The House/Senate conference Transportation Bill (HB 2313) raises Virginia’s sales tax rate from 5% to 5.3%, EXCEPT, as Del. Bob Marshall points out, it is increased to 6% in Northern Virginia and Hampton Roads.
The bill includes the following tax increases:
- Replace the current 17.5 cents per gallon flat tax on gasoline with a 3.5 % wholesale sales tax paid by distributors, which will be passed on to consumers, and a 6 % wholesale sales tax on diesel fuel.
- Increase the 5% retail sales and use tax paid statewide on most purchases to 6% in Northern Virginia and Hampton Roads and 5.3 % in the rest of the state.
- Apply a $100 annual fee on alternative fuel vehicles, including hybrids.
- Increase the current 3% sales tax paid on the purchase of motor vehicles to 4%.
- Increase the amount of general fund money diverted to fund transportation from .50 % to .675 %, raising roughly $200 million when fully phased in.
- The sales tax in Northern Virginia and Hampton Roads will be 6% instead of the 5.3% in the rest of the state.
- In Northern Virginia there will be an increase of 40 cents per hundred dollars on the sale of a house. That’s an extra $1600 on the sale of a $400,000 home.
- Also in Northern Virginia there will be a 2 % occupancy tax for hotels.
- If Congress passes the Marketplace Equity Act (which requires on line businesses to collect sales taxes) the proceeds will be distributed as follows: 55.55% for schools; 22.2% for local governments with no restrictions; and 22.2% for roads and transit. If Congress does not pass the Internet sales tax collections act, an additional 1.6 % tax would be added to the wholesale gas tax.
Not all of the sales tax increase (the extra .3% statewide or extra 1% in Northern Virginia & Hampton Roads) will go to transportation. Part will go to schools and other general fund programs. There is no prohibition from using more of the tax increase for things other than transportation, nor anything to stop reinstating the gas tax on top of all the other taxes in future!
John Taylor of Tertium Quids adds that the conference bill “also allows ALL local governments the ability to impose a 1% sales tax without a referendum or sunset date!”
If this is all accurate (the conference bill is not yet available on the Legislative Information System website, so we can not verify all this), it may soon be cheaper to shop in Maryland and DC, both of which have a 6% sales tax, than it will be in Northern Virginia if localities here place their own 1% tax on top of the 6% state sales tax. At that point, Tysons Corner could kiss many of those shoppers coming from DC and Maryland goodbye thereby decreasing revenue from the sales tax.