Monday, February 9, 2026
Dear Chairman Sullivan and Members of the Virginia House Finance Subcommittee,
Thank you for the opportunity to share testimony on House Bills 900 and 978. On behalf of the National Taxpayers Union, the nation’s oldest taxpayer organization championing lower taxes, responsible spending, and pro-growth policy, we appreciate the Committee’s work on these proposals but believe both bills in their current form should be rejected.
HB 900 and HB 978 would significantly change how Virginia raises revenue. Both bills include modernization and targeted relief, while expanding the tax base by applying sales and use taxes to new services, digital activity, and everyday transactions. This expansion calls for careful scrutiny from a taxpayer perspective.
Broad tax expansions impose real costs on families and businesses.
Many newly taxed services under these bills are not discretionary or luxury purchases. They include routine services that families have to maintain their homes, vehicles, and daily lives, as well as services essential for small business operations. Taxing these activities raises living and operating costs, even when spread across small transactions.
While base-broadening can be a prudent method of lowering rates, not all expansions are neutral. Taxing services and transactions that serve as business inputs can compound costs throughout the economy, resulting in higher prices or reduced economic activity.
Taxes on services and digital activity require particular caution.
Virginia’s economy has shifted toward services and digital tools, benefiting workers, consumers, and state revenues. Expanding the sales tax in these areas for business-to-business transactions, risks discouraging investment and innovation. Over time, this can weaken the economic growth that supports state and local budgets.
Delivery services and the fees imposed in this legislation illustrate this challenge, but similar concerns apply to taxes on repairs, maintenance, logistics, and digital services essential to modern commerce.
Tax relief should not assume offsetting tax increases are required.
Both bills suggest that reducing or exempting certain taxes must be paired with raising others. When tax policy encourages investment, job creation, and higher wages, state revenues grow organically. Replacing tax cuts with these specific taxes risks creating a more complex system that shifts, rather than reduces, tax burdens.
Conclusion
National Taxpayers Union urges the Committee to proceed cautiously with HB 900 and HB 978. Expanding sales and use taxes to new services and digital activity may raise short-term revenue, but also involves higher costs for families, greater burdens on small businesses, and slower long-term economic growth.
Virginia’s strongest revenue strategy is a low-rate, broad-based, neutral tax system paired with disciplined spending. This approach allows economic growth to stimulate future revenues rather than relying on continual tax expansion.
Thank you for your consideration. We would be happy to answer any questions or supply additional information.
Sincerely,
Jess Ward
Senior Director of State Affairs
National Taxpayers Union
Mattias Gugel
Director of State External Affairs
National Taxpayers Union