Interchange fees on tips

AN ACT Relating to prohibiting fees on certain acts of commerce 1
to protect tipped wages for workers while reducing the financial 2
burden on employers; amending RCW 49.46.020; adding a new chapter to 3
Title 19 RCW; and providing an effective date. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
NEW SECTION. Sec. 1. (1) The legislature finds that the use of 6
credit or debit cards can prevent an employee from receiving the full 7
amount of their earned tips and gratuities. Currently some employers 8
deduct a proportional amount of any fees the employer is assessed on 9
a credit or debit card transaction from an employee's tip.10
(2) The legislature also finds that credit or debit card usage in 11
commercial transactions places an undue financial burden on merchants 12
required to collect taxes on behalf of the state of Washington when 13
the merchant must pay fees assessed on the taxed amount.14
(3) Therefore, the legislature intends to bring greater 15
transparency, clarity, and accountability to certain acts of 16
commerce. Prohibiting all interchange fees on tips and gratuities 17
will ensure employees receive their full earned tips and gratuities. 18
Prohibiting all interchange fees on taxes merchants collect on behalf 19
of the state will reduce the financial burden merchants bear on 20
behalf of the state. 21
S-0054.2
SENATE BILL 5070
State of Washington 69th Legislature 2025 Regular Session
By Senators Saldaña, Hasegawa, Conway, Cortes, Fortunato,
Krishnadasan, Lovelett, Nobles, Orwall, Stanford, Trudeau, Valdez,
Wellman, and J. Wilson
Prefiled 12/16/24. Read first time 01/13/25. Referred to Committee
on Labor & Commerce.
p. 1 SB 5070
NEW SECTION. Sec. 2. The definitions in this section apply 1
throughout this chapter unless the context clearly requires 2
otherwise.3
(1) "Acquirer bank" means a member of a payment card network that 4
contracts with a merchant for the settlement of electronic payment 5
transactions. An acquirer bank may contract directly with merchants 6
or indirectly through a processor to process electronic payment 7
transactions. 8
(2) "Authorization" means the process through which a merchant 9
requests approval for an electronic payment transaction from the 10
issuer. 11
(3) "Clearance" means the process of transmitting final 12
transaction data from a merchant to an issuer for posting to the 13
cardholder's account and the calculation of fees and charges, 14
including interchange fees, that apply to the issuer and the 15
merchant. 16
(4) "Credit card" means a card, plate, coupon book, or other 17
credit device existing for the purpose of obtaining money, property, 18
labor, or services on credit. 19
(5)(a) "Debit card" means a card or other payment code or device 20
issued or approved for use through a payment card network to debit an 21
asset account, regardless of the purpose for which the account is 22
established, whether authorization is based on a signature, a 23
personal identification number, or other means. 24
(b) "Debit card" includes a general use prepaid card, as defined 25
in 15 U.S.C. Sec. 1693l-1 as it existed on the effective date of this 26
section. 27
(c) "Debit card" does not include paper checks.28
(6) "Electronic payment transaction" means a transaction in which 29
a person uses a debit card, a credit card, or other payment code or 30
device issued or approved through a payment card network to debit a 31
deposit account or use a line of credit, whether authorization is 32
based on a signature, a personal identification number, or other 33
means. 34
(7) "Gratuity" means a voluntary monetary contribution to an 35
employee from a guest, patron, or customer in connection with 36
services rendered and due to an employee under RCW 49.46.020(2), 37
including all tips, gratuities, and service charges.38
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(8) "Interchange fee" means a fee established, charged, or 1
received by a payment card network for the purpose of compensating 2
the issuer for its involvement in an electronic payment transaction.3
(9) "Issuer" means a person issuing a debit card or credit card, 4
or the issuer's agent. 5
(10) "Merchant" means a person that collects and remits a tax or 6
collects a gratuity due to an employee. 7
(11) "Payment card network" means an entity that:8
(a) Directly or through licensed members, processors, or agents, 9
provides the proprietary services, infrastructure, and software to 10
route information and data for the purpose of conducting electronic 11
payment transaction authorization, clearance, and settlement; and12
(b) A merchant uses to accept as a form of payment a brand of 13
debit card, credit card, or other device that may be used to carry 14
out electronic payment transactions. 15
(12) "Person" means any individual, firm, public or private 16
corporation, government, partnership, association, or any other 17
organization or entity. 18
(13) "Processor" means an entity that facilitates, services, 19
processes, or manages the debit or credit authorization, billing, 20
transfer, payment procedures, or settlement with respect to any 21
electronic payment transaction. 22
(14) "Settlement" means the process of transmitting sales 23
information to the issuing bank for collection and reimbursement of 24
funds to the merchant, and calculating and reporting the net 25
transaction amount to the issuer and merchant for an electronic 26
payment transaction that is cleared. 27
(15) "Tax" means any moneys collected under chapters 82.08, 28
82.12, and 82.14 RCW. 29
(16) "Tax documentation" means documentation sufficient for the 30
payment card network to determine the total amount of the electronic 31
payment transaction and the tax or gratuity amount of the 32
transaction. Tax documentation may be related to a single electronic 33
payment transaction or multiple electronic payment transactions 34
aggregated over a period of time. Examples of tax documentation 35
include, but are not limited to, invoices, receipts, journals, 36
ledgers, and tax returns filed with the department of revenue or 37
local taxing authorities. 38
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NEW SECTION. Sec. 3. (1) An issuer, a payment card network, an 1
acquirer bank, or a processor may not receive or charge a merchant 2
any interchange fee on the tax or gratuity amount of an electronic 3
payment transaction if the merchant informs the acquirer bank or its 4
designee of the tax or gratuity amount as part of the authorization 5
or settlement process for the electronic payment transaction. The 6
merchant must transmit the tax or gratuity amount data as part of the 7
authorization or settlement process to avoid being charged 8
interchange fees on the tax or gratuity amount of an electronic 9
payment transaction.10
(2) A merchant that does not transmit the tax or gratuity amount 11
data in accordance with this section may submit tax documentation for 12
the electronic payment transaction to the acquirer bank or its 13
designee no later than 180 days after the date of the electronic 14
payment transaction. Within 30 days after the merchant submits the 15
tax documentation, the issuer must credit to the merchant the amount 16
of interchange fees charged on the tax or gratuity amount of the 17
electronic payment transaction. 18
(3) This section does not create liability for a payment card 19
network regarding the accuracy of the tax or gratuity amount data 20
reported by the merchant. 21
(4) It shall be unlawful for an issuer, a payment card network, 22
an acquirer bank, or a processor to alter or manipulate the 23
computation and imposition of interchange fees by increasing the rate 24
or amount of the fees applicable to, or imposed upon, the portion of 25
a credit or debit card transaction not attributable to taxes or other 26
fees charged to the merchant to circumvent the effect of this 27
section. 28
(5) Payment card networks shall, within two years of the 29
effective date of this section, provide a mechanism for merchants to 30
transmit tax or gratuity amount data as part of the electronic 31
payment transaction process sufficient to allow acquirer banks to 32
exclude those amounts from any interchange fee assessment.33
Sec. 4. RCW 49.46.020 and 2019 c 236 s 2 are each amended to 34
read as follows: 35
(1)(((a) Beginning January 1, 2017, and until January 1, 2018, 36
every employer shall pay to each of his or her employees who has 37
reached the age of eighteen years wages at a rate of not less than 38
eleven dollars per hour.39
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(b) Beginning January 1, 2018, and until January 1, 2019, every 1
employer shall pay to each of his or her employees who has reached 2
the age of eighteen years wages at a rate of not less than eleven 3
dollars and fifty cents per hour.4
(c) Beginning January 1, 2019, and until January 1, 2020, every 5
employer shall pay to each of his or her employees who has reached 6
the age of eighteen years wages at a rate of not less than twelve 7
dollars per hour.8
(d) Beginning January 1, 2020, and until January 1, 2021, every 9
employer shall pay to each of his or her employees who has reached 10
the age of eighteen years wages at a rate of not less than thirteen 11
dollars and fifty cents per hour.12
(2)(a) Beginning on January 1, 2021, and each following January 13
1st as set forth under (b) of this subsection, every employer shall 14
pay to each of his or her employees who has reached the age of 15
eighteen years wages at a rate of not less than the amount 16
established under (b) of this subsection.17
(b))) On ((September 30, 2020, and on )) each ((following)) 18
September 30th, the department of labor and industries shall 19
calculate an adjusted minimum wage rate to maintain employee 20
purchasing power by increasing the current year's minimum wage rate 21
by the rate of inflation. The adjusted minimum wage rate shall be 22
calculated to the nearest cent using the consumer price index for 23
urban wage earners and clerical workers, CPI-W, or a successor index, 24
for the ((twelve)) 12 months prior to each September 1st as 25
calculated by the United States department of labor. Each adjusted 26
minimum wage rate calculated under this subsection (((2)(b))) takes 27
effect on the following January 1st. 28
(((3))) (2)(a) An employer must pay to its employees: (((a))) (i) 29
All tips and gratuities; and (((b))) (ii) all service charges as 30
defined under RCW 49.46.160 except those that, pursuant to RCW 31
49.46.160, are itemized as not being payable to the employee or 32
employees servicing the customer. 33
(b) An employer may not reduce an employee's tips, gratuities, 34
and service charge by the amount of any interchange fees as defined 35
in section 2 of this act.36
(c) Tips and service charges paid to an employee are in addition 37
to, and may not count towards, the employee's hourly minimum wage.38
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(((4))) (3) Beginning January 1, 2018, except as provided in RCW 1
49.46.180, every employer must provide to each of its employees paid 2
sick leave as provided in RCW 49.46.200 and 49.46.210.3
(((5))) (4) The director shall by regulation establish the 4
minimum wage for employees under the age of ((eighteen)) 18 years.5
NEW SECTION. Sec. 5. (1) An issuer, a payment card network, an 6
acquirer bank, a processor, or other designated entity that has 7
received the tax or gratuity amount data and violates section 3 of 8
this act is subject to a civil penalty of $1,000 per electronic 9
payment transaction, and the issuer must refund the merchant the 10
interchange fee calculated on the tax or gratuity amount relative to 11
the electronic payment transaction. Civil penalties imposed under 12
this section must be paid to the director of the department of labor 13
and industries for deposit in the supplemental pension fund 14
established in RCW 51.44.033. Penalties under this section are in 15
addition to any other penalties or other relief provided under 16
chapter 49.46 RCW and Title 82 RCW.17
(2)(a) An entity, other than the merchant, involved in 18
facilitating or processing an electronic payment transaction, 19
including, but not limited to, an issuer, a payment card network, an 20
acquirer bank, a processor, or other designated entity, may not 21
distribute, exchange, transfer, disseminate, or use the electronic 22
payment transaction data except to facilitate or process the 23
electronic payment transaction or as required by law.24
(b) A violation of this subsection constitutes a violation of the 25
consumer protection act pursuant to chapter 19.86 RCW.26
NEW SECTION. Sec. 6. This act takes effect July 1, 2026.27
NEW SECTION. Sec. 7. Sections 1 through 3, 5, and 6 of this act 28
constitute a new chapter in Title 19 RCW.29
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