tennessee county charges one amount while another charges something different for essentially the same method of payment, what accounts for the difference?
Those questions cannot be answered from the checkout screen.
They require contracts.
Transaction counts.
Procurement files.
And math.
Follow the extra money
Start again with the $5,000 tax bill.
The government says you owe $5,000.
You choose to pay by card.
Now you owe something more.
In Knox County, the published credit-card rate would add $125.
In Hamilton County, 2.39% would add $119.50.
Nashville’s 2.55% would add $127.50.
Shelby County’s 2.6% would add $130.
The government says it is owed the same $5,000 either way.
The extra money exists because of the payment lane.
Somebody built that lane.
Somebody maintains it.
Somebody negotiated its price.
And somebody gets paid when you use it.
That is where the investigation should go next: county by county, city by city, utility by utility and court by court, comparing contracts, transaction counts, bidder proposals, processing costs and the total amount Tennessee residents pay simply to move money they already owe.
The original bill tells you what government wants from you.
The extra charge tells you who is standing between you and the cashier.
I am a retired detective and criminal justice / government educator based in Tennessee. I am a commentary write for Tennessee Lookout and a weekly columnist with Knox TN Today. My work examines public policy, public safety systems and civic responsibility. My reporting and commentary have also appeared in Governing, The Arizona Capitol Times, South Florida Sun Sentinel, Police1, among other state and regional outlets.
