HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/HB 221 Sales of Firearms and Ammunition
SPONSOR(S): Commerce Committee, Regulatory Reform & Economic Development Subcommittee, Snyder
and others
TIED BILLS: IDEN./SIM. BILLS: CS/SB 214
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Regulatory Reform & Economic Development 11 Y, 4 N, As CS Mortellaro Anstead
Subcommittee
2) Agriculture & Natural Resources Appropriations 9 Y, 5 N Byrd Pigott
Subcommittee
3) Commerce Committee 15 Y, 6 N, As CS Mortellaro Hamon
SUMMARY ANALYSIS
A Merchant Category Code (MCC) is a code used by credit card payment associations that categorizes where
a credit card purchase is made without showing the specific items that were purchased. Payment organizations
use the MCC codes to classify different merchants and businesses by goods or services so that they can track
and restrict transactions, report taxes, interchange promotions, gather information on purchasing behaviors, file
reports with the Internal Revenue Service (IRS), determine rewards, identify high-risk business models and
prohibited business types, and track customer spending.
Historically, MCCs have allowed retailers who sell firearm and ammunition to be categorized under general
retail or sporting goods stores. Recently, the International Organization for Standardization (ISO) updated the
MCC and created a new MCC for firearm and ammunition retailers. Some argue that the information gathered
from the use of this new code could be construed as a firearm registry maintained by private entities.
The bill:
Prohibits payment settlement entities, merchant acquiring entities, or third-party settlement
organizations from classifying merchants or assigning them with an MCC that identifies them as sellers
of firearms or ammunition; and
Authorizes the Department of Agriculture and Consumer Services (DACS) to conduct investigations of
alleged violations and bring an administrative action seeking to impose a Class III administrative fine for
violations.
The fiscal impact to state government is indeterminate.
The effective date of the bill is July 1, 2023.
This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives .
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FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Current Situation of Merchant Category Codes When Purchasing Firearms
Merchant Category Codes
The International Organization for Standardization (ISO) is an independent, non-governmental
organization that develops international standards. One of the standards that the ISO created are the
Merchant Category Codes (MCC). The MCCs are used by Mastercard, Visa, Amex, and other major
card payment organizations.1 The MCCs are a 4-digit number that is assigned to a merchant by an
acquiring bank in compliance with the card association. Once the business opens a merchant account
with the MCC, the business is classified by that market segment and it allows the business to begin
accepting credit cards as a form of payment.2
Payment organizations use the MCC codes to classify different merchants and businesses by the
goods or services they offer so that they can track and restrict transactions, report taxes, interchange
promotions, gather information on purchasing behaviors, file reports with the Internal Revenue Service
(IRS), determine rewards, identify high-risk business models and prohibited business types, and track
customer spending.3
Merchant Category Codes in Relation to Firearms
An MCC shows where the purchase is made, but it does not show the specific items that were
purchased. Each credit card network has its own master list of MCCs. There are many codes that are
being standardized based on the ISO standard, but some financial organizations, third party settlement
organizations, or processors have their own MCC lists. 4
Historically, retailers who sell firearms and ammunition have been assigned an MCC of general retail
stores or sporting goods stores.5 On September 7, 2022, the ISO approved an application by a New
York-based bank to adopt a new MCC for firearm retailers, which includes a gun code for “gun and
ammunition shops.”6 MCCs adopted by the ISO are not required to be used, but card associations like
Visa, MasterCard, and American Express, have all agreed to use the new MCC. 7 However, Visa and
MasterCard have not yet updated their lists to include the new MCC for firearm retailers.8
1 The ISO, About Us & Retail financial services – Merchant category codes, https://www.iso.org/about-
us.html#:~:text=ISO%20is%20an%20independent%2C%20non -
governmental%20international%20organization%20with,support%20innovation%20and%20provide%20solutions%20to%20g lobal%
20challenges (last visited Feb. 28, 2023).
2 Dwyer, B., CardFellow, Merchant Category Code: Reporting & Rates (2020) , Apr. 6, 2020,
https://www.cardfellow.com/blog/merchant-category-code-mcc/ (last visited Feb. 28, 2023).
3 Citi, Merchant Category Codes, Treasury and Trade Solutions, available at https://www.citibank.com/tts/solutions/commercial-
cards/assets/docs/govt/Merchant-Category-Codes.pdf (last visited Feb. 28, 2023).
4 Motola, C., Merchant Maverick, Merchant Category Codes (MCC): All You Need to Know , May 26, 2021,
https://www.merchantmaverick.com/ merchant-category-code-mcc/ (last visited Feb. 28, 2023).
5 Kerber, R., Reuters, Global Standards Body Approves New Merchant code for Gun Sellers, Sept. 9, 2022,
https://www.reuters.com/world/exclusive-global-standards-body-approves-new-merchant-code-gun-sellers-2022-09-09/ (last visited
Feb. 28, 2023).
