A Colorado legislative committee gave initial approval Thursday to legislation that would block credit card companies from charging common “swipe fees” on sales taxes, a year after lawmakers rejected a more expansive version of the proposal.
Companies like Visa and Mastercard charge fees to restaurants and stores every time customers use cards to pay their bills. That fee is assessed as a percentage of the total bill, and it includes sales tax in that total. Businesses collect those taxes and then pass them on to the government.
would generally exempt sales taxes from the swipe fee calculation, a move that supporters say would help save businesses money. It passed the Senate’s on a 3-2 party-line vote, with Democrats in favor.
The bill “addresses a simple question of fairness: Should (businesses) be charged for swipe fees on money that was never theirs to begin with?” said Sen. Iman Jodeh, an Aurora Democrat. She’s sponsoring the bill with Sen. William Lindstedt, a Broomfield Democrat, who also subbed onto the committee for the vote.
The measure would apply to credit card companies and to banks with more than $60 billion in assets. Lindstedt said that amounted to 40 banks and one credit union nationwide. The bill is a narrower policy than — which, among other things, would’ve also applied the swipe fee prohibition to tips.
That proposal passed the state House before dying in the Senate.
If SB-134 passes, Colorado would become one of the first states to adopt a version of the policy. Illinois passed a law prohibiting swipe fees on taxes and tips in 2024. The policy was then challenged in federal court by banks and credit unions, and a judge last month.
As with its predecessor last year, the bill’s supporters find themselves among strange bedfellows. Backers include progressive groups like the Bell Policy Center and the nonprofit law firm Towards Justice, alongside industry interests including the Colorado Restaurant Association, the state brewers guild and major companies like Target and Home Depot.
Supporters argued that the bill would save small businesses money.
“We paid over $62,000 last year in swipe fees, (and) that includes swipes on taxes we cannot keep and on the tips that servers and bartenders take home,” Chrissy Strowmatt, the general manager of Denver’s Blue Bonnet restaurant, testified Thursday. “We need some of that back to be able to literally stay open and employ our 47 employees. Just getting back what is going toward sales tax would be around $6,000 to $7,000 in annual savings that we desperately need right now.”
The bill is opposed by various financial institutions and trade groups, including the Colorado Bankers Association, Visa, JPMorgan Chase and a national coalition of similar companies. It’s also opposed by United Airlines, more than its market cap, according to the Atlantic.
Labor unions tied to the airline industry have also released statements opposing the bill, though the unions have not registered formal positions on it and did not testify Thursday.
Critics said Thursday that the bill’s requirements were technologically unworkable and costly. They warned that, as in Illinois, the bill’s passage would draw swift legal challenges.
“This bill is virtually certain to trigger years of litigation,” testified Ben Metzger, the vice president of strategy for Canvas Credit Union.
While Lindstedt and Jodeh sought to exempt local banks and credit unions from the proposal, representatives from those groups said the financial payment industry was too complex to carve them out. Lindstedt said he was open to additional efforts to ensure that smaller Colorado-based financial institutions wouldn’t be harmed by the proposal.
No one from the credit card companies testified Thursday.
The bill heads next to the Senate floor, where it needs two more votes before it can move to the House. In that chamber, it already has significant backers: Both the House speaker and Democratic majority leader are signed on as primary sponsors.
