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McDonnell budget to cut accelerated Va sales tax

Bob Lewis, AP Political Writer

RICHMOND, Va. (AP) -- A budget-balancing gimmick enacted 3½ years ago that requires some merchants to pay early estimated sales taxes would almost disappear under a proposal Virginia Gov. Bob McDonnell will include in the budget amendments he presents the General Assembly next week.

The accelerated sales tax was put in place in 2009 at the depth of the worst economic swoon since the Great Depression to artificially boost declining state tax revenues. It would apply to only about 200 retailers statewide under the governor's proposed change.

"The accelerated sales tax is bad policy and needs to be eliminated as quickly as we can," McDonnell said in a news release Tuesday announcing the change, the first of several the administration plans to release this week before the budget is made public.

McDonnell finished midpoint revisions to the state's two-year, $80 billion budget on Friday and formally presents them to the legislature's tax- and budget-writing committees Monday. The General Assembly reconvenes Jan. 9.

Retailers despise the accelerated sales tax, which was also used to help the state overcome another fiscal slump during a recession a decade ago.

"I have always opposed the policy of playing budget games with sales tax receipts," McDonnell said. "The accelerated sales tax penalizes Virginia retailers and merchants and skews states revenues."

The Republican governor, with strong backing from business lobbies, wants lawmakers to authorize nearly $21 million for the fiscal year beginning July 1 to offset a one-time revenue decline expected from raising the threshold for paying accelerated sales taxes from $26 million in annual taxable sales to $48.5 million.

That would exempt about 98 percent of Virginia merchants from paying the accelerated sales tax.

When it went into effect, accelerated sales tax payments applied to all retailers who had $1 million or more in annual taxable sales or purchases.

In 2011, lawmakers approved McDonnell's request to phase out the accelerated payments by raising the annual taxable threshold to $5.4 million, removing the requirement from more than 7,000 merchants but reducing sales tax revenues by about $45.7 million.

The two-year budget passed earlier this year includes McDonnell's request to relieve another 1,407 retailers from the tax and provide $50 million to cover the hit to general revenues.

Retail sales and use tax receipts account for about one-fifth of general state revenues that support such core state services as health care, support for public schools and public safety.

McDonnell also said Tuesday that he will request an additional $250,000 for additional research into Parkinson's disease and related movement disorders at Virginia Commonwealth University. Parkinson's is an incurable ailment that causes muscle rigidity, tremors and changes in speech and gait.