A key component of the landmark transportation funding legislation enacted in the 2013 General Assembly of Virginia (HB 2313), calls for an increase in the statewide Retail Sales and Use Tax, along with an additional Retail Sales and Use Tax increase in the localities comprising the Northern Virginia and Hampton Roads regions. Specifically, effective July 1, 2013, the statewide Retail Sales and Use Tax will increase by .3% (total state and local tax of 5.3%) and by an additional .7% in the Northern Virginia and Hampton Roads regions (total state and local tax of 6%).
A number of ABC-VA member firms have expressed some concerns regarding the implications that these increases in the Retail Sales and Use Tax will have upon contracts for construction that were bid upon and awarded prior to July 1, 2013, and will run past this effective date of the changes in tax rates. The Virginia Department of Taxation has published the “Guidelines for the Retail Sales and Use Tax Changes Enacted in the 2013 General Assembly of Virginia.” I have highlighted what I believe to be the key provisions including those offering possible recourse for companies that have entered into contracts for construction prior to April 3, 2013.
It appears that the two options available to contractors that have entered into contracts prior to July 1, 2013 that will extend beyond this effective date of the tax changes are: 1) to pass through the increase in sales and use tax on purchases delivered and paid for after July 1, 2013, pursuant to the applicable contract documents, or 2) to apply for a refund of the increase in the sales and use tax on such purchases pursuant to bona fide contracts entered into prior to April 3, 2013 (refer to page 9 of Guidelines for more information).
Contributed by Harold Kelly, ABC-VA Vice President, Central Virginia Region