Proposed new Virginia ‘tech tax’ sparks backlash from business community

RICHMOND, Va. (AP) — Trade associations representing hundreds of companies that do business in Virginia have come out swinging against a proposal to expand the state sales tax to cover digital goods, something Republican Gov. Glenn Youngkin proposed and Democrats endorsed in their budget legislation.

Both chambers of the legislature included the new sales tax on purchases like streaming subscriptions, cloud storage and online downloads in the two-year budget plans they passed last week. The Senate went beyond the House of Delegates in also applying it to business-to-business transactions.

In a letter sent to lawmakers beginning Tuesday, the Northern Virginia Technology Council and other business-focused lobbying and trade organizations said the General Assembly should reject the proposed “tech tax,” which budget documents from both chambers show is estimated to generate over $1 billion in revenue over the next two-year state budget. At a minimum, the letter said, if policymakers move forward with the proposal, they should broadly exempt business-to-business transactions — or companies may be forced to pass along costs to consumers or move to other states.

“The proposed tech tax hike would put Virginia companies at a significant competitive disadvantage in industries where global competition is high and margins are narrow. The tax will very likely impact hiring and reduce internal research and development investment, the majority of which is currently concentrated here in Virginia,” Jennifer Taylor, president and CEO of the group, said in a statement included with the letter, which a representative of the organization shared with The Associated Press.