DENVER – An effort by Colorado legislators to provide small businesses with a measure of relief from swipe fees was watered down from “relief” to a study last week, and eventually defeated by members of the House Finance Committee.

According to supporters of the bill (HB 1154), small businesses are in effect paying credit card companies to collect taxes for the state, since the card companies swipe fees are charged based on sales tax as well as the good purchased.

According to a report in the Colorado Statesman, the state collected $2.1 billion in sales tax revenues last year. Of that, about 60% came from credit, prepaid cards or debit cards, which the publication calculated results in about $25 million in swipe fees collected just on the sales tax.

From the beginning, HB 1154 drew strong opposition from the financial services industry, which first delayed the hearing, then arrived in force to fight the bill when it got to the House Finance Committee last week. The opposition prompted the bill’s sponsors to strike the original bill and turn the issue into a study, but critics then took aim at the study, calling it both overly broad and limited only to state-chartered institutions that issue credit cards.

At the same time, retailers lined up to support the proposed bill, citing the money they would save from the swipe fee relief. The Colorado Wyoming Petroleum Marketers Association estimated the credit card companies made $11 million last year by charging the interchange fees on excises taxes for Colorado convenience and fuel retailers.