eNews: Special Edition February 20, 2022

Sunday, February 20, 2022 - 05:30pm

Budget Sunday: Grocery Tax update

This afternoon and early evening, the House Appropriations Committee (HAC) and Senate Finance and Appropriations Committee (SFAC) reported their respective amendments to the budget submitted by former Governor Northam in December.

This is the first update on the budget release from today. VML staff will continue to analyze these and other amendments released by HAC and SFAC and provide further updates to our members tomorrow and later in the week as information becomes available.

Grocery tax update

The amendments reported by SFAC and HAC related to the exemption of groceries from sales taxes were consistent with the approaches taken by the respective bills passed by the Senate and House of Delegates. See below for a status update on these two bills.

As House and Senate budget negotiators begin their work, VML will continue to encourage them to honor two simple principles on any changes to Virginia’s sales taxes:

(1) fully replace all lost local funding; and

(2) codify the local revenue replacement method in state law.

Senate bill status

SB451 (Boysko): In its latest form, SB451 would exempt groceries from the 1.5 percent state sales tax, leaving the 1 percent local option sales tax alone. Importantly, the Senate compromise bill also would codify revenue replacement to localities in the Code of Virginia.

Revenue Lost from One Percent K12 Sales Tax Distribution: ~ $280 million annually in K12 funding, distributed by school-aged population;
Revenue Replacement: ~ $280 million annually in K12 funding, distributed by school-aged population, through an amendment to the Code.
Senate Budget Update: Amendments reported Sunday evening by the Senate Finance and Appropriations Committee (SFAC) were consistent with the revenue replacement approach currently laid out in SB451 (Boysko).

House bill status

HB90 (McNamara): HB90 would exempt groceries from both the 1% local sales tax and the 1.5% state sales tax. In its current form, HB90 proposes to replace local K12 revenue through the biennial budget, and would replace revenue from the local 1% sales tax through a complex mechanism that would be set out in the Code.

Revenue Lost from One Percent K12 Sales Tax Distribution: ~ $280 million annually in K12 funding, distributed by school-aged population;
Revenue Replacement: K12 revenue will be replaced through the biennial budget, consistent with former Governor Northam’s introduced budget.
Revenue Lost from One Percent Local Option Sales Tax: ~ $280 million annually in general revenue for local governments;
Revenue Replacement: ~ $280 million annually through a complex mechanism in the Code that may not account for changes in local grocery sales in future years.
House Budget Update: Amendments reported Sunday afternoon by the House Appropriations Committee (HAC) were consistent with the revenue replacement approach laid out in HB90 (McNamara).

VML Contact: Carter Hutchinson, chutchinson@vml.org

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