California’s Honest Pricing Law (SB 478): What It Means for Your Fees

The short answer: since July 1, 2024, California’s Honest Pricing Law (SB 478) has required most businesses to include every mandatory fee in the price they advertise. A credit card surcharge generally isn’t treated as a mandatory fee as long as customers can avoid it by paying another way. A fee everyone has to pay, though — such as a “service fee” added to every bill — must be built into the listed price.

We get questions about this law from Orange County merchants every week, usually right after they’ve seen a competitor add a fee or heard about a lawsuit. Here’s how it works and what it means for the way you price.

What Does SB 478 Actually Require?

The law, codified at California Civil Code §1770(a)(29), makes it illegal to advertise or display a price that leaves out mandatory fees or charges. It targets “drip pricing,” where the price you see at the start is lower than what you end up paying. It doesn’t limit what businesses can charge; it controls how prices are shown.

According to the California Attorney General’s guidance, a few things can still be listed separately:

• Government taxes and fees, such as sales tax.
• Reasonable shipping costs for physical goods. Handling charges must be included.
• Optional fees for services the customer chooses to add.
• Fees triggered by later customer conduct, such as late-return or cleaning fees.

Disclosing a fee later in the transaction doesn’t fix the problem. The advertised price itself has to be the full amount the customer must pay.

Does It Apply to Credit Card Surcharges?

Generally, no — provided customers can avoid the surcharge. The Attorney General’s FAQ treats a card fee as optional when the customer can pay another way, such as cash or debit, without paying it. If your business accepts only credit cards, the card fee becomes mandatory and must be included in the advertised price.

Surcharging in California also has its own rules, and card-network rules apply on top of state law — including Visa’s 3% cap and a ban on surcharging debit cards. We cover those in our guide to cash discount vs. surcharge programs.

What About Restaurants?

Restaurants got a specific carve-out. Under SB 1524, which amended the law before it took effect, restaurants, bars, food concessions, and grocery stores may add a mandatory fee if it is clearly and conspicuously displayed, with an explanation, everywhere prices appear — on the menu, menu boards, and online ordering pages. A small line at the bottom of the check isn’t enough.

For a restaurant on Main Street in Huntington Beach or Harbor Boulevard in Costa Mesa, that means any kitchen-appreciation fee, health-care surcharge, or service charge has to be on the menu, not just the receipt.

What Should Orange County Businesses Check Right Now?

• Every place a price appears — your website, online ordering, menus, signage, quotes, and social posts.
• Every fee every customer pays. If no customer can avoid it, it belongs in the listed price (restaurants excepted, with clear disclosure).
• How your card fee is set up. If you surcharge, make sure customers can pay another way without the fee, and that your program follows card-network rules.
• Your POS settings. Many systems add fees automatically. Make sure what prints on the receipt matches what you advertise.

We’re not attorneys, and nothing here is legal advice. If you’re unsure whether a particular fee complies, check with a lawyer familiar with California consumer law. What we can do is review how your current processing program is set up and make sure the payments side is compliant and transparent.

Frequently Asked Questions

When did SB 478 take effect?

July 1, 2024. It applies to most goods and services sold to consumers in California, both online and in person.

Can I still charge a credit card surcharge in California?

SB 478 doesn’t ban card surcharges that customers can avoid by paying another way. Card-network rules still apply, including caps and a ban on surcharging debit cards. Speak with an attorney about your specific situation.

Does the law apply to business-to-business sales?

The law is aimed at consumer transactions. Sales to other businesses generally fall outside it, but check with counsel if you sell to both.

Do restaurants have to put service fees in menu prices?

Not necessarily. Restaurants may keep a separate mandatory fee if it’s clearly and conspicuously disclosed, with what it’s for, wherever prices are displayed.

Sources: California Attorney General — SB 478 Hidden Fees · California Attorney General — price transparency law announcement