Most owners look for a late-fee law that does not exist. They want a number for their state, the way there is a speed limit for their road. So they search, find a table, copy the figure next to their state, and put it on the invoice.
The honest answer is less tidy and more useful. No US state sets a statutory maximum late fee on a business-to-business invoice. What governs instead is contract law, and it turns on three things you control: whether the fee was in writing before you billed, whether the amount is defensible as compensation rather than punishment, and whether the customer had a real chance to see it.
Correction, August 2026
An earlier version of this post published a 50-state table of "maximum late fees," including a claimed $25 per-invoice cap in Delaware and a 1% monthly cap in New York. Those figures were not accurate and carried no statutory citation. Delaware's 5% cap comes from 25 Del. C. § 5501(d), which governs residential rent, not commercial invoices. New York's usury statute sets 16% per year and expressly bars corporate borrowers from raising it as a defense, so it does not operate as a 1% monthly invoice cap either. The per-state table has been removed and replaced with the law that actually applies. If you set your invoice terms off the old version, re-read "How to write the clause" below.
This guide covers B2B invoices, meaning invoices between two businesses or between a sole proprietor and a business. If your customer bought for personal or household use, stop here. Consumer transactions run on entirely different rules with real caps, and that distinction is where most of the bad advice on this topic comes from.
Why there is no per-state late-fee number
A late fee on a commercial invoice is not a regulated product. It is a contract term. Courts assess it under the liquidated damages doctrine: a clause that fixes a sum payable on breach is enforceable if it was a reasonable estimate of a loss that was genuinely hard to calculate at the time of contracting, and unenforceable as a penalty if it was not.
For contracts for the sale of goods, that test is codified at UCC § 2-718, adopted in some form by every state. For services contracts, state common law applies and reaches broadly the same place. Neither one produces a percentage ceiling. Both produce a reasonableness question.
That is why the honest state-by-state answer is a shrug for 47 states and a caveat for three. Anyone publishing a confident cap for all fifty is reading the wrong statute, usually a residential landlord-tenant provision or a consumer credit code.
The three tests your fee has to pass
1. It was in writing before the invoice went out. Not after it went late. A fee you invent once you are already annoyed is unenforceable almost everywhere, because the customer never agreed to it. Your terms page, your signed service agreement, or the invoice template itself all work. A policy you kept in your head does not.
2. The amount is compensatory, not punitive. You should be able to say what late payment actually costs you: the financing gap, the time spent chasing, the bookkeeping. 1.5% per month on a $10,000 invoice is $150, which is a plausible carrying cost. 15% per month is not an estimate of anything.
3. The customer had a fair chance to see it. Conspicuous placement in the payment-terms block beats eight-point type in the footer. For repeat customers, a signed master agreement settles it permanently. For one-off work, the fee needs to be legible on the invoice and, ideally, on the quote that preceded it.
Fail any one of these and the amount stops mattering. Pass all three and you are in the range every state enforces.
The range that actually holds up
1% to 1.5% per month, or 12% to 18% per year, is the working standard. It is enforceable in effectively every state for a commercial contract, it is high enough that a customer notices, and no court will call it predatory. If you want a single number for your terms and want to stop thinking about it, use 1.5% per month.
Above 2% per month, scrutiny begins. You are now defending the clause as compensation rather than assuming it, and in a small number of states you have also walked into a usury argument.
A flat administrative fee alongside the percentage is common and generally fine. $25 to $75 per late invoice, stated upfront. On small balances a flat fee is the better instrument: 1.5% of a $400 invoice is $6, which changes nobody’s behavior, while a $35 administrative fee is a real number.
Proportionality cuts both ways. A $50 fee on a $5,000 invoice is trivially reasonable. The same $50 on a $120 invoice invites the argument that you are punishing rather than recovering.
Where state law does bite
Three situations produce a genuine ceiling. Everything else is the reasonableness test above.
