This article was written collaboratively by Sierra Blachford, Chris Zdorovtsov (former SDSU Extension Community Vitality Field Specialist), Sandra Vanneman (SD EBT Program Administrator) and Shanna Peterson (SD EBT Program Specialist).
The Benefits of Electronic Purchases
Many farmers markets or direct marketing farmers accept only checks and cash for purchases. While this system is sufficient, accepting all forms of electronic purchases can open up new opportunities for the market. First, electronic purchases will provide sales data to the market. This data can be used to track growth and understand buying patterns and trends throughout the year. Furthermore, many American’s are comfortable with shopping by using a debit or credit card, rather than cash or check.
The ability to conduct electronic sales can allow the market to increase gross sales. Customers are no longer limited to purchase within their cash budget.
Markets and direct marketing farmers can reach a wider customer base by becoming a FNS SNAP Retailer and accepting SNAP purchases. The Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, was developed by the United States Department of Agriculture (USDA) and Food Nutrition Service (FNS) to help alleviate hunger in the U.S. The USDA website is located at www.fns.usda.gov.
In South Dakota, ongoing SNAP benefits are issued on the 10th of each month. The benefits can be redeemed at any USDA or FNS authorized retailer through the use of a plastic debit card, entitled “South Dakota EBT”.
Information on the card’s magnetic strip along with a 4-digit personal identification number, ensure the proper account is debited when a household uses the card to purchase eligible food items from authorized retailers. SNAP purchases cannot be taxed regardless of State or local food tax rules. Additionally, refunds on returned items cannot be paid in cash.
The benefits to accepting electronic purchases at the Farmers Market are:
- Potential to increase market sales and revenue
- Increased number of potential customers
MarketLink is a program of the National Association of Farmers Market Nutrition Programs (NAFMNP) that assists farmers and markets with accepting the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) and electronic payments. Founded in 2013 in partnership with the USDA, MarketLink has helped more than 3,000 farmers and markets accept electronic payments - including more than $1m in SNAP sales. The marketlink.org website guides you through the steps to determine eligibility, apply to become a SNAP authorized retailer and receive and set-up equipment.
FNS SNAP Retailer Eligibility
A farmers market is eligible to become a FNS SNAP retailer if the market sells eligible food products and meets at least one of two criteria as follows:
Criterion Section One: Offer on a continuous basis at least three different varieties of food in each of the following four staple food groups, with perishable foods in at least two categories, on a daily basis:
- Fruits and Vegetables (includes plants and seeds for growing fruits or vegetables;
- Breads and grains;
- Dairy; and
- Meat, poultry and fish.
If the market does not meet the criterion in section one, they could meet the requirements in section two and still be eligible to become a FNS SNAP Retailer.
Criterion Section Two: Have at least 50 percent of total gross farmers market retail sales in eligible staple food items (e.g., bread, flour, fruits, vegetables, beef, chicken, fish, etc.). Most farmers markets meet this requirement.
For more information on FNS SNAP retailer eligibility requirements, please visit the USDA Store Eligibility Requirements website.
There are some products that are not eligible for purchase with SNAP funds. Non-eligible SNAP items include:
- Hot foods;
- Foods to be eaten at the market;
- Alcohol, cigarettes or tobacco;
- Items purchased for re-sale;
- Inedible gourds and pumpkins that are used solely for ornamental purposes; and
- Gift baskets that contain both food and non-food items if the value of the non-food items exceed 50% of the purchase price. Baskets containing any amount of alcohol, cigarettes, cat, dog or other pet food and/or pet toys.
Initially, creating an incentive program for SNAP users may be beneficial for drawing in new customers. FNS will need to be made aware of programs created at the market level. It can be difficult, at first, to draw SNAP customers to the market. This can happen for many reasons, including social stigma or lack of transportation. The key to implementing a successful SNAP program is breaking through these barriers whenever possible.
For example, create a system where SNAP purchases and traditional credit or debit purchases are accepted in the same format. This can make the SNAP customer feel less conspicuous.
Apply to be a SNAP Retailer
There are step-by-step instructions for Farmers Markets on how to apply to become authorized available on the MarketLink website. To accept SNAP funds a market must become an FNS SNAP retailer. To do so a farmers market applies for a license on behalf of participating vendors.
All traditional retailers, including farmers markets, are legally required to file a Social Security number at the time of application. The Social Security number is not needed only if the market is owned by a government agency.
While the application may request the names of the board of directors, it is not necessary for all directors to submit their Social Security numbers. FNS will accept the name and Social Security number of one member who is named the “responsible party.”
The leader of the sponsoring organization, often the chair of the market’s board of directors or the market’s manager is usually named as the “responsible party.”
All Social Security numbers are kept strictly confidential and are only collected to help prevent fraud. An Employee Identification Number (EIN) cannot be used in place of a social security number. In some cases, markets may report their EIN number on the application, but this does not remove the need for a social security number from the “responsible party.”
