Proposed state budget cuts dealer discount

By Heather Sullivan - bio | email

RICHMOND, VA (WWBT) - The proposed state budget on Governor McDonnell's desk cuts the dealer discount, money retailers count on for collecting the state sales tax. The move could generate millions of needed dollars for the state. But the retailers say they need the money, too.

The dealer discount is a small percent of the state sales tax that retailers get to keep to cover their expenses in collecting and accounting for the tax. It varies depending on their amount of sales.

It's a discount that adds up for retailers. Said Sarah Paxton with La Difference furniture store, "My guess is that it's somewhere between $2500 and $4000 dollars a year" for her store. James Hatcher, President of Pleasants Hardware says, "I think it will cost us about $12,000 a year."

Because of the budget crunch, the proposed state budget suggests letting stores with revenue less than $4.8 million a year to keep 40% of their usual dealer discount, but cuts it altogether for stores that sell more than that. That could add up to $64 million a year for the state, but leaves the cost of collecting tax to retailers.

Said Paxton of La Difference, "There's a lot of training and paperwork. My accountant easily spends three hours a month just doing our sales tax report, just making sure its completely accurate."

Some argue that technology makes collecting the tax easy. But retailers say having to file paperwork for exempt customers like charities and wholesalers, and changes like sales tax holidays, take time.

Said Hatcher with Pleasants Hardware, "We need to maintain tax exempt forms on file for people, we need to make sure if they are non-tax, that they're legitimate non-tax. So it's a matter of almost a daily basis of enforcing the tax code."

Another proposed change: retailers may have to pay some taxes a month earlier, which could give the state an estimated $140 million.

But George Peyton with the Virginia Retail Federation said, "Last time this happened back in the Warner administration, some of them had to go out and take credit lines to make sure they had the money to pay their accelerated sales tax payment."

Already facing layoffs and budget cuts, the state needs the money. But the retailers say they need it, too.

Said Paxton, "The loss of income is just one more nail that you really don't want to have."

Governor McDonnell is reviewing the proposed budget.

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