HJR 651: Joint Subcommittee Studying the State and Local Taxation of the Telecommunications Industry

July 23, 2003

During the final meeting of the joint subcommittee studying the state and local taxation of the telecommunications industry, legislative staff presented the principles that had guided two years of negotiations between industry and local government representatives and the proposed framework that will allow the continuation of the work already done. This information will be presented by the HJR 651 Chairman to the SJR 347 Tax Commission, as directed in the resolution creating this subcommittee.

Guiding Principles

The principles that the interested parties followed in developing the framework for changing the way communications and video services are taxed are as follows:

  • Reduce consumer confusion,
  • Consolidate taxes,
  • Make taxes uniform statewide,
  • Reduce the tax rate on the vast majority of Virginians,
  • Make taxes competitively neutral,
  • Preserve state and local government revenues,
  • Establish a single point of administration.

Taxes to be Repealed

If agreement can be reached on all the details of a new plan for taxing communications and video services, it will take effect July 1, 2005, and repeal:

  • Local consumer utility tax (only on communications),
  • Local gross receipts tax (only portion billed to consumer where applicable),
  • Current E-911 rate structure,
  • Virginia relay fee,
  • Cable franchise fee

Proposed Framework

The proposed framework under which discussions will continue in an effort to develop draft legislation is comprised of the following five components.

1. The simplified plan would impose a statewide sales and use tax of 4.5 percent on communications and video services and an E-911 fee not to exceed $0.75 on wireline and wireless.

2. Tax revenues collected would be remitted to a single point of administration, possibly a third party administrator.

3. Localities would be kept whole based on (i) tax rates adopted no later than July 1, 2003, and (ii) revenues from such rates collected beginning July 1, 2003, and ending June 30, 2004, as determined by the Auditor of Public Accounts (APA).

4. The sales and use tax imposed on communications and video services will be in lieu of the retail sales and use tax; however, the rate of such tax will not exceed the retail sales and use tax rate.

5. The distribution of revenues under this plan will be determined by the local governments and approved by the General Assembly.


Some members of the joint subcommittee expressed concern about the fact that the new tax plan would broaden the base of services that would be taxed to include satellite, long distance, pagers, and calling cards. In response, the industry representative explained that including these was necessary to achieve competitive neutrality and therefore, fairness. All members agreed that reducing the overall tax burden was a positive result of the plan.

Next Step

The joint subcommittee approved the motion to continue with the work of the negotiating team (industry and local government representatives) in an effort to work out all of the details in order for proposed legislation to be drafted for introduction in the 2004 General Assembly Session and submitted to the SJR 347 Tax Commission no later than November 1, 2003.

The Hon. L. Preston Bryant, Jr.

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



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