RICHMOND, Va. (AP) – An industry group representing hundreds of companies doing business in Virginia says the state sales tax on digital products proposed by Republican Gov. Glenn Youngkin and approved by Democrats in their budget bill is opposed to the expansion plan. law.
Both chambers of Congress included a new sales tax on purchases such as streaming subscriptions, cloud storage and online downloads in the two-year budgets they passed last week. The Senate extended the law beyond the House of Representatives to apply to transactions between companies.
The Northern Virginia Technology Council and other business-focused lobbying and trade organizations said in a letter sent to lawmakers starting Tuesday that the General Assembly should reject the proposed “tech tax.” The tax would increase state budget revenues over the next two years, estimated to generate more than $1 billion, according to budget documents from both chambers. The letter says that if policymakers move forward with the proposal, they should at least broadly exempt business-to-business transactions, or companies would be forced to pass costs on to consumers or to other states. He said he may be forced to do so.
“The proposed high-tech tax increase would put Virginia businesses at a significant competitive disadvantage in a globally competitive and narrow-margin industry. This tax would impact jobs and “It is very likely that internal R&D investment will be reduced, and the majority of that investment is currently concentrated here in Virginia,” said Jennifer Taylor, group president and CEO. said in a statement included with the letter. the organization shared with The Associated Press.
The Technology Council says on its website that it has nearly 500 members, ranging from Fortune 100 companies to academic institutions and government contractors.
Additional interest groups also signed the letter, including the Virginia Chamber of Commerce, the Data Center Coalition, and the Broadband Provider Coalition.
So is the Virginia Association of Manufacturers, whose president and CEO Brett Vassey said the proposed tax would increase the cost of software and online training materials used in factories.
Democrats say the tax expansion is a common-sense adjustment to bring Virginia's tax code in line with an increasingly digital world.
Democratic Sen. L. Louise Lucas, chair of the Senate Appropriations Committee, said that currently, individuals pay sales tax on CDs but not digital downloads, and companies pay sales tax on physical servers. He said he would pay taxes on cloud storage, but not on cloud storage. She presents her chamber's budget proposal.
Lucas, who called the proposal a “new economy” tax, said: “I think it makes sense that the same tax would apply to individuals and businesses when they use the same services.”
When Youngkin presented his 2024-2026 budget in December, he called for an expansion of the sales tax to cover what he called “Big Tech” loopholes. But he also combined it with an income tax cut that Democrats rejected in a budget that would have reduced overall tax revenue.
“Governor Youngkin made it clear in his State of the Union address that he is only interested in plans to reduce Virginia’s tax burden. While the Governor will consider all legislation submitted, the Governor’s Emancipation Opportunity Budget , has proposed nearly $1 billion in tax cuts over two years, building on the $5 billion in tax cuts we delivered to Virginians on a bipartisan basis in his first two years in office,” spokesperson Christian Martinez said in an email. said in an emailed statement.
Later this week, lawmakers are expected to send competing budget proposals to a conference committee. The conference committee is a group of lawmakers working to find a compromise proposal to present to Mr. Yonkin. This process takes place in public and has not been completed on time in recent years.