Applications to become an FNS SNAP retailer may be found at the USDA Learn About SNAP Benefits at Farmers Markets website. A paper application can also be requested from FNS by calling (877)-823-4369.
Applications can take up to 45 days for processing. Applications can be processed faster when all required documents are filled out completely. The market will need to determine which system will be used to conduct transactions at the market will be used and provide this information with the application.
Establish a Bank Account
The market will need to establish a bank account to accept all electronic purchases. If the market becomes a SNAP Retailer, this account should also be available for the EBT contractor to deposit the daily settlement redemption of the SNAP transactions.
The SNAP funds are automatically deposited into the market’s bank account within two business days. After being deposited into the market’s account the funds must be dispersed to the appropriate vendors. The credit and debit funds will be deposited into the markets accounts at varying times depending on what device or Third Party Processor is selected.
Coordinate with Electronic Sales Manager and Vendors
The market needs to elect a person(s) to conduct the electronic transactions. This should be the number one priority of at least one person; vendors who are busy with customers are not likely to be the best choice. This person could be the market manager, a volunteer or a staff member. This role shall be referred to as the electronic sales manager. The market manager and vendors should also be familiar with the electronic sales system so they can step in to operate the system if a situation arises.
Electronic Sales Manager
The electronic sales manager should know everything about the system in order to oversee the machine’s operation and accounting system. To accept the funds from the customer, swipe the card, enter the total and ask the customer to enter their PIN number if needed. All EBT/SNAP customers will have a PIN number. Then, the transaction is completed when the customer is given their receipt. In addition, they should aim to be familiar with the following items:
- Be aware of what items are allowed to be purchased and which are not allowed with SNAP
- Utilize a clearly defined system for reimbursing vendors and accounting or bookkeeping
- Understand how market will track sales and measure progress
The most important step for all vendors is that they are willing to participate in the credit, debit and SNAP acceptance. Vendors should be familiar with the following items:
- Be aware of what items are allowed to be purchased and which are not allowed with SNAP
- Understand that SNAP purchases cannot be taxed
- Keep scrip or receipts together in a safe place to turn into the market manager in order to get their reimbursement
- Keep an accurate financial record of their own sales so discrepancies are less likely to occur
- Promote sales with electronic purchases by posting signs indicating their participation
- Practice good customer service
- Have a basic understanding of the electronic sales system
Manual EBT vouchers
Option One: State Issued EBT Vouchers
Once the market is authorized, FNS automatically notifies the States’ EBT contractor. The States’ EBT contractor is an entity that is selected through a competitive process to preform EBT-related services for the State SNAP Agency. After the application is accepted, the EBT contractor will contact the market to determine their needs. For this option, the market would need to order manual EBT voucher forms.
When using manual EBT vouchers the customer does not swipe their card. The EBT voucher is filled out and totaled. Taxes are not charged on EBT purchases.
Then, the electronic sales manager calls the S.D. EBT Retailer Assistance phone number. While on the phone, they will tell the customer service representative the cardholder’s number and total purchase amount. Then, the customer service representative will give the electronic sales manager a voucher authorization number.
This authorization number should be written on the EBT voucher form. A hold is placed on the cardholder’s account for the transaction amount from purchases at the market. The customer signs the manual EBT voucher for the transaction amount and is provided a copy. The transaction is complete and the customer is able to take home their purchase.
After the market selling day, the electronic sales manager can redeem the manual EBT vouchers using the online SNAP EBT Retailer website located at www.ebtedge.com.
After the purchases have been redeemed online, the money will be deposited into the market’s bank account within two banking days. This website can also be used to request an additional supply of manual EBT vouchers.
Option Two: Third Party Issued EBT Vouchers
If a market utilizes a third party processor to conduct electronic sales, the processor will issue their own EBT vouchers for manual transactions in case of the system being down.
Electronic Point-of-Sale Devices
If a market would like to accept SNAP, debit and credit purchases they must obtain an electronic Point-of-Sale (POS) device. A POS device is the equipment used to process an electronic transaction. There are several POS equipment options available to farmers markets in South Dakota. Each option is explained below.
Option One: EBT-Only Machine
This point-of-sale (POS) device is a non-wireless electronic device that only processes SNAP/EBT cards. South Dakota provides one free EBT-only terminal per authorized retailer/market. However, there are certain USDA standards a market must meet to be able to receive this terminal free. To find out if your market is eligible for this terminal, please contact the South Dakota EBT Administrator.
This terminal requires access to electricity and a phone line. If the market desires to utilize this equipment option, the EBT contractor will require that an EBT-Only Retailer Agreement be signed and returned by a responsible party. This terminal is only compatible with SNAP transactions; it does not accept credit or debit transactions.
