VA Mulls Statewide Flat Tax For Communication Services
Internet Calling and Satellite TV Would Be Subject to Levy
By Chris L. Jenkins, Staff Writer
Tuesday, January 24, 2006
Jan. 23 -- A House of Delegates panel passed a bill Monday
that would change how Virginia taxes phone, cable, wireless
and Internet services in light of the new ways
telecommunication services are offered to consumers.
The proposed tax system would replace what supporters of the
bill call an antiquated mix of local levies.
The bill would create a flat 5 percent tax statewide on a
range of technologies and would impose taxes on monthly
satellite television bills, Internet calling technology and
long-distance service, which currently are not taxed.
It would eliminate the taxes imposed by each locality, which
in some cases reach 30 percent on local calls, mobile
services and paging. It also would eliminate cable
"Fifty years ago, the only way to communicate with others
was with a plain old telephone line," said Del. Samuel A.
Nixon (R-Chesterfield), the bill's chief sponsor.
"Technology has evolved, but our taxing policies have not."
"It's fair, it's balanced and adheres to the principles of
taxes being as low as possible and broadly applied as
possible," Nixon added. He cited statistics from the Council
on State Taxation, a Washington research group, that found
that Virginia has the highest telecommunication taxes in the
The measure, which passed the Finance Committee by a vote of
15 to 7, is expected to come before the full chamber this
week. The bill then must pass the Senate and be signed by
Gov. Timothy M. Kaine (D) to become law.
This is the second time in as many years that state
officials have tried to alter the state's telecommunication
tax structure. Last year, Nixon offered the same bill, but
it was quickly revised to merely study the impact of the
taxes after intense lobbying from the satellite industry,
which opposes the bill again this year.
Supporters said the taxes would raise the same amount of
revenue -- about $425 million annually -- that localities
now receive from local taxes and franchise agreements. The
Virginia tax department said at the hearing Monday that it
cannot predict exactly how much money would be raised from
the new system. A new state law would not affect federal
The impact on consumers would depend on the type of
telecommunication services they use and where they live.
Fairfax County residents with land lines, long-distance
service, cell phones and cable TV would pay an average of
$5.35 less a month, according to an analysis done for a
group of telecommunication companies supporting the measure.
But a resident of Clarke County who has a land line,
long-distance service, a cell phone and satellite TV would
pay $1.44 a month more if the measure were approved,
according to the analysis.
Representatives of the satellite industry said they had not
seen the results of the analysis and could not comment on
its findings. But they pointed out that the analysis does
not include increases on Internet calls and satellite radio.
Virginia is the only state actively trying to address how to
tax emerging technologies, according to industry analysts.
Satellite companies and several rural lawmakers are lobbying
as they did last year to defeat the bill because, they said,
consumers in rural areas rely more on satellite television
than do people in areas served by cable. Even though cable
bills would decrease in some rural counties, they would
increase in others, according to the analysis.
"This is harmful to rural areas," said Del. Ben L. Cline
(R-Rockbridge). Referring to taxes on Internet phone calls,
he added: "The Internet is a savior to rural areas like
mine, and this would have a major impact."
Mark C. Pratt, who represents DirecTV, said the average
customer's bill would increase about $3 a month because of
the tax. He added that some businesses -- in particular call
centers, which often are in rural areas -- also would be
hurt, because many of those areas have taxes that are lower
than the proposed 5 percent tax called for by the
Several legislators who voted against the bill in committee
said they were still weighing its impact on their districts.
"The trick for me is figuring out whether there's a net gain
or a net loss for my district," said Del. Jeffrey M.
Frederick (R-Prince William), who voted against the measure.