Gov. Bob McDonnell

Gov. Bob McDonnell will ask state lawmakers next week to relieve more Virginia businesses of a requirement to pay a portion of their July sales taxes a month in advance.

McDonnell’s proposed changes to the two-year state budget will include a $20.8 million  amendment to eliminate the accelerated sales tax requirement for half of the Virginia businesses that still pay it by the 2014 fiscal year, the governor’s office announced this morning. McDonnell and state lawmakers have worked to gradually phase out the accelerated sales tax, which was initiated as a budget-balancing gimmick in the 2010 fiscal year.

This policy initially applied to all dealers with $1 million or more in taxable sales or purchases in the previous year. The accelerated payment was equal to 90 percent of the retail sales tax liability paid in June of the previous year.

McDonnell and state lawmakers have gradually raised the threshold over the past two years, reducing the number of businesses required to pay the accelerated sales tax. McDonnell’s amendment will raise the current threshold from $26 million of taxable sales to $48.5 million. Under the change, only the top 200 dealers will still be required to make accelerated payments of 90 percent of their previous June 2012 sales tax liability.

McDonnell will submit budget amendments to the General Assembly’s money committees on Monday.

“The accelerated sales tax is bad policy and needs to be eliminated as quickly as we can,” McDonnell said in a statement today. “That’s why I asked the General Assembly to begin eliminating it two years ahead of schedule in 2011 and why I am including another $20.8 million in my proposed budget amendments this year to eliminate the accelerated sales tax for half of Virginia retailers now paying it.

“I have always opposed the policy of playing budget games with sales tax receipts. The accelerated sales tax penalizes Virginia retailers and merchants and skews states revenues. When the General Assembly acts on this proposal, we will have removed the AST from 98 percent of the retailers originally required to make AST payments by 2014. We need to get this anti-business policy off our books as soon as possible and I hope the General Assembly will support this budget proposal.”

– Michael Sluss