There is no question that tough times call for tough measures; and that certainly is the case today. Here in Virginia, the General Assembly will be challenged this winter to balance the state budget and will consider significant reductions to do it. One that is being proposed, however, would do great harm to the very businesses we rely on to lead our economic recovery.

That suggestion is the elimination of the dealer discount, a small reimbursement to retailers to cover a portion of the costs associated with the collection and remittance of various taxes and fees such as the ones applied to retail sales, motor fuels, cigarettes and tire recycling.

Before leaving Richmond, outgoing Gov. Tim Kaine said that the cost and burden of collecting and remitting these dollars to the state are inconsequential because of the technological advances since the sales tax was first instituted in the 1960s. This is simply untrue.

Virginia businesses incur an extensive number of costs to calculate, record and collect sales and other taxes and fees; to set up systems to gather data, prepare manuals, file reports, train personnel, supervise performance; and undergo internal and independent audits. While improved technology has allowed businesses to collect and remit taxes and fees to the Commonwealth more efficiently, those same enhancements have added to the complexity and cost of compliance. Electronic payments, advance payments, sales tax holidays, exemptions for charitable organizations and changing tax rates have all complicated the process.

According to a national study, the average cost of 3.09 percent of total sales tax liability on retailers indicates that Virginia businesses are already under-compensated for the services they provide on behalf of the Commonwealth (Pricewaterhouse Coopers 2005 Joint Cost of Collection Study).

The Commonwealth has mandated that these businesses must perform the function of state tax collection agents. The dealer discount is designed to provide reasonable compensation to Virginia firms to cover a portion of their actual costs. Asking these companies to serve as unpaid tax collectors is morally wrong and will harm, not advance, our economic progress.

Every dollar a retailer must devote toward the task of collecting taxes is a dollar diverted from payroll, expansion and the purchase of inventory. During this ongoing recession, those who support this amendment are advocating an increased burden on businesses at a time when stimulus is needed. Indeed what what kind of signal would this send about Virginian’s business-friendly corporate environment?

Everyone deserves to be paid for services rendered. That is both fair treatment and sound public policy, and those principles should rule in the decision regarding the future of the dealer discount.