Governor's Budget Will Rapidly Speed Up Elimination of Unfair Sales Tax Policy for Retailers

Press Release

Date: Dec. 16, 2011
Location: Richmond, VA
Issues: Taxes

Governor Bob McDonnell will use the Caboose Budget Bill to rapidly speed up the phase out of the accelerated sales tax policy in the Commonwealth. With the Governor's action, by the end of Fiscal Year 2012 95.6% of affected sales tax dealers will no longer have to make accelerated payments to the state. The Governor will include $50 million to facilitate this policy change. The Governor had earlier sought to begin unwinding the accelerated sales tax beginning in FY2013. With today's action, the governor has sped up the process substantially.

Speaking about the budget action, the Governor noted, "I have always opposed the policy of playing budget games with sales tax receipts. The accelerated sales tax can feel to retailers like a 'double tax.' It penalizes Virginia retailers and merchants and skews states revenues. It is bad policy and it needs to be eliminated as quickly as we can. Last year, in the middle of the General Assembly session, I recommended significant relief for thousands of dealers from the accelerated sales tax. Now, when the General Assembly acts on this proposal, we can continue that progress and remove 95.6% of all initially impacted retailers from this policy by next June. We need to get this anti-business policy off our books and I hope the General Assembly will agree with me and support this budget proposal."

George Peyton and Margaret Ballard of the Virginia Retail Federation commented on the Governor's budget action remarking, "Members of the Virginia Retail Federation applaud Governor McDonnell's funding in his budget to eliminate the accelerated sales tax payment for over 95% of Virginia retailers. This annual onerous tax payment has been a burden for many retailers during these challenging economic times."

To eliminate the accelerated sales tax further, the Governor is asking the General Assembly to appropriate $50 million in the biennial budget to allow for the elimination of the accelerated sales tax requirement for 1,407 more retailers. In fiscal year 2010, which began on July 1, 2009, at the height of the Great Recession, the General Assembly required certain merchants to pre-pay a portion of their July 2010 sales tax remittance in June. This policy change, commonly known as the accelerated sales tax payment, applied to all dealers with $1 million or more in taxable sales and/or purchases in the previous year and was equal to 90% of their retail sales and use tax liability paid in June of the previous year. In the 2011 Session, the General Assembly reversed part of this policy change by raising the $1 million or more taxable sales and/or purchases threshold to a level of $5.4 million or greater in the previous year. This change relieved 7,026 dealers from the accelerated sales tax requirement and decreased revenues by $45.7 million.

The Governor's proposal recommends that the threshold for dealers to be subject to the payment be raised in June 2012. The new threshold level will be $26 million in sales and/or purchases in the previous year. This proposal is built into the Caboose Budget Bill and will exempt another 1,407 dealers from making accelerated sales tax payments next June. Fiscal year 2012 general fund revenues have been reduced by $50 million to account for this provision.


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