Arkansas. The state constitution, not a statute, caps the maximum lawful rate on loans and contracts not otherwise specified at 17% per year under Ark. Const. amend. 89, § 3. That is roughly 1.4% per month, which sits just under the standard 1.5%. Arkansas is the one state where the common default is arguably too high, so use 1% per month there unless you have local advice saying otherwise.
New York, on large balances. N.Y. Gen. Oblig. Law § 5-501 sets civil usury at 16% per year, but § 5-521 bars corporations from raising the civil usury defense at all, and loans of $250,000 or more are outside the civil cap regardless. What survives for a corporate customer is criminal usury at 25% per year. In practice 1.5% monthly is fine in New York; the old claim that New York caps you at 1% was wrong.
Any transaction that is actually a consumer transaction. If the person owing you money bought for personal use, your state’s consumer credit code applies and the caps are real and much lower. Sole proprietors are the trap here, because a sole proprietor buying for the business is a B2B transaction while the same person buying for their home is not. If you are a sole proprietor on the other side of this question, can I charge interest on a late invoice as a sole proprietor walks through it.
The mistake that produced the old table
Search “maximum late fee” and most of what comes back is residential landlord-tenant law wearing a business costume. Those caps are real, specific, and completely inapplicable to an invoice.
Delaware is the clearest example. 25 Del. C. § 5501(d) caps a residential late charge at 5% of monthly rent and blocks it entirely within five days of the due date. That is a rent rule. It says nothing about what a Delaware IT firm can charge a Delaware manufacturer on a 60-day-old invoice. The “$25 Delaware cap” that circulated in the earlier version of this post, and that still circulates on several competitor sites, has no basis in commercial law.
The same confusion produces bogus figures for consumer credit card late fees, utility late charges, and state prompt-payment statutes. Before you trust a per-state late-fee number anywhere, including here, check which chapter of the code it came from.
What you get when your terms say nothing
If you never wrote a late-fee clause, you are not entirely without a claim. Most states give you a statutory default interest rate on money owed, expressed per year, generally landing between 4% and 12%. It is much less than a contract rate, but it is not zero, and it is what a small claims judge will award.
Those rates vary meaningfully by state and several of them float. The full 50-state table with statute citations is in late payment interest rates by US state, which is the companion reference to this post. The short version: writing one sentence into your terms is usually worth two to three times the statutory fallback.
How to write the clause
Put this on the invoice template and in your standard terms so it applies by default, rather than being a decision you make when you are already frustrated:
Invoices not paid within 30 days of the invoice date accrue interest at 1.5% per month on the outstanding balance, plus a $35 administrative fee per late invoice.
Four things make it stick.
Use the statute’s vocabulary. “Interest” and “finance charge” are safe. “Penalty” hands the other side the exact argument you want to avoid, since the whole enforceability question is penalty versus compensation.
Show the arithmetic on every statement. Interest you never invoiced is interest you never charged. Add the accrued amount as its own visible line with the days-late count beside it. Customers who ignore a static balance often respond to one that is visibly growing. If you bill through QuickBooks, how to add a late fee to a QuickBooks invoice covers the mechanics.
Keep the calculation. Original due date, rate applied, days elapsed, running total. If this ever reaches small claims, the math is most of your argument.
Decide in advance whether you will waive it. Many owners charge interest and then drop it as the closing concession. That works, and it works better when the charge was documented from day one rather than invented at the negotiation.
When a late fee is the wrong tool
A late fee is a pricing signal, not a recovery mechanism. It changes behavior on the customers who intend to pay and are simply slow. It does nothing to a customer who has stopped answering, and it does nothing to a customer who cannot pay.
Late fees earn their keep when the invoice is large enough that a percentage is a real number, the customer is a business with a written agreement, and the relationship is worth preserving. They are the wrong instrument when the balance is small enough that enforcement costs more than recovery, when there is no written agreement to point to, or when the account has gone quiet.
Past roughly 60 days of silence, the fee has already failed as a signal and the question becomes escalation. A structured sequence, a settlement option, and a final demand notice do more than an accruing charge. See the friendly reminder sequence for the early stage, how to settle an unpaid invoice for less when partial recovery beats full stalemate, and the final demand letter template for the end of the line.
