Colorado Credit Card Companies May Drop Merchants Over New Sales Tax Fee Bill

Colorado’s credit card companies might just stop accepting your card if you sign the new bill.

That is the hard risk facing Western Slope merchants after the legislature passed Senate Bill 134. The bill removes sales tax from the calculation of swipe fees. It passed the House 45-19. It cleared the Senate. It heads to the governor’s desk.

The logic is simple. When you buy a $100 meal, the bank charges a fee on that $100. Currently, if you add $8 in tax, the fee applies to the full $108. The new law says fees apply only to the $100. The $8 in tax is exempt.

Supporters say this saves money for small businesses. They say it stops banks from profiting off taxes collected for local services.

“Restaurants have been begging our legislature and the governor for financial relief for years, and this bill would provide them with real savings,” said Sonia Riggs, president and CEO of the Colorado Restaurant Association.

Democratic House Speaker Julie McCluskie of Dillon led the charge. She argues the change is fair. Merchants collect the tax. They shouldn’t pay a premium to the bank for the privilege of holding it.

“When a merchant takes a credit card from a consumer and processes that card, they should not have to pay fees on the local or state taxes that they are collecting from that customer,” McCluskie said.

She claims this will help struggling local businesses save thousands annually. The restaurant and retail industries agree. They lined up to back the measure. They say it provides relief without forcing consumers to pay more.

Joshua Mantel of the Bell Policy Center framed it as a moral issue. If a community raises sales tax for affordable housing or a fire station, the profit should stay local. It shouldn’t go to credit card companies.

The banking industry disagrees. They are fighting hard. They point to Illinois. That state passed a similar law. It is now entangled in litigation. Colorado could face the same legal morass.

Jenifer Waller, CEO of the Colorado Bankers Association, says the cost of changing payment systems is too high. Colorado represents only roughly 2% of transactions nationwide. Why spend millions to tweak the system for one state?

“They will continue to pay a swipe fee on the bulk of the purchase... but they will not have to pay an interchange fee any longer on the taxes they collect,” McCluskie said.

Waller warns of a worse outcome. Lenders might just decline to make the investment altogether. If they don’t update their systems, the result could be confusing. Inconvenient. Maybe even a return to cash-only for some transactions.

Read that again. The financial institutions might just walk away from the complexity.

For folks on the Western Slope, this isn't just a Capitol story. It’s about the cost of doing business. A restaurant in Delta might save on fees. Or it might face a new layer of uncertainty if the credit card processors refuse to adapt. The bill assumes the banks will pay up. It doesn't guarantee they will.

The short version: The legislature voted to cut fees. The banks are threatening to break the system instead. The governor now decides whether to sign the law or let it die.

Make no mistake. This is a gamble. It bets that the savings for merchants outweigh the risk of payment chaos. It bets that lenders won't just shrug and raise fees elsewhere to cover the loss.

Waller said the expense of changing the system is the real problem. If the banks are right, the "savings" are temporary. They might just get buried in new administrative costs or higher base fees.

The bill passed. The fight moves to the executive branch. The bankers are watching. The merchants are waiting.