Senator Kipp Proposes Bill to Eliminate Colorado's Sales Tax Vendor Fee

The Colorado Senate convened on August 25, 2025, for the 1st Extraordinary Session, focusing on House Bill 25 10 05, which proposes the elimination of the sales tax vendor fee. This fee currently allows businesses to retain a portion of the state sales tax they collect, intended to offset their administrative costs.

Senator Kipp opened the discussion by highlighting that the vendor fee, established in 1939, is outdated given today's digital transaction capabilities. He argued that the subsidy, which amounts to approximately $58.6 million annually, is no longer justified and that eliminating it could help address budget shortfalls exacerbated by recent federal tax reforms. Kipp emphasized that the financial relief from federal tax cuts would outweigh the losses from the vendor fee, benefiting small and mid-sized businesses significantly.

In contrast, Senator Kirkmeyer expressed strong opposition to the bill, arguing that the vendor fee is not a subsidy but a necessary reimbursement for businesses acting as tax collectors for the state. She pointed out that the costs of collecting sales tax often exceed the vendor fee, placing an unfair burden on small businesses. Kirkmeyer warned that eliminating the fee would further strain businesses already struggling with rising operational costs, particularly in the wake of the COVID-19 pandemic.

The debate highlighted a divide among senators regarding the implications of the vendor fee's elimination. Proponents of the bill argue it is a step toward fiscal responsibility, while opponents contend it unfairly penalizes small businesses and could lead to increased financial strain on them.

As the session progressed, the discussion included concerns about the broader impacts on state services funded by sales tax revenue. Senators debated the balance between necessary budget cuts and the potential consequences for local businesses and communities.

The meeting concluded without a definitive resolution, as further discussions and potential amendments to the bill are anticipated in subsequent sessions. The outcome of this legislation could significantly affect Colorado's small business landscape and the state's fiscal health moving forward.