@WasatchSales, you do not get taxed on your taxes, so by adding a second tax, you will only get that tax rate based on the subtotal which is the correct way to apply taxes. Square does charge their fee on the total that goes thru the credit card charge because it is all a lump sum and even if it was separate it still costs the same amount on fees to process tax and it does subtotals. You could adjust your rate to include the sales tax rate also to something like 2.86%, I didn't do the math but that should be more than enough to cover the 20¢ difference on your example).
think of it when you go to a store and spend $800 on a tv you don't get the 10% state tax $80, then get the local homerule tax of 3% on the $880 you get it bill based on the purchase subtotal.
Personally, if I was going to charge a surcharge, which I wouldn't, I would not use a second tax as that can cause confusion down the line for audits and for the customer to see 2 taxes on their bill. Also be sure that it is legal in your state to pass the processing fees to your customer as it is illegal in many states.
depending on the state you are in you can not collect any fee at all for a credit card surcharge, but there isn't a rule/law about how much you can charge for a fee if it is allowed. if you don't want business you could put up a 10% credit card surcharge fee but obviously, that isn't good for business.
personally, and from a business perspective, I don't think a business should be charging the customer a fee to pay you but some people insist that the customer should. also the pinching of pennies to get back the fee on the fee seems crazy too. the difference between 2.83 and 2.75% is .08, so if 8¢ per $100 is going to break your business they have bigger issues.
If you are using a sales tax to collect a user fee there isn't a way to separate it from actual sales tax. you would just have to do it in a spreadsheet after.