If the farmers market will use an EBT-only terminal, the State’s EBT contractor provides a retailer agreement to be signed and returned by the responsible party. Once the EBT contractor receives the signed retailer agreement, the contractor will mail the EBT-only terminal to the farmers market within two weeks with instructions on how to install it. If the market needs additional assistance, the market can call the toll-free retailer customer service number provided by the EBT contractor. On-site assistance is also available upon request.
Once the equipment is operational, the EBT contractor processes EBT transactions free of charge and distributes funds directly into the farmers market’s bank account.
Any changes in banking information should be reported to the EBT contractor two weeks in advance of the change. This notification is very important to continue the uninterrupted transfer of funds (1).
Option Two: Contracted POS System
To accept electronic sales a market may select a Third Party Processor (TPP) to purchase or lease a POS terminal. A TPP is any company that is a transaction-processing provider. They route EBT, commercial credit and debit transactions. These companies charge a transaction fee or a small percentage of the total sale.
They also manage and maintain commercial POS terminals. POS terminals can be leased or purchased from a TPP. Some POS devices are wireless and run off battery packs. The prices for a wireless terminal range from $800 - $1200.
Others require a landline and an electrical plug in. Markets should decide which TPP and POS system meet their needs best.
It can take up to 30 days to lease or purchase and receive a wireless POS terminal. However, markets can begin the process of obtaining a commercial POS terminal before the FNS application is approved.
Depending on which POS is selected; the TPP should coordinate with the market to train the electronic sales manager to use the new machine.
Option Three: Cell Phone-Based Card Reader
Another option is to use a cell phone-based card reading device. These devices cannot accept SNAP transactions because they do not allow for PIN numbers to be entered. If a market elects to use a cell phone-based device, it will need to use manual vouchers to process SNAP sales.
These systems can be a good option because the equipment is low-cost and require no electrical hook-up. Options are available with no long-term contracts and set up fees. Examples include the “Square” card-reader or the “PayPal Here” card-reader. These companies of charge transition fee or charge a small percentage of the total sale. The range is from 2% - 4% of the total purchase price. Markets should conduct research in the marketplace to determine which cell phone-based card reader may be the best fit for their market.
Most phone based credit and debit devices are used in the following manner. Set up an online account with the card-reader and order device. Attach the card-reader account to the market’s bank account. Verify the bank account’s connection to the card reader. Download an “App.” Plug the device into a cell phone. Set up app and begin processing transitions.
It is suggested that the electronic sales manager conduct trial transactions before the actual selling day. Customers can receive receipts via email or text message. The funds from these purchases will often collect into an account with the device provider. Then, the electronic sales manager transfers the money to the bank account.
Option Four: Wireless POS Terminal, accepts all electronic purchases
Through USDA grant funding, the South Dakota Department of Social Services has pre-purchased several wireless devices that will be offered on a first come, first serve basis while supplies last to farmers markets and direct marketing farmers (producers) who are not currently authorized and participate at a market at which no famers are currently SNAP authorized. The state will only pay for the terminal itself and not the monthly fees.
The monthly fee during the market season and the transaction fees are still the responsibility of the market. To find out if your market is eligible for this terminal, please contact the South Dakota EBT Administrator.
This wireless terminal will function anywhere a normal cell phone will function. It does not need electrical hook-up, but gains power from two provided power packs. This terminal also comes with a case for transportation.
This terminal accepts traditional credit and debit transactions, as well as SNAP transactions. If a market selects to accept traditional credit and debit transactions the market will be responsible for all associated fees. If a market is not interested in accepting credit and debit, these functions can be turned off. The current State EBT Contractor fees from 2013 are listed below:
- $45 monthly fee – this fee is waived during the non-selling season months
- $.15 per EBT transaction
- $.40 per debit transaction
- $.22 per credit transaction + 1.75% of the total purpose price
After the inventory of free, grant-funded terminals have been issued; additional markets can purchase this wireless POS terminal from the States’ EBT contractor. The 2013 cost of a terminal is $1,200.00.
At the Market
There are many options available to markets for conducting the actual business of the transactions at the market. The options can be discussed among vendors and management. It is recommended that markets that are interested in accepting electronic purchases visit a market that already accepts these purchases. The POS system and the electronic sales manager could be located in a central spot at the market. Consider placing the POS system at a pre-existing informational booth. Options for managing the sales at the market are described in detail below:
Option One: Scrip Method
Scrip is a term for any substitute for legal tender; like paper money or tokens. The customer purchases script from the central POS system. Then, it is used in the place of cash when purchasing items from vendors.
The market will need to design or purchase scrip currency that is hard to counterfeit. For paper scrip, non-photocopy able paper is required. Placing sequential serial numbers on all scrip is strongly advised. There are several recommendations:
- Scrip should state market’s name or logo as well as the denomination ($1, $5, $10)
- If the market accepts debit/credit cards, consider making the scrip slightly different for debit/credit customers than SNAP customers. This will make record keeping simple.
