On April 8, 2024, Virginia Governor Glenn Youngkin released his proposed amendments to the Budget Bill, notably including the removal of the sales tax expansion to digital goods. The 2024–2026 Budget Bill, HB 30, proposed three significant changes to Virginia’s tax structure, effective on January 1, 2025: 1) an increase to the sales and use tax rate from 4.3 to 5.2%, 2) expansion of the sales and use tax base to apply to digital products, and 3) a reduction in the personal income tax rates. Current Virginia law does not impose sales tax on downloaded or electronically accessed digital products and software. The proposal sent to the Governor would repeal Virginia statute § 58.1-648(C), which expressly excludes digital products delivered electronically from the communications sales tax.
The Governor approved the general purpose of the Budget Bill but returned it without his signature with the request that the specific amendments be adopted. The most important change requested by the Governor is the elimination of the sales tax expansion to digital goods. Virginia’s strong financial position fueled his proposal to limit tax increases. Annual tax collections rose by 40% in the last five years, fueled by more jobs and economic growth. With the highest labor force in Virginia’s history and with more job growth than 42 other states in the last two years, the Governor expects that revenues will remain strong even when viewed conservatively against economic uncertainty.
We will continue to monitor the progress of the Budget Bill and proposed amendments. Please contact our tax professional below with your questions or concerns.
TECHNICAL INFORMATION CONTACT:
Susan Bittick
Principal
Ryan
512.476.0022
susan.bittick@ryan.com
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