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Senate adopts bill ending state sales-tax vendor fee, prompting debate over small-business costs
Summary
The Colorado Senate passed House Bill 1005 to eliminate the statesales-tax vendor fee starting Jan. 1, 2026. Supporters said the vendor fee is an outdated subsidy; opponents said the change burdens small retailers and urged delay or referendum. Multiple amendments were proposed and defeated; the bill passed on final reading.
The Colorado Senate on Aug. 24 passed House Bill 1005, a measure to eliminate the state sales-tax vendor fee that lets retailers retain up to 4% of collected state sales tax (capped at $1,000 per filing period). Sponsors said the allowance dates to the 1930s and is no longer justified; opponents said its removal will impose new costs on small businesses.
Supporters argued the vendor fee is a legacy allowance that became a de facto subsidy and that federal tax changes made the state policy outdated. "Every dollar we give away through an outdated vendor discount is a dollar we take away from kids in classrooms, from seniors who need health care," said Senator Kipp, a sponsor, urging passage.
Opponents said the fee compensates retailers that act as the state—s tax-collection agents and that removing it would force many small businesses to hire bookkeepers or raise prices. "We should be paying these folks; if the state's not going to go in there and collect the taxes, then we should be paying these folks," said Senator Pelton B., who led several amendment efforts to preserve or delay the change.
Lawmakers debated several floor amendments. One amendment that would have delayed the bill's effective date to Jan. 1, 2027 and required a legislative study of rural and border retailers was defeated. Another amendment that would have limited the fee—s elimination to larger retailers was ruled outside the bill title and not adopted. An amendment to remove penalties for late remittance if the fee is eliminated was proposed and later withdrawn. Despite those efforts, the chamber adopted the bill on a final voice vote.
Supporters said removing the vendor fee will help the state address revenue needs created by recent federal tax changes and restore budget capacity; opponents said the move disproportionately affects neighborhood retailers and could prompt businesses to relocate or reduce staff. Senate debate repeatedly referenced the larger special-session effort to address an identified budget gap.
The bill—s sponsors said they will continue stakeholder conversations about small-business burdens in 2026, and backers noted the Department of Revenue will update systems to reflect the change. Opponents said referendum or delay should have been used to give businesses more time to adjust.
Votes at a glance: the Senate adopted House Bill 1005 on final reading on Aug. 24. (Final roll-call tally for the floor passage was not recorded in the transcript of the voice vote; the Committee-of-the-Whole report on second reading showed recorded committee votes during the process.)
What happens next: The measure, as amended on the floor, will move toward enrollment and transmittal to the House and, if signed by the governor, become effective Jan. 1, 2026 unless otherwise changed.
