Washington SB 5777: Creating a business and occupation tax deduction and increasing the rate for persons conducting payment card processing activities.

Bill Text

AN ACT Relating to creating a business and occupation tax 1
deduction and increasing the rate for persons conducting payment card 2
processing activities; amending RCW 82.04.290 and 82.04.29004; 3
reenacting and amending RCW 82.04.299; adding a new section to 4
chapter 82.04 RCW; creating new sections; and providing an effective 5
date.6
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:7
NEW SECTION. Sec. 1. The unique nature of payment system 8
arrangements distinguishes payment card processors from other 9
taxpayers. Due to the unique nature of processors' activities related 10
to interchange fees and network fees, the legislature intends to 11
address the business and occupation taxation of processors' 12
activities on a prospective basis through the deduction and rate 13
authorized in this act. The legislature does not intend for 14
inferences as to the taxability of prior periods to be drawn from the 15
passage of this act.16
NEW SECTION. Sec. 2. A new section is added to chapter 82.04 17
RCW to read as follows:18
S-1742.1
SENATE BILL 5777
State of Washington 69th Legislature 2025 Regular Session
By Senators Robinson, Braun, and J. Wilson
Read first time 02/25/25. Referred to Committee on Ways & Means.
p. 1 SB 5777

(1) In computing the tax under RCW 82.04.290(4), a processor may 1
deduct from the measure of the tax amounts retained by persons other 2
than the processor in the following forms:3
(a) Interchange fees;4
(b) Network fees; and5
(c) Portions of fees retained by other processors.6
(2) The definitions in this subsection apply throughout this 7
section unless the context clearly requires otherwise.8
(a) "Acquirer" means a person that contracts directly or 9
indirectly with a merchant to provide settlement for the merchant's 10
electronic transactions over a payment card network. "Acquirer" does 11
not include a person that acts only as a processor for the services 12
it provides to the merchant.13
(b) "Interchange fee" means an amount received by an issuer with 14
respect to the interchange of a transaction conducted by a merchant.15
(c) "Issuer" means any person that authorizes the use of a card 16
to perform an electronic transaction.17
(d) "Network fees" means fees received by payment networks 18
associated with the processing of a transaction or with the 19
acceptance of the payment network's brand.20
(e) "Payment network" means an entity that directly or indirectly 21
provides the proprietary services, infrastructure, and software that 22
route information and data to an issuer from an acquirer to conduct 23
the authorization, clearance, and settlement of electronic 24
transactions; and a merchant uses in order to accept as a form of 25
payment a brand of card or other device that may be used to carry out 26
electronic transactions.27
(f) "Processor" means a person, including an acquirer or issuer, 28
that processes or routes electronic transactions for issuers, 29
acquirers, or merchants.30
Sec. 3. RCW 82.04.290 and 2020 c 2 s 3 are each amended to read 31
as follows:32
(1) Upon every person engaging within this state in the business 33
of providing qualifying international investment management services, 34
as to such persons, the amount of tax with respect to such business 35
is equal to the gross income or gross proceeds of sales of the 36
business multiplied by a rate of 0.275 percent.37
(2)(a) Upon every person engaging within this state in any 38
business activity other than or in addition to an activity taxed 39
p. 2 SB 5777

explicitly under ((another section in)) this chapter ((or subsection 1
(1) or (3) of this section)); as to such persons the amount of tax on 2
account of such activities is equal to the gross income of the 3
business multiplied by the rate of:4
(i) 1.75 percent; or5
(ii) 1.5 percent for:6
(A) Any person subject to the surcharge imposed under RCW 7
82.04.299;8
(B) Any person whose gross income of the business subject to the 9
tax imposed under this subsection (2), for the immediately preceding 10
calendar year, was less than ((one million dollars)) $1,000,000, 11
unless (I) the person is affiliated with one or more other persons, 12
and (II) the aggregate gross income of the business subject to the 13
tax imposed under this subsection (2) for all affiliated persons was 14
greater than or equal to ((one million dollars)) $1,000,000 for the 15
immediately preceding calendar year; and16
(C) Hospitals as defined in RCW 70.41.020, including any hospital 17
that comes within the scope of chapter 71.12 RCW if the hospital is 18
also licensed under chapter 70.41 RCW. This subsection (2)(a)(ii)(C) 19
must not be construed as modifying RCW 82.04.260(10).20
(b) This subsection (2) includes, among others, and without 21
limiting the scope hereof (whether or not title to materials used in 22
the performance of such business passes to another by accession, 23
confusion or other than by outright sale), persons engaged in the 24
business of rendering any type of ser