All Virginia cities, many towns, and 47 counties impose business, professional, and occupational license taxes. Even when they don't make profits, businesses still must pay the tax imposed on their gross receipts instead of taxable income. Gov. Bob McDonnell calls that an obstacle to success.
"Sixty percent of all small businesses fail within the first five years, either because of under-capitalization, bad management, or government intrusion, whether it's taxes or regulations," he says.
One new law allows localities to exempt unprofitable businesses. The governor says a second gives localities more flexibility for new companies.
"That really gives it a lot of opportunities to allow localities to compete, to be able to get new businesses to come their, or, more importantly, to get entrepreneurs to start a business," McDonnell says.
Local governments are not mandated to make these changes.