HB1343:

Taxation; numerous changes to the Commonwealth's tax structure.

Bill Summary:

Taxation in the Commonwealth. Makes numerous changes to
the Commonwealth's tax structure. The bill provides that the standard deduction
for individual income taxes shall be set permanently at $4,500 for individuals and
$9,000 for married persons. Under current law, the standard deduction is
scheduled to revert to $3,000 and $6,000, respectively, beginning with taxable year 2026. Beginning with
taxable year 2022, individual income tax brackets, the filing threshold,
the amount of the standard deduction, and the amount of personal exemptions
shall be adjusted on an annual basis in accordance with the yearly change in
the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).

The bill imposes the retail sales and use tax on digital
personal property, defined in the bill as a digital
product delivered electronically that the purchaser owns or has the ability to
continually access without having to pay an additional subscription or usage
fee to the seller after paying the initial purchase price.

The bill also applies the retail
sales and use tax to the following services: admissions; charges for
recreation, fitness, or sports facilities; nonmedical personal services or
counseling; dry cleaning and laundry services; companion animal care;
residential home repair or maintenance, landscaping, or cleaning services when
paid for directly by a resident or homeowner; vehicle and engine repair;
repairs or alterations to tangible personal property; storage of tangible personal
property; delivery or shipping services; travel,
event, and aesthetic planning services; and communications services that are
not subject to the communications sales and use tax and are not digital
personal property.

Certain exemptions are provided to the sales and use tax on
services, including health care services that must
be performed by a person licensed or certified by the Department of Health
Professions, veterinary services, professional services,
Internet access services, and services provided by a person who does not
receive more than $2,500 per year in gross receipts for performance of such
services. The bill exempts services purchased by a
nonprofit organization and services purchased by a homeowners'
association or by a landlord for the benefit of his tenant. The bill also repeals the service exemptions
currently provided for the sale of custom programs and modification of
prewritten programs.

The bill imposes the communications sales and use tax on prepaid calling services and on digital subscription
services, defined in the bill as
services for which the user pays in order to access and use software, reading materials,
or other digital data or applications for a defined period of time, which products the user does not own or have permanent access
to outside of such period of time.

The bill provides that a portion of the income tax credit for
low-income taxpayers who are residents of the Commonwealth shall be refundable.
Under current law, eligible taxpayers may claim either (i) a nonrefundable
income tax credit equal to $300 for each individual, his spouse, and any
dependents or (ii) an income tax credit equal to 20 percent of the federal
earned income tax credit. For taxpayers claiming the credit referenced in
clause (ii), 50 percent of the value of the credit
would be refundable in taxable year 2021, and the refundable portion would
increase by five percent each year, becoming fully refundable starting in
taxable year 2031. Nonresident taxpayers and resident taxpayers claiming the
credit referenced in clause (i) shall not be eligible for a refundable credit.

The bill also exempts food purchased for human consumption and
essential personal hygiene products (the grocery tax) from all state and
regional sales taxes and that, beginning July 1, 2022, food purchased for human
consumption and essential personal hygiene products are also exempt from the
local sales tax, and the grocery tax is eliminated.

Bill Patron: Watts

Last Action(s):
(House) Left in Finance February 15, 2022

Bill Status: