The Virginia Senate voted today to change how merchants are compensated for collecting the state's sales tax, leading a spokesman for the state's merchants to denounce the revision as an indirect tax increase.
If approved by the House of Delegates, the legislation would generate $22 million to state coffers during the next two years.
The Senate approved a second measure today that would raise an additional $19 million by freezing for two years a rollback of gross receipts tax for the state's utilities, while exempting small mutual telephone associations from the tax.
The sales tax change, offered by Senate Majority Leader Hunter B. Andrews (D-Hampton), would place a $1,000-a-month limit on the amount any company can keep as a fee for collecting the state's 4 percent levy.
"What you smell ain't necessarily what's cooking," said Sumpter T. Priddy Jr., the president of the Virginia Retail Merchants Association. "When the cost of operating goes up, the cost to the customer goes up."
Priddy said the $1,000 ceiling for a company that has 40 stores in Virginia, for example, works out to $25 a store. "There's no way that can cover the collection costs," Priddy said. "We'll have to pass it on. There is no such thing as a free lunch."
Priddy also criticized Andrews for "not giving us a chance to fight this by, in his wisdom," belatedly tacking it onto a bill that originally called for a more modest change in tax collecting procedures.
The current procedure permits every collection point to retain 3 percent of that portion of the sales tax(3 percent) that is passed on to the state, no matter how many locations the company has. A merchant gets nothing from the 1 percent that goes to the locality in which the business is located.
Andrews said the change would affect only the state's 217 largest dealers, because all others already retain less than $1,000 a month.
A similar bill was approved by the Senate last year, but died in the House. Priddy vowed today to carry the fight to the House, although this year, an even stricter proposal, capping the fee at $500, is pending.
The original bill, which is incorporated in the final version, would produce $3.2 million during the next two years by giving the state five extra days of interest each month to invest its tax collections. It would accomplish that by moving from the 20th of each month to the 15th the date by which firms that collect the tax must pass it on to the state.