VA Supreme Court Nullifies New Regional Taxes

A series of new regional taxes enacted last year on motor vehicle rentals, repairs, inspections, and registrations were struck down by the Virginia Supreme Court on Feb. 29. These taxes, implemented on Jan. 1, 2008, included an additional two percent rental tax on vehicles under 26,000 pounds, a five percent sales tax on motor vehicle repairs, and a one percent registration tax. The Supreme Court ruled these taxes “null and void.”

In 2007, the Virginia General Assembly passed and the governor signed legislation authorizing two regional authorities, the NVTA, and the Hampton Roads Transportation Authority (HRTA) to impose and collect a number of regional taxes and fees targeting motor vehicles. The Supreme Court ruled that the “NVTA is not a...political subdivision to which the General Assembly may constitutionally delegate its legislative taxing authority.”

While not a party to this lawsuit, the decision also effectively kills the similar HRTA taxes, which were scheduled to take effect on Apr. 1, 2008. Both the Virginia Department of Taxation and the regional Northern Virginia Transportation Authority (NVTA) have ordered companies to cease collection of these taxes immediately. The governor’s office and the NVTA are currently in discussions on how to return collected taxes to taxpayers. The Virginia legislature is considering its next step, which may include passing new legislation directly imposing the taxes.

For more information on this action by the Virginia Supreme Court, contact TRALA’s Tom James at 703-299-9120 or at tjames@trala.org.

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