By Jenifer Waller

Four Colorado lawmakers recently published an op-ed in Colorado Politics calling for legislation to prohibit interchange fees on the sales tax portion of credit and debit card transactions (“Why Colorado should stop charging swipe fees on sales taxes | OPINION,” March 5). Their argument sounds appealing: small businesses shouldn’t pay fees on money that belongs to the government. But the argument collapses under scrutiny, and the real beneficiaries of this bill aren’t the mom-and-pop shops on Main Street. They’re trillion-dollar corporations like Walmart, Target and The Home Depot and mega-chain restaurants like Olive Garden and KFC.

Let’s start with the central claim: credit card companies are “skimming” public tax dollars. This is flatly false. When a merchant collects $100 in sales tax, that merchant remits $100 to the state. Banks and credit unions are not involved in tax remittance at all. Card processing fees are a cost of doing business paid by the merchant, just like rent or insurance. They do not reduce state revenue by a penny.

The lawmakers cite $217 million in swipe fees on sales taxes in 2024 as though that number exists in a vacuum. Here’s the context they left out: Colorado merchants processed roughly $177 billion in credit and debit card sales that year, generating approximately $13.8 billion in tax revenue. Card processing fees are a tax-deductible business expense and, like any other cost, are built into the price consumers pay. Merchants are free right now, without any legislation, to avoid interchange on the tax portion by simply collecting sales tax via cash or check, a reality that may soon be the case for all consumers if this misguided bill becomes law. Almost none do, because accepting cards is enormously beneficial to their bottom line. Credit cards help both consumers and retailers alike by making transactions quick, seamless, secure, and accurate.

The lawmakers claim Visa and Mastercard control more than 80% of the market and centrally set interchange rates, implying monopolistic behavior. But market share alone does not equal market failure. Walmart controls 21% of the U.S. grocery market; that doesn’t mean government should set the price of eggs. Coca-Cola and Pepsi control 72% of the soft drink market; that doesn’t mean government should set the price of soda. When a merchant signs up to accept cards, it gains access to multiple payment networks, tens of thousands of issuing banks and credit unions, and billions of customers worldwide. That is an efficient, competitive and accessible marketplace.

The sponsors also claim their bill exempts banks and credit unions with assets under $60 billion, and therefore community institutions have nothing to worry about. Colorado’s community banks and credit unions strongly disagree and stand united in opposition to this legislation. The payments system is deeply interconnected, and mandates affecting the largest participants inevitably cascade down to smaller ones. We saw this with the Durbin Amendment’s debit card price controls: exempted community banks still lost interchange income, consumers saw fewer rewards programs, free checking accounts disappeared, minimum balance requirements rose, and hundreds of thousands of Americans left the banking system entirely. Lobbyists for Target, Walmart and The Home Depot may claim good intentions for small businesses and restaurants, but the simple fact is they’re pursuing this legislation in dozens of states because it’s a windfall for mega-retailers, not independent Main Street small businesses.

The op-ed frames this as relief for struggling small restaurants, citing an average of $167,000 in annual swipe fees. But a restaurant paying $167,000 in processing fees is processing roughly $10.6 million in card sales annually. That’s not a struggling diner. And this bill doesn’t only apply to small restaurants. It applies to multi-billion-dollar conglomerates like Darden, Yum! Brands, and McDonald’s. The largest remitters of sales tax in Colorado will be the largest financial beneficiaries of this bill. Most notably, Walmart, a trillion-dollar, anti-union behemoth, stands to profit millions per year. None of those savings will be passed on to consumers.

Colorado’s small businesses face real challenges. Rising rents, insurance costs and workforce issues deserve serious legislative attention. But this bill doesn’t address those problems. It rearranges costs within the payments system in ways that benefit the nation’s largest retailers and chain restaurants at the expense of the financial institutions that serve Colorado families. Our lawmakers should focus on solutions that actually help small businesses rather than advancing a proposal that helps mega-stores and mega-chains while the main-street businesses they threaten continue to struggle.

Jenifer Waller is president and chief executive of the Colorado Bankers Association.