A new Washington business and occupation (B&O) tax rate of 3.1% has been established for payment card processing activities. The tax rate does not apply where the processor operates or is affiliated with the payment network and makes payments to an affiliated financial institution. The new rate also does not apply when the payment card processing company is also the issuer of the card. Activities excluded from the new rate are subject to the applicable services and other activities B&O tax rate.

A deduction from the payment card processor tax is allowed for interchange fees, network fees, and portions of fees retained by other processors. Where applicable, the B&O surcharge for financial institutions and the advanced computing surcharge may apply to payment card processing activities subject to the new 3.1% rate.

"Payment card processing activities" means services related to acquiring, processing, or routing electronic transactions for issuers, acquirers, payment networks, or merchant. It does not include: the issuance and authorization of the use of payment cards, the authorization, clearance, and settlement of electronic transactions by a payment network, nor the retail services or retail sale of hardware or software. Ch. 401 (H.B. 2020), Laws 2025, effective January 1, 2026