The NSW Ombudsman has been asked to investigate whether the former Coalition government ignored repeated legal advice by recouping $144 million over eight years through an "unlawful" surcharge on government transactions.

Minister for Finance Courtney Houssos said customers of Service NSW had been slugged with merchant fees despite the department receiving advice from the Crown Solicitor on three separate occasions that the practice was unlawful — twice in 2016 and once in December 2022.

Merchant fees are a percentage applied to credit and debit card payments, as well as online payment services, used to recoup transaction fees charged by payment providers including banks.

Ms Houssos said that an estimated 92 million transactions were unlawfully incurred with $144 million worth of merchant fees since 2016.

"The average charge for Service NSW is around $1.99 and for Revenue NSW it's around 92 cents," she said.

"Modelling suggests that the average individual would be affected about $30 over the last eight years.

"It is a common law principle that government cannot collect a merchant fee or a fee for service unless it has a specific statutory authority to do so."

Ms Houssos has since asked the state ombudsman to find out who was responsible and has also referred the matter to the state's Independent Commission Against Corruption to investigate allegations of "possible serious maladministration".

She said the current government first became aware of the issue in July 2024 after being notified by the newly appointed Auditor General, Bola Oyetunji.

In response to the allegations, former NSW finance minister from April 2019 to March 2023, Damien Tudehope said he did not recall receiving that advice but didn't rule out its existence.

"I don't recall ever receiving any advice that the passing on of merchant fees by Service NSW was illegal," Mr Tudehope said.

"I'm not denying that it exists, but I don't recall ever seeing any such advice and I must say that if I had received any advice I would of raised it immediately."

Minister for Customer Services Jihad Dib said a specialist task force had since been established and that merchant fees had been wiped off at least 80 per cent of applicable government services.

Mr Dib said he believed the fees should be fully removed from all services within one or two weeks.

"What we have done is looked at switching off the most-high traffic ones and the ones that we do most often," he said.

"We're talking about renewing your licence, renewing your car registration, your boat licences, your national park passes, applications for fishing permits basically everything you can do inside a Service NSW centre has been charged that surcharge."

Shadow Minister for Customer Service and Digital Government James Griffin said that if the fees had been charged incorrectly then customers should be fully refunded.

"I think the other challenging concern is that when Minister Dib turns around and looks at someone to do the task force and implement the recommendations, there's not many people left at Service NSW thanks to his government's cuts to the agency," Mr Griffin said.

All NSW government agencies were directed to impose merchant fees on customers based on 'cost-recovery only' in May 2012, during the Barry O'Farrell government.

All departments have been instructed to report to NSW Treasury by the end of November on whether they charge merchant fees for services and to confirm they have the legal authority to do so.