HJR 651: State and Local Taxation of the Telecommunications Industry and its Customers

June 4, 2003
Richmond

This is the second year of the study, whose charge is to examine all taxes and fees imposed on the telecommunications industry and its customers to ensure that such taxes are fair and equitable to all elements of the industry and its customers and are relatively easy to administer and collect. Since the joint subcommittee last met in September 2002, industry and local government representatives have been meeting in an attempt to devise a plan that will meet all the interested parties’ needs.

Telecommunications Industry Proposal

A telecommunications industry representative presented its plan, known as the Communication Industry Tax Simplification and Competitive Neutrality Proposal. The objective is to reduce expense and excessive administration associated with current tax collections, reduce consumer confusion, and improve receipt and verification of revenues.

The proposal calls for statewide application of the 4.5 percent sales tax to communication and video services on a competitively neutral basis. The tax would be applied to local and long distance calls, wireless, paging, cable, satellite, and phone cards. In addition, a $0.50 “911 Fee” would be applied to each wireless line and a $0.50 “911 Tax” to each local exchange line. The proposal also includes a statewide rights-of-way fee applied to all cable television service lines.

The 4.5 percent sales tax and the 911 Fee/Tax replace the following taxes that are currently billed to consumers:

Local consumer utility tax;
Local gross receipts tax (the portion exceeding 0.5 percent);
E-911;
Virginia Relay Fee; and
Cable Franchise Fee.

The sales and use tax and the 911 tax would be paid to a single point of administration to be redistributed to localities and the Wireless 911 Board based on a revenue neutral formula that has yet to be determined. The wireless 911 fee would be remitted directly to the Wireless 911 Board.

VML/VACO Response

Representatives from the Virginia Municipal League (VML) and the Virginia Association of Counties (VACO) commented on the proposal. The two organizations have created a local government advisory group (consisting of more than 40 officials) to work with the local government negotiating team that meets with the telecommunications negotiating team. VML and VACO also distributed a survey among their members in September 2002 to gather information regarding local telecommunications taxes and fees and the revenues collected.

There were several concerns about the proposal expressed by VML and VACO. Those concerns include:

Needing specific revenue data from the telecommunications industry in order to calculate the revenue impact of the proposal and develop an apportionment formula;
Labeling the new replacement telecommunications tax as a state sales and use tax;
Collapsing the cable franchise fee into the new single rate and its effect on cable franchise authorities; and
Administering the collection and distribution of the tax at the state level rather than by each locality.

While the telecommunications industry and the local government representatives have come a long way since the study began last year, more work needs to be done on the proposal before the joint subcommittee can adopt recommendations concerning it.

Telephonic Reading Services Legislation

During the last part of the joint subcommittee’s meeting, a presentation was made dealing with HB 2771, which was introduced in 2003 by Delegate Chap Peterson, a member of the joint subcommittee. Delegate Peterson briefly explained the bill, which was referred it to this joint subcommittee by the House Committee on Commerce and Labor. While no action can be taken on the bill as it is not a year for carryovers, Chairman Bryant agreed to hear from the bill’s supporters.

The bill would have authorized the State Corporation Commission to collect an assessment from each local telephone company in the Commonwealth for the operation of telephonic reading services, similar to the current assessment for the operation of telecommunications relay service for the deaf and hard of hearing. “Telephonic reading services” means audio information (primarily newspaper articles) provided by telephone to the blind and visually impaired through a nationally available, multi-state service center to registered readers in all parts of the Commonwealth, including the interstate acquisition and distribution of daily newspapers and other information. The Department for the Blind and Visually Impaired would be the state agency responsible for the administration and operation of telephonic reading services.

The supporters of HB 2771 spoke about how important this service is to each of them in their jobs and daily activities. Without this service, many blind and visually impaired persons are unable to benefit from newspapers accounts without assistance from an individual who can read to them.

Next Meeting

The joint subcommittee scheduled its next meeting for July 8 at 1:00 p.m. in House Room C in the General Assembly Building. At that time, the telecommunications industry and local government representatives will update the subcommittee on their further negotiations concerning the industry proposal.

Chairman:
The Hon. L. Preston Bryant, Jr.

For information, contact:
Joan E. Putney
Division of Legislative Services

THE RECORD