For over a decade, a Virginia tax-free weekend has been held in August to help shoppers save money on specific items like clothing and school supplies. Sales tax holidays are popular nationwide, with a least fifteen states hosting similar events throughout July and August.
But this year, a provision governing the Virginia sales tax holiday expired on July 1, and lawmakers have not renewed it. (Doing so would require particular legislative action that seems unlikely given political divisions in the Virginia legislature.)
Meanwhile, the Commonwealth is looking at an estimated budget surplus of around $5 billion, which Virginia Gov. Glenn Youngkin has pointed to in calling for a billion dollars in additional tax cuts.
“When we have growth, then we have growth in receipts into the state government, which allow us to continue to reduce taxes and increase record investments in these key priorities,” Youngkin said in a statement.
Virginia Sales Tax Holiday
- Virginia's sales tax holiday weekend typically began on the first Friday in August, just in time for back-to-school shopping.
- Virginia sales tax is 5.30%, but when combined with local sales tax averages about 5.75%, according to the Tax Foundation.
Data showed that last year, Virginia families could spend over $600 on school supplies. During the sales tax holiday, savings could be over $35. Alternatively, groups and organizations offering items like new backpacks to families in need could provide more supplies to a greater number of students due to thousands of dollars of savings. And Virginia's tax-free weekend didn't just apply to school supplies — other items, such as clothing and emergency supplies, qualified as tax-exempt.
The Virginia law that enables the sales tax holiday needed to be renewed by the legislature before the first of July because Virginia's budget year ended on June 30. Other state legislative changes typically become effective on July 1. For example, Virginia gas taxes increased on July 1, right before the Independence Day holiday. (The previous 28 cents per gallon tax rose to 29.8 cents per gallon.)
But legislative action wasn't taken in time, so Virginians have lost the back-to-school sales tax holiday for 2023. It's unclear whether the tax-free weekend will return in the future.
Youngkin $1 Billion Proposed Virginia Tax Cuts
There have been some tax cuts in Virginia this year, including a 1% reduction in state sales tax on groceries and certain personal hygiene items that started in 2023. Due to local sales tax, however, many Virginians still pay taxes on groceries.
The Commonwealth operates on a 2-year budget cycle, which means not having a budget agreement won't disrupt operations for now. But the uncertainty surrounding when a budget agreement will be reached is notable and tax policy is a sticking point.
Gov. Youngkin has proposed nearly $1 billion in permanent tax cuts, but the Virginia Senate, led by Democrats, remains opposed. Some lawmakers question the long-term impact of proposed corporate tax breaks and worry that significant income tax cuts could put Virginia at a disadvantage in a potential economic downturn.
Virginia Tax Rebate for 2023?
Last year, Virginia offered tax rebates to qualifying residents. The 2022 Virginia rebates, which were mostly issued last fall, were up to $250 for individual filers (up to $500 for joint filers). The Virginia payments were in line with a trend where more than twenty other states offered so-called “stimulus or inflation relief payments to eligible residents, (Some states are sending "stimulus" payments this year as well.)
Similar Virginia tax rebates that would go out later this year have been proposed but not agreed to. For now, the General Assembly led by Republicans, and the Democrat-led Senate are at a standstill regarding the amendment of the Virginia budget for FY24. Despite ongoing negotiations, no resolution has been reached yet.
