Effective January 1, 2026
Washington State will implement a new Business & Occupation (B&O) tax classification specifically for payment card processing activities. This change, enacted under SHB 2020 (Chapter 401, Laws of 2025), affects businesses that acquire, process, or route electronic transactions for issuers, acquirers, payment networks, or merchants.
Key Highlights
- New classification: Payment Card Processing B&O tax
- Tax rate: 3.1%
- Effective date: January 1, 2026
Certain deductions will be allowed—such as interchange fees, network fees, and portions of fees retained by other processors—but only when reported under the new classification. Companies that both issue cards and process transactions, or operate affiliated payment networks, may still need to report under the Service and Other Activities classification instead.
Next Steps for Businesses
Businesses engaged in payment processing should:
- Review their current B&O reporting categories.
- Consult tax advisors regarding apportionment and potential surcharges.
For further details, see: