A bill that from charging interchange fees on the sales-tax portion of a purchase drew no less ire from the financial-services industry when Colorado legislators instead suggested a study about the issue.
Bankers called a proposed study of interchange fees “biased” and “unfair” because the outcome, they testified Wednesday, appeared to be predetermined toward legislating the interchange fees.
“The consumer does not win in this case,” said Koger Propst, president of ANB Bank. “This is a fairness issue. These are voluntary business contracts, and when did it become good for a state to step into that, and where does that stop?”
After a two-hour hearing before the House Finance Committee, the bill was killed 9-2 because little money exists to do a study that some said can’t actually be done.
“There are issues here that need to be addressed at some point,” Rep. Kit Roupe, R-Colorado Springs, said despite voting against the measure.
Backers said the study, while helpful, didn’t answer the question of whether it’s appropriate for a bank to make money for collecting taxes.
At issue are fees merchants are assessed against credit card purchases by consumers. Known as interchange fees, they typically are a 3 percent assessment on the total cost of a bill — including the government’s sales tax.
Merchants complain that last year they unfairly paid at least $25 million in interchange fees on the $2.1 billion the state collected in sales taxes.
Bankers say it’s unfair to expect them to provide a service — guarantee merchants and the government their payment from the transaction — without the bankers being paid.
Bill sponsors Rep. Jon Becker, R-Fort Morgan; Rep. Alec Garnett, D-Denver; and Sen. Owen Hill, R-Colorado Springs, changed their legislation offering instead to study the issue, especially the assertion that it’s too complex to separate the various expenses of a credit card purchase.
The study would have to be finished by October, a deadline even state employees admitted was unreasonable.
“We’re not at all confident we can obtain useful data to do this, and the short time frame — seven months — to do a macro-economic analysis of tax laws,” said Brian Tobias, senior policy analyst for the Colorado Department of Regulatory Agencies.
Additionally, the amended bill allows for the state to raise money to fund the analysis from the private sector that could be impacted by its outcome.
“My concern is the study appears biased to the outcome of reducing the cost for merchants,” said Jim Reuter, executive vice president of marketing at FirstBank. “I’m not opposed if the outcome makes sense.”
Colorado and 11 other states prohibit retailers from assessing the same fee governments can charge consumers who pay by credit card, leaving them to subsidize the cost of collecting the government’s tax themselves.
A number of small-business representatives testified to the costs they bear whenever a consumer uses a credit card. Paying extra for card issuers to collect sales taxes eats more into their paper-thin profits.
“The taxes we collect and pay were about $5 million last year,” said Scott Paulson, who is also the president of the Colorado Wyoming Petroleum Marketers Association. “My cost to take credit cards is my second-largest expense for each store. Ironically, (credit card processors) make more on my selling gas than I make on it.”
David Migoya: 303-954-1506, dmigoya@denverpost.com or twitter.com/davidmigoya