6 See id at The ISO.
7 Mion, L., Fox Business, Visa, MasterCard, Amex, to Categorize Gun Store Sales Separately, Sept. 11, 2022,
https://www.foxbusiness.com/economy/visa-mastercard-amex-categorize-gun-store-sales-separately (last visited Mar. 1, 2023).
8 Visa MCC Manual; MasterCard, Quick Reference Booklet – Merchant Edition, Nov. 15, 2018,
https://www.mastercard.us/content/dam/mccom/en-us/documents/rules/quick-reference-booklet-merchant-edition.pdf (last visited Feb.
17, 2023) (In Visa’s and MasterCard’s MCC lists, noting firearms under codes 5099 and 5999, for durable goods (not elsewhere
classified) and miscellaneous and specialty retail shops, respectively).
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Advocates in support of the new MCC note that this helps to identify and report suspicious activity, such
as unusually large purchases of weapons or ammunition. 9 Opponents of the new MCC, have concerns
that the new MCC may be too close to a national registry for gun owners.10
On September 20, 2022, twenty-four attorneys general, including the Florida Attorney General, sent a
letter to Visa, MasterCard, and American Express, expressing concerns about the possibility to misuse
the new MCC by tracking data which could infringe upon consumers privacy. In addition, they stated it
could result in “arbitrary disparate treatment” of firearm retailers and consumers because the new MCC
would only capture firearm purchases from gun retailers but not from department stores.11
Parties Involved with Transactions
Even the smallest credit or debit card transactions involve a host of parties that facilitate the exchange
between the merchant and customer.
These parties include the cardholder, the merchant, the merchant bank, the payment processors, the
issuing banks and the card associations.12 In a typical transaction, a cardholder will purchase a good or
service from a merchant through the use of a credit or debit card. At this time the merchant will send a
payment authorization request to the merchant’s payment processor who in turn submits the
transaction to the correct card association.13 The card association will then send this authorization
request to the issuing bank where the transaction will either be approved or denied. 14 The issuing
bank’s response will then be sent back to the card association which sends the information to the
merchant bank who sends the information to the merchant.15
The parties:
The cardholder is the buyer in the transaction and has a line of credit or a checking account with
an issuing bank.
The merchant is the seller in the transaction and in choosing to accept debit card and credit
card purchases will partner with a payment processor.
A payment processor sends payment information to the customer’s card association.
A card association acts as an intermediary between the issuing bank (customer’s bank) and the
merchant bank as they relay both payment information to the issuing bank and the issuing
bank’s response to the merchant bank.
The issuing bank receives purchase information from the card association and either approves
or denies the transaction. It will inform the card association of its determination. Upon
determination from the issuing bank for a transaction the card association will inform the
merchant bank.
The merchant bank is the bank of the merchant and will inform the merchant of the issuing
bank’s determination.16
9 CBS New York Team, CBS New York, New York Leaders Call for Establishment of Merchant Category Code for Gun and
Ammunition Stores, Aug. 30, 2022, https://www.cbsnews.com/newyork/news/new-york-gun-ammunition-store-merchant-category-
code/#:~:text=August%2030%2C%202022%20%2F%207%3A 44%20PM%20%2F%20CBS,merchant%20category%20code%20for
%20gun%20and%20ammunit ion%20stores (last visited Mar. 1, 2023).
10 Marek, L. Industry Dive. Visa Raises Concerns on New Gun Code, Sept. 14, 2022, https://www.paymentsdive.com/news/visa-
concerns-new-gun-code-payments-nra/631845/ (last visited Mar. 1, 2023).
11 Skrmetti, J. and others, Letter from Attorneys General to Card Associations regarding MCCs, Tennessee State Government,
International Organization for Standardization (ISO), https://www.tn.gov/content/dam/tn/attorneygeneral/documents/pr/2022/pr22-36-
letter.pdf (last visited Mar. 1, 2023).
12 FIS Global, How Credit Card Processing Works, https://www.fisglobal.com/en/insights/merchant-solutions-worldpay/article/how-
credit-card-processing-works (last visited Mar. 7, 2023).
13 Id.
14 Id.
15 Id.
16 Id.
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A credit card transaction is made up of three processes, the authorization process, the settlement
process, and the funding process.17 The authorization process happens near instantaneously and can
either end in approval or denial.18 The authorization process reflects the issuing bank’s approval or
denial of a transaction which is then relayed through the payment network to the merchant.
