Bill

HB 25B-1005

Eliminate State Sales Tax Vendor Fee

2025 First Extraordinary Session Introduced by Jennifer Bacon and 21 co-sponsors

Repeals the state sales tax vendor fee starting Jan 1, 2026, so retailers no longer keep a fee on tax collections; increases General Fund revenue and requires admin costs.

Governor Signed

WeVote Research Nonpartisan

Bill Summary · HB 25B-1005

HB 25B-1005 — Eliminate State Sales Tax Vendor Fee

Status: Governor signed (08/28/2025) | Introduced: 08/21/2025 | Effective: vendor‑fee repeal begins January 1, 2026

Purpose / Intent

The bill repeals the state sales tax “vendor fee” — a small allowance retailers keep to cover the cost of collecting and remitting state sales tax — to promote perceived fairness across retailers, simplify administration, and reduce retailer confusion. The statute includes legislative findings that any revenue increase from repeal is incidental (de minimis) and not a new tax under TABOR.

Key provisions

Repeal: Amends Colorado Rev. Stat. §39‑26‑105 to prohibit retailers from retaining any vendor fee for state sales tax collections beginning January 1, 2026.
- Previously: 4% of state sales tax (capped at $1,000 per retailer per filing period) for most filing periods (with some historical variations).
Conforming amendments:
- Adjusts definitions used in the Colorado Regional Tourism Act (24‑46‑303) to exclude revenue changes attributable to prior vendor‑fee changes from “state sales tax increment revenue.”
- Adjusts mechanics for calculating and preserving the amount credited to the Housing Development Grant Fund (HDGF), specifying a 1.655% allocation of sales tax collections to the HDGF and reducing monthly allocations by the portion required under HB 24‑1434 ($35,985,000/year through FY 2031‑32; $985,000/year beginning FY 2032‑33).
Appropriation: Act includes (and the fiscal notes reflect) General Fund appropriations to implement the repeal.

Fiscal impacts (Legislative Council Staff / JBC)

State revenue increases (LCS final fiscal note):
- +$27.6 million in FY 2025‑26
- +$56.8 million in FY 2026‑27
- +$56.9 million in FY 2027‑28 (and similar thereafter)
Revenue by fund (FY 2026‑27 example):
- General Fund: +$54.6 million
- Housing Development Grant Fund: +$2.235 million
State expenditures (implementation and program impacts):
- Total increase ≈ $1.5 million (FY 2025‑26) and ≈ $2.3 million (FY 2026‑27 and ongoing) — costs split between the Department of Revenue (programming, temporary staff, forms) and Department of Local Affairs (HDGF administration).
- FTE: 1.2 FTE (FY 2025‑26), 0.9 FTE (FY 2026‑27)
Appropriations included in the act:
- $156,219 General Fund (FY 2025‑26)
- $67,499 General Fund (FY 2026‑27) (centrally appropriated costs handled separately)
TABOR implications:
- JBC notes increased TABOR refund liability of ~$56.8 million in FY 2026‑27 (due to higher General Fund receipts and forecast interactions).

Who is affected

Retailers: no longer retain the vendor fee for state sales tax collections beginning 1/1/2026 (affects retailers eligible under prior rules — typically those with timely returns and filing period sales under thresholds).
State funds: General Fund and the Housing Development Grant Fund see net revenue increases; departmental budgets (DOR, DOLA) absorb implementation costs.
Local governments/home‑rule jurisdictions: the bill contains conforming language preventing double counting of revenue for regional tourism increment calculations; most local vendor fee practices (if any) are not directly changed by this state repeal.

Procedural / timeline notes

Passed both houses (House amended and subsequently concurred), enrolled and sent to Governor 08/26/2025; signed by Governor 08/28/2025.
Repeal effective date established in statute: January 1, 2026.
Fiscal notes produced: initial and final LCS fiscal notes (08/21/2025; final 10/16/2025) and JBC staff analyses (Aug 21–23, 2025) document implementation costs and TABOR effects.