Yes, Virginia, a Tax Hike Looms

Association gets Senate to bend on tax collection method

Steve Dwyer, CSP Reporter

RICHMOND, Va. -- Virginia convenience retailers scored an important concession Wednesday when the state Senate accepted an amendment from the Virginia Petroleum, Convenience and Grocery Association to forego a proposal that would promulgate a compound tax assessment on motor fuel.

The Senate withdrew its plans for the compound—or variable—assessment, and is expected to collect taxes at the wholesale rack when the measure is approved. The Senate recessed Wednesday without taking a final vote, and plans to reconvene July 9 to continue deliberation on the measure.

Michael [image-nocss] O'Connor, president and CEO of Richmond, Va.-based VPCGA, which has 650 retail members operating over 6,000 convenience and grocery stores, told CSP Daily News that the compound taxing model lack "transparency." Under the Senate bill, compound taxation would have increased Virginia's motor fuel tax from 17.5 to 41.7 cents per gallon. Each July 1, the compounding of tax would occur when the previous year's rate was multiplied by .09161.

While the motor fuel tax will still rise accordingly, having the tax collection assessed at the wholesale rack is considered far less onerous to both retailers and motorists, but O'Connor cautioned: "As long as the General Assembly remains in session and transportation funding is on the agenda, it's a perilous time for the industry."

He added, "We were able to avert the worst, for now, as at least with the tax being collected at the wholesale rack, this will provide that necessary transparency of tax collecting."

Regardless of how a tax is assessed, O'Connor said that it's incomprehensible that a tax increase on motor would even be considered in the first place with fuel costs already so high. The Virginia tax rate will rival the state of Washington, which has the nation's highest tax at 36 cents per gallon.

The tax rate hike is necessitated to support funding for transportation infrastructure, as the Commonwealth's population over the years has risen significantly, and roads need to be improved.

O'Connor said that it would be hard to put an exact number on VPGCA members that would be most vulnerable to the higher tax, but certainly those operating along state borders are the ones that will suffer most in lost fuel sales as the state tax increases on an annual basis.

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