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DENVER — State legislators in Colorado are mulling a bill that would exempt sales taxes from swipe fees.
According to the Denver Post, the goal of House Bill 1154 is to cut the fees processors charge retailers every time a customer pays with a debit or credit card. If passed, the measure would be the first of its kind in the United States.
The bill has been assigned to the House Finance Committee. A hearing date has not yet been scheduled. If passed, the Colorado law would take effect in July 2017 to allow companies time to devise a method of selectively assessing the swipe fee.
"Taxes are for the benefit of the public good, not so credit card companies and payment networks can make more money off them," said Grier Bailey, government affairs manager for the Colorado Wyoming Petroleum Marketers Association, which represents convenience store owners and fuel stations in both states.
The bill is sponsored by state Reps. Jon Becker (R-Fort Morgan) and Alec Garnett (D-Denver) and Sen. Owen Hill (R-Colorado Springs). It also has several bipartisan co-sponsors.
Though the state already pays retailers 3.33 cents for every sales-tax dollar they collect and remit on time, Colorado's other taxing bodies — from municipalities and counties to special tax districts — do not, according to the news report.
By law, governments are allowed to assess a convenience charge on credit card payments to recoup interchange fees. This assures the government collects 100 percent of its assessment when a consumer pays their bill — property taxes, vehicle registrations and utility bills among them — with a credit card and not a discounted amount because of the swipe fee.
However, Colorado and 11 other states prohibit retailers from assessing the same fee, leaving them to subsidize the cost of collecting the government's tax, the newspaper added.
Opponents of the measure say it puts an unfair burden on card processors and banks because it would require sophisticated, expensive software. Also, taxes vary so widely across the state that any system would be difficult to create.
"Why should we have to provide any service for free?" asked Jenifer Waller, senior vice president of the Colorado Bankers Association. "It's naïve to think the nationwide processors will create a unique system just to suit Colorado."
According to the Denver Post, the state collected $2.1 billion in sales taxes last year. Retailers pay roughly $25 million a year in swipe fees assessed on state sales tax collections, sponsors of the legislation say. That amount is even higher when local government taxes are added.
Colorado's sales tax rate is 2.9 percent and depending on the municipality or county, the total tax can be as high as 10.5 percent.
In July, the state began crediting retailers a "vendor fee" of 3.33 percent on sales taxes it collects.