Local governments take card payments for property taxes, utility bills, court fines, permits, licenses and recreation fees. Each of those offices may have its own processor, payment portal and fee arrangement. When one of them goes out to bid, the solicitation can look very different from a typical merchant services deal. This guide explains how these RFPs are titled, what they ask for, and how convenience fees and service fees work for government. It's written for merchant services and government payments sellers.
How these RFPs are titled
- Merchant card services or merchant services. Common when the focus is card acceptance and settlement.
- Credit card processing services. Often used by smaller offices.
- Payment processing services or electronic payment services. Usually broader: cards, ACH/eCheck and sometimes cash payments at retail locations.
- Online payment portal or payment gateway. When the main need is the payer-facing website and integration.
The buyer may be the treasurer or tax collector, the utility, the clerk of court, or a central finance or IT office buying for everyone. Sometimes merchant services are folded into a broader banking services RFP.
What the RFP typically asks for
Payment channels
Expect a list of channels to support: online portal, mobile, interactive voice response (IVR) phone payments, counter point-of-sale terminals, kiosks, text-to-pay, recurring and autopay, and sometimes cash payments at retail locations. Accepted methods usually include major card brands, debit and ACH/eCheck, and increasingly digital wallets.
Integration
Payments must post to the government's tax, utility billing, court case management or permitting system. RFPs ask for real-time or batch posting, file formats, existing integrations with the government's software vendor, and who builds and maintains the interface.
PCI DSS
Governments that take cards must meet the Payment Card Industry Data Security Standard (PCI DSS). RFPs ask vendors to show current compliance (often an Attestation of Compliance), describe how card data is handled, and explain how their solution reduces the government's own compliance burden, for example through hosted payment pages, tokenization or point-to-point encryption.
Fees: who pays
The biggest question is usually who bears the cost of processing. The government can absorb it, pass it to the payer as a convenience fee or service fee where allowed, or ask vendors to propose a "no-cost to the government" model where the payer's fee covers processing. RFPs ask for the full fee schedule, how fees are calculated and disclosed, and how they differ by channel and payment type.
Revenue sharing
Some RFPs ask whether the vendor will share a portion of fee revenue with the government. Others prohibit any arrangement in which the government profits from payer fees. Read the RFP and the applicable state rules closely before proposing either way.
Settlement, reconciliation and reporting
Expect questions about funding timing, deposit to the government's depository bank, daily reconciliation reports, chargeback handling and refunds.
Convenience fees vs. service fees for government
Government payment sellers hear these terms constantly, and they're easy to mix up. Both pass some or all processing cost to the payer, but they are governed by different rules. Card network rules, state law and each government's own policies all apply, so treat the following as an overview, not a rulebook.
Convenience fees
A convenience fee is a charge for the convenience of paying through an alternative channel, such as online instead of in person. State policies show how this works in practice. Arizona's state accounting manual, for example, describes a convenience fee as a fixed amount added to the transaction, limits it to online payments, requires the same amount across channels where it's charged, and requires it to be disclosed before the payment is completed with the option to cancel.
Service fees
Visa's Government and Higher Education Payment Program (formerly its Tax Payment Program) allows eligible government and higher education merchants to charge a service fee. According to Visa's program description:
- The fee is allowed only for eligible payments in specific merchant categories: taxes (MCC 9311), fines (9222), court costs (9211), miscellaneous government services (9399) and tuition (8220, 8244, 8249).
- The merchant registers through its acquirer, and Visa assigns an identifier to the merchant.
- The fee may be a flat or variable amount.
- The merchant must accept Visa in every channel where it accepts payments.
- The payment and the service fee are processed as two separate transactions.
- The fee must be clearly disclosed to the cardholder before payment.
Arizona's state policy likewise treats a service fee as a percentage that may apply in any channel and is submitted separately from the payment, and says an agency may charge one type of fee or the other for a given transaction type, not both.
What this means in an RFP
Many government RFPs ask vendors to explain how their fee model complies with card network rules and state law. Mastercard and other networks have their own rules. Network rules are updated regularly, and the Visa program description cited here is an older document, so confirm current requirements with your acquirer and the current network rules before proposing a fee structure.
Typical timing
- A reason to change. A contract nearing its end, payer complaints about fees, a new tax or utility billing system, a desire to add channels, or a push to consolidate vendors across offices.
- Needs assessment. The office gathers volumes, current costs and wish lists, often with its software vendor and IT.
- RFP issued or cooperative contract used. Response windows are typically [PLACEHOLDER: typical response window].
- Implementation and integration, typically [PLACEHOLDER: typical implementation period].
Contracts often run several years ([PLACEHOLDER: typical contract term]). The months before an RFP are when the office decides what it wants, including the fee model.
How to prepare
- Know the software. Integrations with common tax, utility, court and permitting systems often decide these deals.
- Have a fee model for each scenario: government-absorbed, convenience fee, service fee and no-cost.
- Lead with PCI scope reduction. It's a real cost and risk for a small finance office.
- Map the offices. In one county, the tax collector, utility and courts may be three separate opportunities.
How Public Funds Signal helps
Public Funds Signal tracks local governments in the territories our customers sell into for early signs they'll change processors, payment portals or fee models for tax, utility, court and permit payments. Each alert names the entity and office, the expected change, estimated timing and the incumbent where known, with supporting documentation.
See how Public Funds Signal works for government payments teams →
This guide is general information, not legal advice. Card network rules and state laws change; confirm current requirements with your acquirer, the card networks and counsel before relying on them. Facts checked October 2026.