HB 1484 (McNamara) and SB 850 (Suetterlein) propose to eliminate the 1 percent local option sales and use tax on groceries and essential personal hygiene products, effective July 1, 2023. Under the bills, the state would backfill lost revenue in the form of a supplemental school payment. Beginning July 1, 2023, and until July 1, 2025, this revenue would be distributed based on each city and county’s estimated average share of monthly sales and use tax distributions attributable to sales of food for human consumption and essential personal hygiene products. After July 1, 2025, funding would be distributed based on each city and county’s pro rata share of sales and use tax collections.
HB 1484 has been referred to the House Finance Committee and SB 850 has been referred to the Senate Finance and Appropriations Committee.
Sales and use taxes on groceries were the focus of extensive discussions during the 2022 legislative session and the subsequent special session, culminating in a compromise proposal finalized in June 2022. This compromise, which took effect January 1, eliminated the state portion of the sales and use tax on groceries and committed to replacing the portion that is distributed based on school-age population out of state General Fund revenues. VACo encourages legislators to take no further action to eliminate this important local revenue source. Although VACo appreciates the legislation’s provisions for revenue replacement, localities would be reliant on the state to continue to appropriate these funds in addition to the school-age population distribution.
Several related measures have also been introduced dealing with sales and use taxes on food for human consumption and essential personal hygiene products.
- HB 1686 (Greenhalgh) and SB 1008 (DeSteph) would authorize local governing bodies of cities and counties to provide an exemption from the 1 percent local option sales and use tax for food for human consumption and essential personal hygiene products. HB 1686 has been referred to the House Finance Committee; SB 1008 has been referred to Senate Finance and Appropriations Committee.
- HB 2196 (Byron) would exempt essential personal hygiene products and infant formula from the local option sales and use tax.
VACo Contact: Katie Boyle