Washington Appeal Court Affirms Exclusion of Interchange Fees from B&O Tax Calculation

The Washington Court of Appeals, Division 3, affirmed the trial court’s ruling that interchange fees should not be included in the taxpayer’s gross income for Business and Occupation (B&O) tax purposes. The case involved a payment card processor challenging the Department of Revenue’s inclusion of interchange fees, which are charged by issuing banks, in the calculation of the processor’s taxable gross income. The court concluded that these fees did not “actually accrue” to the taxpayer, as the processor never received or had actual entitlement to these fees, which were deducted by issuing banks before funds were transmitted through the processor ...