Shops told to pay up as Virginia collects sales tax early

By Andy Jenks - bio | email
Posted by Terry Alexander - email

RICHMOND, VA (WWBT) - Many of your favorite shops are being hit with some hefty tax bills a month early.

For just the second time this decade, Virginia is speeding up its sales tax collection. Businesses are now in the unusual position of having to pay the tax before merchandise is even sold.

A few weeks ago, Thom Suddeth of the Road Runner Running Store in Carytown got a letter in the mail.

THOM: "It was a gift from Tim Kaine to us."
ANDY: "Gift used sarcastically?"
THOM: "Yes, sir."

The so-called "gift" was the notice of Virginia's accelerated tax collection. Proposed by Gov. Tim Kaine, and approved by the General Assembly, it requires businesses like Thom's to pay estimated June sales tax a month ahead of schedule, or face a penalty.

Based on last June's figures, Thom owed more than $5,000, which he paid reluctantly. But in some cases, stores haven't had enough time to generate the money, because the month of June isn't over.

"It's another burden on the retail merchant that's already having a tough time in today's economy," Suddeth said.

So why only this month? Virginia's fiscal year ends next week, and Secretary of Finance Ric Brown says collecting the June tax several weeks earlier than usual helps make the budget for education, health, and safety obligations.

"We will take steps to unwind this acceleration in 2013, assuming that we're in little bit better shape coming out of the recession by then," Brown said.

For retailers like Jack Burke of Leo Burke Furniture in Carytown, that's a long time to wait.

"Naturally, I feel like it's very unfair. I feel we're giving the state an interest free loan," Burke said.

Jack wrote a letter explaining why he shouldn't have to pay the advance, but he was denied. And now, a battle is brewing behind the that customers are unlikely to ever notice.

"No, there's nothing we can do to adjust for that. We just have to bite the bullet, pay the tax, and we'll get caught up next month, but it doesn't make it any more palatable," Burke said.

Today is the deadline for businesses to make their estimated tax payments by mail, so the state argues that businesses are only paying June receipts about a week early. Even so, the Retail Merchants Association will be asked to go after this policy in the next General Assembly session.

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