Current Situation of Credit Card Laws
Relevant Federal Credit Card Laws
Anti-money Laundering Laws
Anti-money Laundering Laws, aim to detect and prevent money laundering and deter financial criminal
activity.19 One provision in these laws, authorizes the Secretary of the Treasury to require any financial
institution or those related to financial institutions, to report any suspicious transactions. 20 Banks,
federally and non-federally regulated, are required to establish anti-money laundering programs which
must meet specified requirements.21 This includes ongoing monitoring to identify and report suspicious
activity and transactions.22 The U.S. Department of Homeland Security website contains “Signs of
Suspicious Activity” which displays images and a description of categories for signs of suspicious
activities, one of which is firearm related.23
Internal Revenue Code
Payment settlement entities are required to make an annual return to the Internal Revenue Service
(IRS) which contains, the gross amount of the reportable payment transactions 24 for each participating
payee.25 The Secretary has the authority to determine the time, form, and manner in which the return
must be made,26 and is reported through Form 1099-K. The form contains a box to report the MCC
assigned to the participating payee. The MCC may be excluded from the form if the filing entity uses an
industry classification system other than or in addition to MCCs or is a third-party settlement
organization.27 Broadly speaking, the MCCs classify businesses based on what they predominately
furnish, services or goods. Payments for services are reportable whereas payments for goods are not
reportable.28
Relevant Florida Credit Card Laws
Relevant Florida laws that relate to credit cards 29 are contained in the Financial Institutions Code and
the Consumer Protection Act.30 Florida’s Credit Card Bank Act provides that a credit card account
between a domestic lender or credit card bank and a borrower must be governed by the laws of Florida
or federal law unless otherwise expressly agreed in writing by the parties but such writing may not
supersede the interest rate provisions of s. 655.954, F.S.31 Florida consumer protection laws set out a
limited number of protections relating to credit cards, such as provisions relating to issuing credit cards,
17 Id.
18 This process plays out in full when a debit or credit card is either accepted or rejected at a payment terminal.
19 31 U.S.C. s. 5311(2) and (3).
20 31 U.S.C. s. 5318(g)(1).
21 31 C.F.R. 1020.210.
22 31 C.F.R. 1020.10(a)(2)(v)(B) and (b)(2)(v)(B).
23 The United States Department of Homeland Security, Recognize Suspicious Activity, https://www.dhs.gov/see-something-say-
something/recognize-the-signs (last visited Mar. 1, 2023).
24 26 U.S.C. s. 6050W(c), defines “reportable payment transaction” as any payment card or third -party network transaction.
25 26 U.S.C. s. 6050W(a).
26 Id.
27 IRS, Instructions for Form 1099-K (01/2022), Jan. 2022, https://www.irs.gov/pub/irs -pdf/i1099k.pdf (last visited Mar. 1, 2023).
28 Id.
29 S. 658.995(2)(a), F.S.
30 S. 655.005(1)(i), F.S.
31 S. 658.995(2)(d), F.S.
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imposing a surcharge, or printing certain information on a merchant’s receipt. 32 No provisions were
identified that explicitly restrict or address the use of MCCs.
Similar Pending Legislation in Other States Related to MCCs
Pending legislation that addresses similar issues:
Kentucky HB 221: Purchases from Licensed Creates a new section to prohibit credit card
Gun Dealers (2023) companies, financial institutions, or other persons
from using an MCC or other method that categorizes
purchases from licensed gun dealers separately from
other retailers. 33
Mississippi HB 1110: Second Amendment Prohibits a financial institution or its agent from
Financial Privacy Act (2023) - PASSED requiring or “assigning” a specific firearm or
ammunition merchant code to any firearms business
located in Mississippi. 34
Texas HB 2041: Notice to Consumers Requires notice given to consumers when a financial
Regarding Firearm or Ammunition institution generates or collects prohibited firearm or
Transactions (2023-2024) ammunition purchase
information. 35
West Virginia SB 555: Prohibiting Banks and Prohibits banks and payment networks from tracking
Payment Networks from Tracking Firearm- firearm-related data and outlines penalties regarding
related Data and Outlining Penalties (2023) the state and local purchasing card contract if banks
and payment networks track firearm-related data. 36
Current Situation Firearms Records
Background
The Second Amendment states “a well-regulated Militia, being necessary to the security of a free State,
the right of the people to keep and bear Arms, shall not be infringed.” 37 As with many amendments in
the Constitution, the courts have had to evaluate how far the right extends. The Supreme Court has
determined that the individual right to keep and bear arms is not unlimited. 38 Many cases have
evaluated the right to bear arms, how far the right extends, and the records that can be kept regulating
gun owners. 39
Federal Records Requirements
In 1938, the Federal Firearms Act40 created a regulation for those selling certain firearms. Firearm
sellers were required to obtain a Federal Firearms License to maintain records with the name and
address of those who bought a firearm.41
32 S. 658.995(3), F.S.
33 KY HB 221.
34 Mike Maharrey, Mississippi House Passes Bill to Prohibit