Hampton Roads residents could soon be paying state sales tax on everything from Netflix and Hulu subscriptions to additional cloud storage and online software.
The latest version of the proposed two-year state budget includes a digital sales tax that would apply Virginia sales tax rates to all digital goods purchased online.
That means video games, smartphone apps, music and streaming services purchased online will be subject to state sales tax. Depending on location, consumers in Hampton Roads may be subject to up to 7% sales tax on digital purchases. Your $15.49 monthly Netflix subscription may be subject to up to $1.08 in sales tax.
“As consumer spending habits have changed over the past few decades, this means that, for example, sales tax will be applied equally to those who buy physical CDs and those who buy digital versions.”・Budget Policy Analyst Megan Davis said. he said in an email to the Commonwealth Institute for Fiscal Analysis.
Davis said the budget would also tax purchases of software applications when the end user is a business. A previous budget proposed by the Virginia Senate would have taxed all business transactions.
The sales tax could generate more than $1 billion a year in revenue for the state, according to an analysis by the Commonwealth Institute, a nonprofit, nonpartisan think tank based in Richmond.
Some members of Hampton Roads’ business community oppose the digital sales tax, especially the business-to-business aspect.
Gretchen Heal, vice president of government affairs for the Hampton Roads Chamber of Commerce, said her business membership organization opposes the sales tax proposal. Mr Heal said it would have a negative impact on businesses of all sizes. He also said Virginia would be less competitive than states without a digital sales tax.
Martin Joseph is president and CEO of 360IT Partners, a Virginia Beach information technology company that provides services such as cloud storage and cybersecurity. Joseph said that if a digital tax is enacted, these cloud services will become more expensive.
“If we are forced to collect sales tax, it will affect our customers,” Joseph said.
Joseph said he is also concerned about the sales tax’s impact on economic development, saying it could make future businesses more reluctant to move to Virginia with the additional tax burden.
“That makes no sense at all,” he said.
State Sen. L. Louise Lucas, D-Portsmouth and chair of the Senate Appropriations Committee, supports the measure, saying it is extremely fair to tax businesses and consumers the same amount, the Associated Press reports. He is said to have expressed his thoughts.
Gov. Glenn Youngkin supported the measure in his original budget, which was released before the House and Senate amendments, but his plan, which also included an income tax cut, was removed by lawmakers.
The digital sales tax is opposed by Virginia business and industry groups, including the Northern Virginia Technology Council, the Virginia Chamber of Commerce, and the Virginia Manufacturers Association. The two organizations sent a joint letter to lawmakers in developing the budget.
The proposed budget now goes to Youngkin, who can suggest amendments to the document or veto items. The General Assembly will reconvene on April 17 to take up Youngkin’s amendment and veto.
Trevor Metcalfe, 757-222-5345, trevor.metcalfe@pilotonline.com
