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State House Finds New Revenue - Stopping Big Retailer's Sales Tax Skim

February 10, 2009

Richmond, VA - Virginia lawmakers' struggle to balance the state budget is a task made seemingly impossible by the ongoing freefall in the U.S. economy. The state faces a $3.2 billion shortfall, an amount expected to increase when January revenue numbers are tallied.

Michael Cassidy, executive director of The Commonwealth Institute, approves of one effort to raise revenue. A bill in the House of Representatives would cap the discounts that retailers can collect from sales taxes.

"Right now, it costs the state over $64 million a year, and a lot of the 'big box' retailers in the state get millions through the program. Wal-mart alone gets over $4 million dollars a year in dealer discounts in Virginia, by being able to keep a piece of the sales tax that folks pay."

The original intent of these 'dealer discounts' was to cover the cost of collecting and accounting for sales tax, says Cassidy. Today, however, it means big retailers get big rewards for what has essentially become a keystroke on their computerized cash registers. Retailers contend they are already victims of a serious sales slump, and need the additional revenue.

Cassidy says trimming dealer discounts is only part of the picture. The General Assembly has already sacked thousands of state workers and trimmed nearly $1 billion from education and medical budgets, yet those cuts won't fill the void. He believes the federal stimulus package would help. Some estimates put Virginia's slice of that pie at $5.8 billion.

Lawmakers in the House and Senate now have competing revenue plans, although one thing they agree on is a tax amnesty program to encourage scofflaws to pay up. There are three weeks left in the legislative session to hammer out all the other differences between the bills.

Aries Keck, Public News Service - VA