RICHMOND — Virginia's gas tax will almost certainly increase Jan. 1, ratcheting up about 45 percent because of last year's landmark transportation funding deal and a congressional unwillingness to crack down on Internet sales tax collections.
The gas tax is set to go from 3.5 percent of the wholesale price to 5.1 percent. The recent trend of lower gas prices won't blunt collections: legislators built a floor into their calculations when they changed the way Virginia funds highway projects last year.
The 5.1 percent will be charged on the wholesale price of gasoline as of Feb. 20, 2013, which was about $3.19, according to the state Senate Finance Committee. Going forward, the wholesale price will be re-averaged every six months, but the tax will be calculated from that 2013 price until gas prices rise above it.
That may be a while. The average wholesale price in Virginia for the six months ending in May was about $2.78, according to the Department of Motor Vehicles, and it will likely be lower when DMV recalculates Nov. 30.
The state tax on diesel fuel, which is 6 percent of wholesale costs, won't change.
The increase was one of several changes legislators agreed to last year when they passed then-Gov. Bob McDonnell's transportation funding bill. Sales tax increased in Hampton Roads as well, and the state expects to collect hundreds of millions of dollars in new revenue.
But some of the deal's revenue depended on Congress passing legislation to simplify and compel sales tax collections on online purchases. Some online retailers collect state sales taxes, but many do not. Virginia taxpayers are supposed to estimate the sales taxes they owe for online purchases each year on their income tax forms, but few do.
Legislators agreed last year that, if Congress doesn't pass legislation requiring online retailers to collect state sales taxes, the gas tax would automatically increase Jan. 1.
Brick-and-mortar retailers have been calling on Congress for years to standardize online sales collections across the country. They often face a price disadvantage because online shops don't have to charge sales tax.
Philip Scotti, who owns four Philip Michael Fashion for Men locations in Hampton Roads, said the current arrangement isn't fair. Buyers go so far as to look at products in person, then leave the store to buy online.
"They will look at the manufacturer, they will write down notes and then you wouldn't see them again," said Scotti, who is also on the board of directors for the Retail Alliance, a merchants association pushing this issue.
Legislation to change this situation has passed the U.S. Senate, but it doesn't have momentum in the House. It's sitting in the House Judiciary Committee, chaired by U.S. Rep. Bob Goodlatte, R-Roanoke.
Goodlatte's office said he didn't have time for a telephone interview on the subject this week, which saw the start of a lame duck congressional session. In a written statement, the congressmen said many House members, including Speaker of the House John Boehner, "do not believe this legislation is the answer."
He said he warned Virginia officials last year that they should not expect Congress to act, and he called the General Assembly's decision to tie the gas tax to the Internet issue "shortsighted." He also said the legislation is "fundamentally flawed."
The Retail Alliance and other groups pressuring Goodlatte to move the bill out of committee disagree on that point. Existing software can easily make state-by-state calculations on sales tax rates, Scotti said, and the bill would require states to provide this software free of charge.
U.S. Rep. Scott Rigell, R-Virginia Beach, supports the measure, but acknowledged last week it "was always sort of a long shot" to get something passed by year's end.
State Sen. John Miller, D-Newport News, said he never expected this revenue to come through. He said many others felt the same, but agreed to the plan because it was part of a much broader deal to raise needed new transportation funding.
U.S. Rep. Robert C. "Bobby" Scott, D-Newport News, said he had some optimism when the legislature tied the two issues together.
"It looked a little better back when they were voting," said Scott, who supports the bill. "It had bipartisan support."
Del. Brenda Pogge, R-Norge, was the only Peninsula legislator to vote against the transportation deal.
"Evidently some people had their hopes set on (the Internet component)," she said. "That was just — we kicked another can down the road."
Fain can be reached by phone at 757-525-1759.