Retail Sales and Use tax; levies tax on following services: admissions, charges for recreation, etc. (HB889)

Introduced By

Del. Vivian Watts (D-Annandale)

Progress

Introduced
Passed Committee
Passed House
Passed Senate
Signed by Governor
Became Law

Description

Sales and use tax on services. Levies the retail sales and use tax on the following services: admissions; charges for recreation, fitness, or sports facilities; nonmedical personal services or counseling; dry cleaning and laundry services; companion animal care; residential home repair or maintenance, landscaping, or cleaning services when paid for directly by a resident or homeowner; vehicle and engine repair; repairs or alterations to tangible personal property; storage of tangible personal property; delivery or shipping services; travel, event, and aesthetic planning services; and communications services that are not subject to the communications sales and use tax and are not digital personal property. The bill also imposes the retail sales and use tax on digital personal property, defined in the bill as a digital product delivered electronically that the purchaser owns or has the ability to continually access without having to pay an additional subscription or usage fee to the seller after paying the initial purchase price. Revenues generated by the taxes levied on services and digital personal property shall be allocated in the same manner as other sales and use taxes; however, revenues from the state portion of the sales and use tax that would be allocated to the general fund shall instead be allocated to school divisions as follows: (i) 60 percent shall be distributed to localities on the basis of school-age population and (ii) 40 percent shall be distributed to localities on the basis of the high-need student population in the locality. The bill clarifies that a high-need student population includes students who are (a) automatically certified for free school meals because of participation in social services programs, (b) participants in a program of special education, or (c) English language learners. The bill provides certain exemptions to the sales and use tax on services, including health care services that must be performed by a person licensed or certified by the Department of Health Professions, veterinary services, professional services, Internet access services, and services provided by a person who does not receive more than $2,500 per year in gross receipts for performance of such services. The bill exempts services purchased by a nonprofit organization and services purchased by a homeowners' association or by a landlord for the benefit of his tenant. The bill also repeals the service exemptions currently provided for the sale of custom programs and modification of prewritten programs. The bill imposes the communications sales and use tax on prepaid calling services and on digital subscription services, defined in the bill as services for which the user pays in order to access and use software, reading materials, or other digital data or applications for a defined period of time, which products the user does not own or have permanent access to outside of such period of time. Read the Bill »

Notes

The Fiscal Impact Statement for HB889 indicates that the legislation will result in significant administrative costs and a positive revenue impact over several fiscal years. The administrative costs to the Department of Taxation are detailed for fiscal years 2025 to 2030, starting at approximately $919,970 in 2025 and gradually decreasing each year. The net overall positive revenue impact is substantial, with estimates showing millions of dollars in increased revenue each fiscal year from 2025 to 2030, largely due to the imposition of Retail Sales and Use Tax on digital personal property and selected services.

(Automated summary by ChatGPT)

Outcome

Bill Has Failed

History

DateAction
01/09/2024Committee
01/09/2024Prefiled and ordered printed; offered 01/10/24 24104556D
01/09/2024Referred to Committee on Finance
02/02/2024Assigned Finance sub: Subcommittee #3
02/03/2024Impact statement from TAX (HB889)
02/05/2024Subcommittee recommends continuing to 2025
02/07/2024Continued to 2025 in Finance

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