Lawmakers are pushing a bill to make Colorado the second state in the nation to prohibit credit card networks from imposing transaction feeds on tips and sales tax. 

Sponsors of House Bill 1282 said Illinois passed a similar measure last year, which goes into effect this July. 

“Swipe fees,” also known as transaction fees or interchange fees, are charges that credit card networks impose on retailers to cover costs associated with expenses like fraud prevention, bad debt and rewards programs. On average, they account for about 2% to 4% of the total cost. 

According to bill sponsor Rep. William Lindstedt, D-Broomfield, Colorado consumers paid $2 billion in such fees last year.

The fees, he said, disproportionately impact small businesses, which are already struggling financially and aren’t able to negotiate rates with credit card networks the way major corporations can. 

“People shouldn’t be benefiting and profiteering off of our own sales tax locally and tips that our restaurant workers receive from their customers,” said Lindstedt. “This is a really great bill because it brings together Republicans and Democrats to bring home profits to Main Street and to our own businesses in our communities and take away profits from giant financial institutions that are stealing profits from our communities and taxpayers.”

Lindstedt’s co-prime sponsor, Rep. Max Brooks, R-Castle Rock, said affordability is the No. 1 issue he heard about from constituents during his campaign last fall. 

“We cannot work on affordability issues in Castle Rock if we’re not supporting our small and community businesses,” he said. “Removing just that one little piece of the tip and tax offset has tremendous impact to our small and medium businesses that we can see reinvested into our community.”

Sonia Riggs of the Colorado Restaurant Association called the bill a “common sense proposal” that would save Colorado’s restaurants tens of thousands of dollars a year. 

“Colorado restaurants are in crisis right now, struggling under the weight of increased costs for food, alcohol, labor, insurance, utilities, rent, and much more,” she said. “Prices have only gone up since the pandemic, and now with tariffs in place and more looming, our industry faces uncertainty and assuredly higher costs in the months to come, while credit card companies are earning record profits.”

Credit card networks brought in $172 billion from transaction fees in 2023, according to the National Retail Federation. 

Riggs said a survey conducted last week of CRA members showed that the average restaurant paid $189,000 last year, and that number is predicted to climb to over $250,000 in 2025. 

If HB 1282 passes, she said, local restaurants can expect to save anywhere from $10,000 to $50,000 a year.

“It’s heartbreaking that these enormous corporations that earn billions of dollars in profit every year are taking so much from small local businesses who need every penny to survive right now,” she said. “We hope the state legislature will help give our restaurants some relief with this bill.”

The bill is scheduled to be heard by the House Finance Committee on Thursday.