HJR 60: Joint Subcommittee to Study
and Revise the State Tax Code
The joint subcommittee held
its third meeting of the year, heard from the staff on follow-up information
on questions raised during the August task force meetings, and received
the two task forces' reports that contained legislative recommendations.
In addition to the August meetings, each task force met in May, June,
and July to receive information about and discuss the issues assigned.
The joint subcommittee also
determined what its work schedule would be for the remainder of this year
and that it would be necessary to continue the study for one more year.
Staff presented information
provided by the Department of Taxation regarding the revenues that could
be raised by expanding the cigarette tax to include all tobacco products
(snuff, chewing tobacco, cigars, and smoking tobacco). The most common
way that states tax tobacco products other than cigarettes is to levy
a tax on the wholesale price of the tobacco product. North Carolina imposes
a tax of two percent on the wholesale price of such products, other than
cigarettes, while Maryland imposes a 15 percent tax on the same tobacco
Assuming Virginia were to levy
a two percent tax on the wholesale price of tobacco products other than
cigarettes, the estimated revenues are $2.7 million in fiscal year 2004,
$2.9 million in 2005, and $2.9 million in 2006. Also, sales tax revenues
would increase by approximately $120,000 in fiscal year 2004, $130,000
in 2005, and $129,000 in 2006.
A representative from the Department
of Motor Vehicles (DMV) explained the process for collecting the motor
vehicle sales and use tax on casual sales of vehicles. When a customer
submits a completed application for a Certificate of Title and Registration,
the customer may also provide documentation of the selling price, which
is generally accepted as the selling price on which the sales tax is based.
If the customer fails to provide such documentation, the selling price
is compared to the NADA Average Trade In Price, and the tax is based on
that determination. According to DMV's most recent numbers, almost
$45 million was collected in sales tax revenues out of $1.2 billion in
casual sales of motor vehicles.
The chairmen of each
task force reviewed the issues assigned to the two task forces and explained
the recommendations made by each. Because of the ever-growing revenue
shortfall the Commonwealth is experiencing, the uncertainty about when
the economy will begin to grow again, and what effect major changes in
the state's tax code might have on revenues, the consensus is to
extend the study for a third year and propose fewer changes during the
2003 General Assembly Session.
The proposed recommendations
of the task forces (the applicable task force and item/issue number
are shown in parentheses) are:
- Adopt the Orrock Subcommittee
Report with standards for charitable organization sales tax exemptions
(Task Force 2, Item 1).
- Restore conformity
with federal income tax law for businesses, with the exception
of accelerated depreciation and carry back loss issues in order
to eliminate fiscal impact (Task Force 1, Item 1).
- Revise administrative
appeals process for income taxpayers to provide:
- an independent
hearing officer (Task Force 1, Item 8)
- no payment of tax
in advance (Task Force 2, Item 8).
- Eliminate June accelerated
sales tax collections in 20022004 budget (Task Force
2, Item 8).
- Revise property tax
appeals process to clarify procedures and standard of proof for
taxpayer (Task Force 2, Item 10).
- Phase out the estate
tax beginning in fiscal year 2005 (Task Force 2, Item 10).
- Impose no new unfunded
state mandates on localities and, to maximum extent possible,
eliminate existing ones (Task Force 1, Item 7).
- Enact a moratorium
on new categories of sales and use tax exemptions (Task Force
2, Item 4).
- Maintain policy of
no sales tax on access to Internet and digital downloads (Task
Force 2, Item 9).
The joint subcommittee
will next meet on September 30 to determine formally which of the recommendations
it will propose for the upcoming session of the General Assembly. That
subcommittee meeting will take place at 1:00 p.m. in Richmond in House
Room C. The statewide public hearings, originally scheduled for October,
have been postponed until next year when the joint subcommittee makes
its final major recommendations. There will, however, be one public hearing
in Richmond on October 28th at 7:00 p.m. in Senate Room B of the General
Assembly Building. The closing meeting of the joint subcommittee for this
year will be November 13, at which time the final report will be presented.
The Hon. Emmett
The Hon. Robert F. McDonnell
Joan E. Putney
Division of Legislative Services
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