A bill that passed out of a state Senate committee on Thursday pitted business against business as Colorado lawmakers considered ending credit-card fees on sales taxes.
And even then, the lines were unclear on which companies Senate Bill 134 would help or hurt.
The chef at Home Team BBQ in Aspen estimated savings last year would have been $12,000. A representative from Murdoch’s Ranch & Home Supply, which has more than a dozen stores in Colorado, said the savings “run into the six figures.” And the two Kokoro Japanese restaurants in Denver and Arvada would have saved $10,000 per location. Manager Mas Torito said he could have used the money to hire more part-time help.
“The thought is so crazy to me,” Torito said. “We’re paying roughly 8% in taxes and another 3% of fees on top of that. And that really adds up.”
Opponents are largely banks and small credit unions that rely on those fees and more to help fight fraud. Merchants pay the bank the fees, typically between 1% to 4% of a customer’s total bill, for the right to accept credit cards. Business organizations, like the Denver Metro Chamber of Commerce, pointed out the bill interferes with private contracts.
“The costs do not disappear, they simply reappear elsewhere often in ways that disproportionately harm small businesses,” testified Leslie Oliver, the chamber’s vice president of external affairs.
Daniel Doherty, who operates Jordinelli’s, a restaurant in Brighton, opposes the bill because he fears he would have to become a financial expert and be “forced to negotiate new interchange fees,” in an unfair world where his own interchange fee increased after the bank learned he asked customers to cover the 3% swipe fee.
“The biggest beneficiaries of this bill are multibillion dollar corporations like Yum, McDonald’s and Walmart. They’re the ones who push for it, and they’re the ones who pocket the savings,” Doherty said.
Colorado lawmakers entertained a similar bill last year, but House Bill 1282 sought to remove tips and sales tax from the swipe fee calculation. That got shut down. This year’s bill is much narrower, said bill sponsor Sen. Iman Jodeh, a Democrat from Aurora.
“This legislation is laser-focused on a single issue: eliminating interchange fees on the sales tax portions of a transaction,” Jodeh said.
But there is more to this year’s bill. It exempts smaller banks with assets of less than $60 billion, or 99% of the banks that do business in Colorado, according to cosponsor Sen. William Lindstedt, a Broomfield Democrat. And should Visa or Mastercard or other large banks try to retaliate, he said “the bill allows for legal recourse to make that stop.”
According to CMSPI, a consulting group that tracks global payments, Colorado’s interchange fees on sales tax in 2024 totaled $217.5 million. Overall, merchants in Colorado have paid $2.1 billion in interchange fees for credit cards, said Callum Godwin, CMSPI’s chief economist.
Credit card swipe fees are generally between 1.5% to 3.5% of the transaction. But often, these are invisible to consumers unless a merchant adds it as a service charge to a customer’s bill. A 2021 state law allows merchants to add a maximum of 2% of the total bill as a service fee and must disclose it ahead of time on a sign within the premises.
Interchange fees also help cover the cost of fighting fraud and without that guaranteed income, financial institutions like Elevations Credit Union would have to find it from its members, said Shelley Ormsby, Elevations compliance officer.
And right now, the payment systems don’t exist to pull out just the fee on sales tax, or to figure out different sales taxes, or which may be applicable under this bill. Such a system would need “near instant identification and validation” of the tax, she said, which would be a substantial redesign that credit card companies would have to impose only on Colorado customers.
A similar law passed in Illinois in 2024 bans swipe fees on tips and sales tax. While opponents sued to stop the law, a U.S. district judge upheld the law last month.
“Ultimately, the bill requires credit unions to remain responsible and liable for the entire transaction including the remittance of tax, but denying compensation for part of that. That imbalance creates operational risk and uncertainty in the payment system,” Ormsby said.
Right now, local merchants aren’t compensated either. They pay swipe fees on sales tax even when they’re just collecting it and sending it off to the state.
“This means I’m paying out of my own pocket to collect and process revenue that never belongs to me,” said Katie Nicholson, co-owner of Old 121 Brewhouse in Lakewood. She estimated the savings would be $2,500.
Advocates of the bill included the Colorado Restaurant Association and, oddly, the Bell Policy Center, a liberal policy thinktank. The two were on opposite sides of a controversial wage bill last year to limit future pay raises for tipped workers.
“We do understand the difficulties present in their kind of business model. We wanted to find a way to support them that didn’t impact their workers wages,” said Joshua Mantell, Bell Policy’s director of government affairs. “Visa and Mastercard are really pretty close to a duopoly in this marketplace and they’re pretty much able to set their fees in the way they think is best and small businesses and restaurants just have to deal with that. I think what the bill gets at is should they be able to profit off the mandatory sales tax that is paid in every transaction? We’re skeptical of that.”
The bill passed out of the Senate Business, Labor, & Technology committee on a 3-2 vote along party lines. It now heads to the full Senate for debate.