Examiner Reports on Delegate Keam's Accelerated Sales Tax Budget Amendment
House budget eliminates detested sales tax program
A Virginia tax program that forces businesses to pay one month of sales taxes early would be virtually eliminated under the budget approved Thursday by Virginia's House of Delegates. The program, which was highly unpopular with restaurants and retailers, requires businesses with sales or purchases of at least $1 million annually to pay 90 percent of their June tax liabilities from the previous year before the fiscal year ends June 30. Normally taxes aren't due until the month after purchases.
The retailers get credited for their payments, but it essentially amounts to an interest-free loan to the state, said Mike Anderson, owner of Mango Mike's in Alexandria, which had to advance the state $10,000 last year.
"Even if you lend money to the mafia, they give you some kind of interest on it," he said. "It's pretty creative. Not fair, but creative."
Joe Theismann's restaurant in Alexandria was affected to the tune of just over $20,000 last year, said owner Vernon Grandgeorge.
"How many people can come up with an extra 20 grand on the spot in tough times?" he said. "I don't know."
It was originally scheduled to be phased out by 2015, but Gov. Bob McDonnell, who opposes the program, introduced a budget amendment last year to move that date up to 2013. In December, he also proposed using $38 million to eliminate the program this June for about 75 percent, or 6,500, affected retailers.
The House budget goes further, providing $112 million to raise the threshold from $1 million to $50 million, which would exempt 98 percent of affected retailers.
The Arlington County Chamber of Commerce hasn't taken an official position on the amendment, but President Rich Doud said he agreed with the general notion of raising the threshold.
"It's rarely, if ever, a good thing for small businesses to have to put cash flow out in advance," he said. "The harder things are, the more precarious cash is to business."
Northern Virginia Dels. David Englin, D-Arlington, and Mark Keam, D-Fairfax, both introduced budget amendments to increase the threshold so that fewer small businesses would be affected. Englin has derided the program as a budgetary gimmick to help the state balance its books. McDonnell, though, has said that the revenue from the policy had already been built into last year's forecast and actually came in less than expected.