Colorado Appropriations Committee Addresses Retailer Service Fee Controversy

The Colorado Senate convened for its 2025 1st Extraordinary Session on August 25, 2025, where significant discussions centered around the retailer's service fee and its implications for small businesses. A key point of contention arose regarding the characterization of this fee as a subsidy, which was firmly rejected by several lawmakers.

During the session, one senator emphasized that the retailer's service fee, as outlined on the Department of Revenue's website, is not a subsidy but a legitimate fee that retailers can retain to cover their expenses related to tax collection and remittance. This clarification aimed to address misconceptions about the fee's nature and its impact on businesses.

The senator also highlighted that the fee varies based on how frequently businesses file their taxes, with options for monthly, quarterly, or semi-annual filings. Importantly, the maximum service fee a retailer can retain for any filing period is capped at $1,000, regardless of the number of business locations. This detail was underscored to illustrate that the average retained fee, estimated at around $60, is a small fraction of the total sales tax collected.

Concerns were raised about the changes to the service fee structure that took effect on January 1, 2022, which eliminated eligibility for larger retailers with over $1 million in taxable sales. This shift has disproportionately affected small businesses, which are considered the backbone of Colorado's economy. The senator noted that the funds previously retained by these retailers have since been redirected to the Housing Development Grant Fund, raising questions about the allocation of resources and support for small businesses.

The discussions reflect ongoing tensions between legislative decisions and the realities faced by small businesses in Colorado, as lawmakers seek to clarify the implications of tax policies and their effects on local economies. As the session progresses, the focus will likely remain on finding solutions that balance revenue needs with the support of small business interests.