How will an Internet sales tax impact Va. roads?

Posted at 12:49 PM, May 13, 2013
and last updated 2013-05-13 13:00:16-04

RICHMOND, Va (WTVR) - Proposed legislation working its way through Congress would allow states to collect sales tax on purchases made over the internet.

Specific language in the Commonwealth's new transportation funding bill would allocate some of the revenue from internet sales tax to statewide transportation funding.  Virginia Governor Bob McDonnell is expected to sign the transportation legislation into law Monday afternoon.

If Congress passes the internet sales tax initiative, the Governor's Office predicted $252.6 million in revenue from online sales tax in fiscal year 2014.  About 57 percent of that money would go directly to statewide transportation.

The rest of the money would be broken down between education, local initiatives and local transportation projects.

The online sales tax initiative passed the U.S. Senate last week, but is expected to face opposition in the House of Representatives.  President Barrack Obama has expressed his support of the measure.

If the internet sales tax bill is shot down by Congress, Virginia lawmakers still have a way of collecting the revenue that would be lost. In the transportation bill, the wholesale tax on gasoline, which was set at 3.5 percent per gallon, would increase to 5.1 percent to offset the funding gap.

Local political experts said if this happens, the spike in the wholesale gas tax would basically eliminate any tax breaks Virginians would have gotten at the gas pump.  The transportation bill eliminated a flat tax on gas in the Commonwealth.

As of right now, online retailers are only allowed to collect sales tax in states where they have a physical presence.  According to various reports, many thought enforcing internet sales tax was difficult because of varying tax rates in different states, as well as other factors.

Proponents of the legislation argue that modern computer software makes it easier for retailers to collect taxes at different rates state-to-state.

Read CNN's report on the online sales tax legislation here.