If the underlying problem is that everyone pays you late rather than that one customer went bad, the fee is treating a symptom. Net 30 isn’t working covers the terms change that fixes the cause.
FAQ
Can I add a late fee to an invoice I already sent? Not unilaterally, and not at your own rate. If the original invoice and your terms were silent, you are generally limited to your state’s statutory default interest from the date the debt came due. You can ask the customer to agree to a late fee going forward and many will, particularly as part of a payment plan, but that is a new agreement rather than an enforcement of the old one.
Does charging a late fee hurt my chance of getting paid at all? Usually the opposite, if you stated it upfront. The damage comes from springing a fee on someone who never saw it coming, which reads as a penalty for a relationship that had been fine. A fee that was on the invoice from the start is just a term, and it gives you something to trade later. How to chase invoices without losing the client covers the tone that keeps both.
My customer is in a different state than I am. Whose late-fee law applies? Whatever your contract’s governing-law clause says, if it has one, and courts generally honor that choice in commercial agreements with a real connection to the chosen state. If your paperwork is silent, expect the customer’s state to be argued. This is the main practical reason to add a governing-law line to your standard terms: it lets you answer this question once instead of per customer.
Is 1.5% per month the same as 18% APR? For the purpose of comparing against a usury ceiling, close enough to work with, and that is how the 18% figure in this post is derived. It is not identical, because compounding a monthly rate over twelve months yields about 19.6% rather than 18%. If you are near a hard ceiling like Arkansas’s 17%, simple monthly interest on the outstanding principal is the safer structure and the easier one to defend.
Can I charge a late fee on a government contract? Generally you do not need to, and generally you cannot impose your own. Under the federal Prompt Payment Act, 31 U.S.C. ch. 39, an agency that pays a proper invoice late owes you an interest penalty automatically without you asking. The rate is set semiannually by Treasury and is 4.75% for July 1 through December 31, 2026. Most states have equivalent statutes for their vendors. Read the contract’s payment clause before you invoice.
Does an unpaid late fee extend how long I have to sue? No. Accrued interest does not restart the statute of limitations on the underlying debt. The clock generally runs from the original breach, meaning the date payment was due. Statute of limitations on unpaid invoices by state has the per-state periods, and they are shorter than most owners expect.
Should I charge a late fee on an invoice I expect to write off? Accruing it costs nothing and preserves the claim if the customer resurfaces. Just do not let a growing paper balance disguise the fact that the account is dead. The write-off decision runs on collectibility, not on the size of the number in your ledger.
Sources
- UCC § 2-718 (liquidated damages, contracts for the sale of goods), as adopted by each state
- Ark. Const. amend. 89, § 3 (17% maximum lawful rate)
- N.Y. Gen. Oblig. Law §§ 5-501, 5-521 (civil usury; corporate defense barred)
- 25 Del. C. § 5501(d) (residential rent late charge, cited here as a common misattribution)
- Prompt Payment Act, 31 U.S.C. ch. 39; Treasury semiannual rate, 4.75% for July 1 to December 31, 2026
A note on who wrote this
ti3 is built by Captira Analytical, a software company that has spent two decades building tools with customers working the unpaid-invoice problem. We sell recovery software, so treat our view on when to escalate as interested rather than neutral. We do not practice law, file liens, or make collection calls, and nothing here is legal advice. State law changes and the reasonableness question is decided case by case, so confirm anything above with a local attorney before you rely on it for a large balance.
If your late fees are stated correctly and customers are still ignoring them, the problem has moved past pricing. Run a free analysis to see what is recoverable on your current aging.
Related guides
The companion reference with the full 50-state statutory rate table: Late payment interest rates by US state.
The full recovery playbook this sits inside: Small business AR recovery: complete guide.
When the fee has stopped working and you need the next step: Demand letter without a lawyer.
Whether the balance justifies court at all: Is it worth suing a customer for $3,000?