- Determine a secure place where the POS equipment and scrip will be stored when not in use and who will be responsible for proper storage.
To conduct the transaction, the staff person would swipe the SNAP, credit or debit card and have the cardholder enter their PIN number if necessary. Then, the staff person enters the dollar amount of script the customer wants to purchase. To complete the transaction, the staff person gives the customer their purchased script and a receipt. At the end of the selling day, the vendors turn in their scrip sales into the market for reimbursement.
If a customer purchases $25 dollars of scrip, but only redeems or spends $20 at the market, there are two options. First, the customer can return the unused script and the market can then credit it back into their account. This process is just like returning an item at a retail store. Cash change should not be given. Secondly, the customer could keep their extra $5 in tokens or paper scrip to use on a later day. The funds do not expire after one market day and will be at the same value for the next selling day. To be fair, the customer must be able to get a refund back if they desire one.
Option Two: Receipt Method, collect purchase then pay
If the market does not want to use script, it can instead design a receipt form that allows for the electronic purchases to be tracked and totaled. Using this method, the customer would begin at the centrally located POS system. A staff person would give them a receipt form. Then, the customer can go and shop. When they are ready to make a purchase, the vendor fills out the receipt. The vendor should list which items were purchased and the total costs. After filling out the receipt, the customer takes their purchase and continues shopping.
When the customer has finished shopping, he or she takes take the receipt to the centrally located POS. The market staff will total the receipt, swipe the customer’s card, have customer enter PIN number if necessary. To complete the transaction, they would provide the customer with a copy of the receipt. Then, the customer can leave. Vendors will be reimbursed based off of the product and total they wrote while the customer was shopping.
This method requires some trust, because if a customer forgot or intentionally left the market without returning to the Central POS System to pay for the items on their receipt, the vendor would lose their purchase money.
Option Three: Receipt Method, pay then collect purchases
If a market or the vendors do not feel comfortable allowing customers to leave with produce without yet paying, they can reverse the order of the system. The customer selects product, the vendor fills out receipt, but does not give them their purchases. The vendor sets the purchases back and waits until the customer has traveled to the Central POS system to pay for the items. After they have paid, they return the vendors stand, with a completed receipt as proof of their payment. At this point, the vendor gives the customer their purchases and the customer can leave.
Spread the Word
Work with local schools, hospitals, churches and the local social services office to make people in the community aware that the farmers market is now accepting credit, debit and SNAP. In addition, remember to add the information to the market website, newsletter, Facebook page and other materials.
These suggestions were made in the SNAP How-to Handbook, “Partners can help with promotion in many ways—they can hand out fliers about the market SNAP EBT program, host cooking demonstrations and nutrition education events at the market, and encourage their clients to attend the farmers market. Partners can promote SNAP at farmers markets at local health fairs, school events, and community festivals to reach targeted audiences. They can provide signage and flyers about farmers markets’ SNAP participation to local SNAP and Women, Infants, and Children (WIC) offices, senior centers, hospitals, clinics, food pantries, schools, churches, and community centers to effectively notify the public that SNAP is available at the farmers market. Press releases and local calendar listings are also effective marketing tools. Special events and outreach initiatives produced with partner support can draw media and other community attention (1).”
Individual Vendors Accepting Electronic Purchases
In some cases, a farmers market is not able or interested in accepting electronic purchases. However, this does not mean that individual vendors cannot complete these steps on their own to accept all forms of electronic purchases. An independent vendor who wants to accept electronic purchases at farmers market, a roadside stand or for a CSA could also complete any of these steps, including becoming an FNS SNAP retailer.
Contact information for SNAP in South Dakota:
Sandy Vanneman, South Dakota EBT Administrator
Shanna Peterson, South Dakota EBT Program Specialist
- USDA SNAP at Farmers Markets
- SNAP At Farmer's Markets: A How-to Handbook: The USDA FNS, USDA AMS and the Project for Public Spaces, Inc. have created a how-to handbook on utilizing these options at the farmers market. The handbook described in detail how to use these options and provides a checklist of things to remember before, during and after the market.
- USDA Food and Nutrition Services Farmers Markets
- SNAP at your Farmers’ Market: Seven Steps to Success
- Farmers’ Market Coalition
- Montana Farmers Market Electronic Benefit Transfer Manual
- Wasserman, Wendy, Debra Tropp, Velma Lakins, Carolyn Foley, Marga DeNinno, Jezra Thompson, Nora Owens, and Kelly Williams. Supplemental Nutrition Assistance Program (SNAP) at Farmers Markets: A How-To Handbook. (http://dx.doi.org/10.9752/MS039.06-2010) U.S. Department of Agriculture, Agricultural Marketing Service, June 2010.