What is a merchant acquiring entity? Often called an "acquiring" or "merchant" bank, a merchant acquiring entity is the bank or other organization that has the contractual obligation to make payment to a merchant or other business, known as a "participating payee," in settlement of payment card transactions. Under Treasury regulations section 1.6050W-1 PDF, a merchant acquiring entity makes payment in settlement of a payment card transaction if it submits the instruction to transfer funds to the participating payee's account. What qualifies as a "payment card?' The term payment card includes credit cards, debit cards, and stored-value cards, as well as payment through any distinctive marks of a payment card (such as a credit card number). A payment card is issued under an agreement that provides standards and mechanisms for settling the transactions between a merchant acquiring bank or similar entity and the providers who accept the cards as payment. Who is responsible for reporting payment card transactions? The merchant acquiring entity that submits the instructions to transfer funds to the participating payee is responsible for reporting the gross amount of reportable transactions. A merchant acquiring entity might outsource the processing of the transactions to a processor that may share the contractual obligation to pay the merchant. When both a merchant acquiring entity and a processor have a contractual obligation to pay the merchant, the entity that submits the instructions to transfer funds to the merchant's account is responsible for preparing and furnishing a payee statement to the participating payee and filing the Form 1099-K with the IRS. Who reports payment card transactions when a payment settlement entity contracts with a third party, such as an electronic payment facilitator, to settle reportable transactions? The entity submitting the instructions to transfer funds to the participating merchant's account is responsible for reporting payment card transactions. In this case, the third party entity is responsible for reporting, because it is the entity submitting the instructions to transfer the funds in settlement of the transactions. What is a Merchant Category Code (MCC)? An MCC is a four-digit number used by the payment card industry to classify businesses by the goods of services they provide. There are approximately 600 MCCs representing different types of businesses. Some examples are: 441- Cruise Lines; 5462 - Bakeries; and, 5532 - Automotive Tire Stores. How should transactions be reported if a merchant has receipts classified under more than one MCC? If a merchant has receipts classified under more than one MCC, the reporting entity may either: File separate Forms 1099-K reporting the gross reportable transaction amounts attributable to each MCC, or File a single Form 1099-K reporting gross reportable transaction amounts and the MCC that corresponds to the largest portion of total gross receipts. Additionally, if a reporting entity (or its processor) employs an industry classification system other than or in addition to MCCs, the reporting entity should assign to each payee an MCC that most closely corresponds to the description of the payee's business.