For over a decade, a Virginia tax-free weekend was held in August to help shoppers save money on specific items like clothing and school supplies. Sales tax holidays are popular nationwide, with a least fifteen states hosting similar events throughout the summer.
But this year, a provision governing the Virginia sales tax holiday expired on July 1, and lawmakers have not renewed it. (Doing so would require particular legislative action that seemed unlikely given political divisions in the Virginia legislature.)
Meanwhile, the Commonwealth had at an estimated budget surplus of over $3 billion, which Virginia Gov. Glenn Youngkin pointed to in calling for a billion dollars in tax cuts.
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“When we have growth, then we have growth in receipts into the state government, which allow us to continue to reduce taxes and increase record investments in these key priorities,” Youngkin said in a statement.
Virginia Sales Tax Holiday
- Virginia's sales tax holiday weekend typically began on the first Friday in August, just in time for back-to-school shopping.
- Virginia sales tax is 5.30%, but when combined with local sales tax averages about 5.75%, according to the Tax Foundation.
Data showed that last year, Virginia families could spend over $600 on school supplies. During the sales tax holiday, savings could be over $35. Alternatively, groups and organizations offering items like new backpacks to families in need could provide more supplies to a greater number of students due to thousands of dollars of savings. And Virginia's tax-free weekend didn't just apply to school supplies — other items, such as clothing and emergency supplies, qualified as tax-exempt.
The Virginia law that enables the sales tax holiday needed to be renewed by the legislature before the first of July because Virginia's budget year ended on June 30. Other state legislative changes typically become effective on July 1. For example, Virginia gas taxes increased on July 1, right before the Independence Day holiday. (The previous 28 cents per gallon tax rose to 29.8 cents per gallon.)
But legislative action wasn't taken in time, so Virginians lost the August back-to-school sales tax holiday.
However, early in September, Virginia lawmakers reached a budget compromise that revived the sales tax holiday. Under this budget proposal, the Virginia sales tax holiday took place in late October.
Youngkin $1 Billion Proposed Virginia Tax Cuts
There have been some tax cuts in Virginia this year, including a 1% reduction in state sales tax on groceries and certain personal hygiene items that started in 2023. Due to local sales tax, however, many Virginians still pay taxes on groceries.
The Commonwealth operates on a 2-year budget cycle, which means not having a budget agreement didn't disrupt operations for now. But the uncertainty surrounding when a budget agreement would be reached was notable since tax policy was a sticking point and upcominig elections put control of the General Assembly in play.
Gov. Youngkin has proposed nearly $1 billion in permanent tax cuts, but the Virginia Senate, led by Democrats, remained opposed. Some lawmakers questioned the long-term impact of proposed corporate tax breaks and worried that significant income tax cuts could put Virginia at a disadvantage in a potential economic downturn.
Virginia Tax Rebate 2023
Last year, Virginia offered tax rebates to qualifying residents. The 2022 Virginia rebates, issued last fall, were up to $250 for individual filers (up to $500 for joint filers). The Virginia payments were in line with a trend where more than twenty other states offered so-called “stimulus or inflation relief payments to eligible residents, (Some states are sending "stimulus" checks or rebate payments this year as well.)
Similar Virginia tax rebates for 2023 are going out this year due to a new Virginia budget compromise. The General Assembly led by Republicans, and the Democrat-led Senate have reached an agreement regarding an amendment to the Virginia budget for FY24.
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