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July 1, 2013

You Are Here …


Today marks the beginning of a new budget year for the commonwealth. And that means all those tax changes – including a number of significant tax increases – passed as part of the $6 billion transportation funding plan start kicking in now.

So here’s what it all means for you – whether you’re a driver or not.

Starting today, July 1, 2013:

  • The gas tax gets a makeover: The 17.5 cents-per-gallon gas tax converts to a 3.5 percent tax on wholesale gas. And for diesel, it converts to a 6 percent wholesale tax.
  • The sales tax goes up: The sales tax jumps to 5.3 percent from 5 percent. In Northern Virginia and Hampton Roads it jumps even higher to 6 percent.
  • The sales tax paid on cars goes up: The sales tax you pay when you buy a car goes up to 4 percent from 3 percent.
  • The fee for registering a hybrid vehicle goes up: The annual registration fee on hybrid, alternative fuel, and electric motor vehicles increases to $64 from $50.

If you’re in Northern Virginia or Hampton Roads, there are a few more tax increases you need to know about:

  • The hotel tax goes up: In Northern Virginia the hotel tax jumps up 2 percent.
  • The recordation tax goes up: In Northern Virginia, a “regional congestion fee” of 15 cents per $100 of property value is added to the real estate recording fee for real property for which a deed, instrument or writing is recorded.
  • The new gas tax kicks in at a higher rate: In Hampton Roads, the wholesale tax on motor fuels is 5.6 percent. That’s 2.1 percent higher than the rest of the state.

And don’t forget, this is just the beginning of the journey when it comes to the new taxes to fund transportation in Virginia. The sales tax on cars gradually increases over the next few years. And depending upon what happens in Washington with the online sales tax legislation, gas tax rates may jump even higher.

So the road trip begins. But it’s still not quite clear where we’re going.

–Sara Okos, Policy Director

The Commonwealth Institute

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