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Virginia Politics
Posted at 12:36 PM ET, 12/16/2011

McDonnell proposes quicker phase-out of ‘accelerated sales tax’ requirement

Gov. Bob McDonnell (R) announced Friday that he recommends speeding up the phase-out of a policy that requires retailers to pay sales tax a month early, allowing the state to receive money in an earlier fiscal year.

McDonnell will include $50 million in his two-year budget to be released Monday to pay for eliminating the requirement for 1,407 retailers.

By the end of fiscal year 2012, nearly 96 percent of affected sales tax dealers will no longer have to make accelerated payments to the state.

“I have always opposed the policy of playing budget games with sales tax receipts,’’ McDonnell said in a statement. “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.” 

McDonnell had planned to make the change in fiscal years 2013, but will speed up the process by a year.

The General Assembly passed a $78 billion budget for fiscal 2011 and 2012 with no general tax increase, but the budget did include several fees and hundreds of millions of dollars in cuts, including to health care, schools and public safety, as it tried to close a $4 billion shortfall over the two years.

Virginia ended the fiscal year with a surplus of $403 million in 2010, and $545 million in 2011. Both came from higher-than-expected tax revenue and savings.

Democrats criticized McDonnell for declaring a surplus after years of cuts to core services; delayed payments to the Virginia Retirement System; and the requirement that retailers pay sales tax a month early, allowing the state to receive money in an earlier fiscal year.

In this year’s session, legislators reversed part of this policy change and relieved 7,026 dealers from the accelerated sales tax requirement. 

By  |  12:36 PM ET, 12/16/2011

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