Meals taxes: Bills introduced in response to issues with meals tax collection in the City of Richmond were passed by indefinitely in Senate Finance and Appropriations on February 27. HB 1483 (McQuinn), as initially introduced, applied to all localities and contained provisions that would have hampered local tax collections, but as amended prior to crossover, applied only to cities with directors of finance. The bill required that any voluntary meals tax payment accompanied by a tax return or written instructions as to its application would be applied in accordance with the return or written instructions, and that in this situation, the applicable statute of limitations would be extended by a period of 12 months. The bill also clarified the ability of the director of finance to waive any penalties and interest when he or she determined that such a waiver was in the best interest of the locality. After the amendment in the House to limit the bill’s scope to certain cities, VACo removed its opposition to the legislation. Senate Finance and Appropriations Committee members opted to treat the bill in similar fashion to its Senate companion, which was passed by indefinitely earlier in the session. HB 1535 (Jones), which was introduced at the request of the City of Richmond, was also passed by indefinitely in Senate Finance and Appropriations on February 27. The bill would have allowed any locality that requires local businesses to collect meals taxes to allow such businesses a commission of up to 5 percent in the form of a deduction from the tax remitted (this commission is intended to compensate businesses for credit card processing fees and other administrative costs associated with collecting the taxes), without requiring that the business be up-to-date on its taxes to collect the commission.
Omitted local taxes: HB 1503 (Jones) was reported from Senate Finance and Appropriations on February 27 and is headed to the Senate floor. Chesterfield County had requested legislation to address a situation in which a local tax has not been assessed, or has been assessed at less than the law required. Under current law, in this case, the commissioner of the revenue (or other assessing officer) must issue corrected assessments and levy taxes on the new or supplemental assessment. The bill provides flexibility to the local governing body to work with taxpayers who receive a new or supplemental tax bill under these circumstances, and would allow the local governing body to authorize the local treasurer (or other officer responsible for the collection of taxes) to enter into an agreement with the taxpayer to allow payment of the taxes and any penalties and interest over a reasonable period, not to exceed 72 months, similar to existing Code provisions allowing for payment plans for delinquent real property taxes. VACo supports the bill.
Assessment notices: HB 639 (Sullivan) and its companion, SB 677 (Durant), have passed both chambers. HB 639 was requested by Arlington County and is intended to clear up confusion caused by 2023 legislation that required localities with annual or biennial assessments, or that conduct assessments in-house, to include information on the assessment notice regarding the “effective tax rate increase” – the amount by which the proposed rate exceeds the lowered rate that would offset increases in assessments. However, in some jurisdictions, the governing body has not yet proposed a tax rate when assessment notices are mailed, causing concerns among some localities as to how to comply with the law. HB 639 and SB 677 will provide clarity by specifying that the notice must include the lowered rate necessary to offset the increases in assessments and generate the same amount of real estate tax as the previous year (when growth in overall total assessed value of real estate would result in an increase of one percent or more in the total real property tax levied). VACo supports this legislation as a clarification to enable localities to comply with the policy decision enacted last year.
Personal property taxes: HB 1429 (Laufer) and SB 483 (Aird) have passed both chambers. The bills add certain farm machinery, equipment, and implements used by an indoor, closed, controlled-environment commercial agricultural facility to the list of types of property that local governing bodies may wholly or partially exempt from taxation, or tax at a different rate than the rate imposed on general tangible personal property. HB 1502 (Willett) and SB 194 (VanValkenburg) are headed to a conference committee to resolve differences between the bills. As introduced, the bills eliminated the sunset provision on the authorization for localities to impose a different tax rate on certain motor vehicles than the rate applicable to the general class of tangible personal property (legislation allowing this authority passed in 2022 with a January 1, 2025, sunset date). As amended in the Senate, the sunset date would be extended to January 1, 2027; the House approach would eliminate the sunset.
Taxation of heated tobacco products: HB 1099 (Kilgore) was introduced at the request of the Attorney General and is intended to ensure that Virginia remains in compliance with the 1998 Tobacco Master Settlement Agreement by revisiting changes made to the definition of “cigarette” in 2019 that excluded heated tobacco products from the definition of a cigarette. Although these products are not currently sold in the United States, the Office of the Attorney General (OAG) anticipates that a product may be introduced into the Virginia market this year, and the OAG is concerned that under the current statutory language, this product would not be required to be stamped, which could place Virginia out of compliance with the Master Settlement Agreement, thus placing Virginia’s annual payments from the Agreement in jeopardy. HB 1099 redefines heated tobacco products as cigarettes, which will require these products, when they are approved for sale in Virginia, to be stamped, and will make them subject to the state cigarette tax (although at a lower rate than the tax for traditional cigarettes), rather than the state “other tobacco products” tax. Defining these products as cigarettes will also make them subject to local cigarette taxes. To address concerns expressed by the distributors, who are responsible for stamping cigarettes, that existing cigarette tax stamps will not be able to be applied to this new product, language was added to the bill directing the Department of Taxation to develop a new stamp for heated tobacco products and barring certification of heated tobacco products for sale until the stamp has been developed.
VACo Contact: Katie Boyle