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Understanding SB 478 and Its Impact on California Businesses: Retailers and Restaurants Brace for Change

Image of a calculator placed on top of bills, next to a pen and paper for financial calculations and planning.

In an era where transparency is increasingly demanded by consumers, California's recent legislative actions underscore a significant shift towards more transparent business practices. The enactment of Senate Bill 478 (SB 478) introduces stringent requirements for all businesses, including retailers and restaurants, to include all mandatory charges in their advertised prices. This legislation, effective July 1, 2024, aims to eliminate the surprise of hidden fees at the point of sale, thereby fostering a fairer shopping and dining experience for consumers.

The Implications of SB 478

SB 478, commonly referred to as the "junk fee" law, mandates that the price advertised must be the price consumers pay. This includes any additional fees that were previously tacked on during the payment process, such as credit card surcharges or service fees for large parties at restaurants. For retailers, this might include handling fees or small order surcharges that customers only see at checkout.

This law not only impacts how prices are presented but also how they are structured. For example, if a restaurant typically adds a service charge for parties of six or more, this charge now needs to be reflected in the menu prices and cannot be added separately when the bill is presented. Retailers, similarly, must include any additional fees in the price tags of their goods, ensuring that the checkout price mirrors the price seen on the shelf.

The Challenge and Opportunity

The transition to this inclusive pricing model presents both a challenge and an opportunity. On the one hand, businesses must overhaul their pricing strategies, which may involve updating systems and retraining staff. On the other hand, this shift offers a chance to enhance transparency and potentially build greater trust with customers. Businesses that adapt swiftly and communicate these changes effectively can differentiate themselves in a competitive market.

For retailers, the change means that advertised prices on their websites or in stores must include all compulsory fees. This could lead to a perceived increase in prices, which businesses need to manage carefully to avoid deterring customers. However, clearer pricing could also simplify the buying process, reduce checkout friction, and improve customer satisfaction.

Restaurants face similar adjustments. The inclusion of service charges in menu prices could simplify tipping, making it easier for customers to understand the total cost of their meal upfront. However, restaurants need to ensure that these changes are clearly communicated to avoid customer confusion or dissatisfaction regarding perceived price increases.

The Risks of Non-Compliance: A Cautionary Tale

The consequences of failing to comply with surcharging regulations can be severe, as demonstrated by a case in Wichita, Kansas. Riverside Café's parent company and its owner were required to pay a substantial sum of $60,397.28 following a consent judgment and injunction for illegally charging a 4% surcharge on credit card transactions at their locations.

This legal action followed several consumer complaints, leading to an investigation by the Sedgwick County District Attorney’s Consumer Protection Division. The surcharge was found to violate local consumer protection laws, resulting in hefty penalties and a mandate to cease the surcharging practice.

Additionally, the settlement included contributions to local charitable organizations and the coverage of court and investigative costs. This example underscores the importance of adherence to legal standards to avoid similar financial and reputational damage. Businesses must ensure that their billing practices align with applicable laws to protect themselves from potential legal action and maintain trust with their customers.

Senate Bill 1524: Potential Adjustments and Future Implications

While SB 478 has already been enacted, Senate Bill 1524 (SB 1524) is currently under consideration and could introduce further modifications to how businesses handle surcharges and fees. SB 1524 proposes to allow businesses, especially restaurants, to list additional mandatory fees separately from the base price if they are disclosed clearly and conspicuously on the menu.

This potential legislation would give businesses some flexibility in how they structure their pricing while still adhering to the transparency that SB 478 aims to promote. For example, a restaurant might list a base price for a meal and then clearly indicate a separate charge for a service fee or surcharge at the bottom of the menu. This approach would need to be highly visible to comply with the proposed requirements of SB 1524, ensuring that consumers are fully aware of any additional charges before making a purchase decision.

Navigating Compliance with Visa and MasterCard Rules

When adapting to California's SB 478 and preparing for potential changes with SB 1524, understanding Visa and MasterCard's surcharging rules is crucial for businesses, especially as these rules distinctly separate the treatment of credit cards from debit and prepaid cards. Visa and MasterCard permit merchants to add a surcharge to credit card transactions, provided it does not exceed the cost of processing these payments, typically capped at 4%. Importantly, these rules prohibit surcharging on debit and prepaid cards, ensuring these remain more cost-effective options for consumers.

Moreover, businesses can adopt a cash discount or dual pricing strategy, which remain compliant with both state law and credit card network regulations. Cash discounts offer a lower price for payments made with cash, while dual pricing displays two separate prices: one for cash and a higher price for credit card payments. Both practices require clear communication with customers, ensuring transparency about the cost differences associated with different payment methods. Implementing these practices can help businesses not only comply with the law but also maintain trust and satisfaction among their customers.


SB 478 Only

SB 478 & SB 1524

VISA/MC Compliance

Surcharge for Debit/Prepaid Cards




Surcharge for Credit Cards



Yes, If Previously Registered

Dual Pricing Strategy



Yes, Must Show Both Prices

Cash Discount Strategy



Yes, Must Show Higher Prices

Surcharge for Large Parties




Delivery Fee




Can I add a surcharge for large parties under SB 478?

No, under SB 478 you cannot add a surcharge for large parties unless it is included in the advertised price. If SB 1524 passes, you would be able to list this surcharge separately as long as it is clearly disclosed.

Are credit card surcharges allowed under California's SB 478?

Is it permissible to surcharge debit card transactions?

Can I offer a cash discount to customers who do not use credit cards?

What about dual pricing for cash and credit card transactions?

Are delivery fees allowed under SB 478?


As SB 478 reshapes the commercial landscape in California, businesses across the spectrum—from retail shops to fine dining restaurants—are urged to examine their pricing structures and customer communication strategies. Evident Business Solutions stands ready to assist businesses in navigating these changes. Our experts provide guidance on compliance, transparent fee structuring, and effective communication to help your business adapt to these new requirements smoothly.

For more detailed guidance and support, contact Evident Business Solutions today. Whether you're adjusting pricing strategies or setting up transparent disclosures, our team is here to ensure that your transition meets both legal requirements and customer expectations. Let us help you turn these regulatory changes into an opportunity for growth and enhanced customer trust.

Reach out now at or call us at (209) 600-3453. Visit our website for more information:

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