Colorado State Capital in the snow
A Colorado bill aimed at reducing credit card "swipe fees" paid by merchants advanced its first hurdle Thursday, passing a hearing before a state Senate committee as lawmakers debate the impact of interchange fees on small businesses.
Senate Bill 26-134 would prohibit major payment card networks from charging interchange fees on the sales tax portion of credit and debit card transactions. Supporters say the change would reduce costs for businesses that are required to collect sales tax on behalf of the state but still pay transaction fees on the entire purchase amount.
Bill sponsors Sen. William Lindstedt (D-Broomfield), and Sen. Iman Jodeh (D-Aurora), argue the measure would provide relief for small businesses facing rising operating costs.
Opponents, including financial institutions and payment industry representatives, warn the proposal could disrupt the global payments system and lead to costly technological changes. They say payment systems currently do not always separate tax and tip data during transaction authorization, potentially complicating compliance.
A similar proposal introduced last year passed the Colorado House but ultimately died in the Senate.
If enacted, SB 26-134 would make Colorado one of a small number of states pursuing limits on how interchange fees are calculated. A comparable law passed in Illinois in 2024 and was later challenged in federal court before being upheld by a judge earlier this year.
Key provisions of SB 26-134 include:
- Prohibits payment card networks from charging interchange fees on the sales tax portion of credit or debit card transactions.
- Applies to payment card networks and financial institutions with more than $60 billion in assets.
- Prevents networks from raising other fees to circumvent the prohibition on taxing sales-tax amounts.
- Allows merchants to receive rebates or adjustments if tax amounts are identified after settlement.
- Permits merchants, consumers, or other injured parties to bring civil actions against payment networks that violate the law.
- Requires payment networks to continue processing cards issued by smaller financial institutions.
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