RD367 - 2007 - 2011 Virginia Retail Sales and Use Tax Expenditure Study, Volume 1, Number 4


Executive Summary:
Pursuant to Code of Va. § 58.1-609.12, the Department of Taxation (“TAX”) is charged with the responsibility of determining the fiscal, economic and policy impact of each of the Retail Sales and Use Tax exemptions provided for by Code of Va. §§ 58.1-609.10 and 58.1-609.11 and reporting such findings to the chairmen of the House and Senate Finance Committees no later than December 1 of each year. Each of these exemptions are to be reviewed in periodic cycles and reports issued on a rotating basis in accordance with a schedule determined by the Tax Commissioner. There are nineteen exemption categories scheduled to be studied during the 2007-2011 period, and every five-year period thereafter. This is the fourth report of the 2007-2011 series and includes a detailed analysis of exemptions that pertain to:

• Purchases of wheelchairs and parts, braces, crutches, prosthetic devices, orthopedic appliances, catheters, urinary accessories, other durable medical equipment and devices, related parts and supplies, insulin and insulin syringes and equipment, devices or chemical reagents that may be used by a diabetic to test or monitor blood or urine, when such items or parts are purchased by or on behalf of an individual for use by that individual. (Code of Va. § 58.1-609.10(10)).

• Purchases of special equipment installed on a motor vehicle when purchased by a handicapped person to enable such person to operate the motor vehicle (Code of Va. § 58.1-609.10(12)).

• Purchases of special typewriters and computers specifically designed for those products used by handicapped persons to communicate when such equipment is prescribed by a licensed physician. (Code of Va. § 58.1-609.10(13)).

• Purchases of medical products and supplies when purchased by a Medicaid recipient through a Department of Medical Assistance Services provider agreement. (Code of Va. § 58.1-609.10(17)).

This report includes detailed information on the policy and fiscal impacts of these four exemptions, as well as the apparent rationale for these exemptions and their legislative history. This report also includes a comparison of the Virginia exemptions with the sales tax structures of other states, with particular emphasis placed on a comparison with the exemptions provided in contiguous states. The goal of the Sales and Use Tax Expenditure Study is to provide a more complete picture of the revenue impact and policy issues surrounding each of these exemptions.

In addition, this report provides the annual fiscal impact of the sales and use tax exemptions for nonprofit entities, as mandated by Chapters 757 and 758, 2003 Acts of Assembly (House Bill 2525 and Senate Bill 743). Legislation enacted during the 2009 General Assembly authorized TAX to combine its Nonprofit Exemption Report with its yearly Retail Sales and Use Tax Expenditure Study. This is the second year TAX has combined these studies.