HD29 - Report of the Joint Subcommittee Studying the Local Taxation of Meals and Lodgings
Executive Summary: The Joint Subcommittee has studied the local taxation of meals and lodgings and has found it is a patch-work quilt of varying tax rates among the various localities in Virginia with some having no local tax authority for the two taxes while others impose very high tax rates. In addition, some localities are subject to a tax rate ceiling while others are not subject to a ceiling. The Joint Subcommittee has noted that a number of cities impose combined meals tax and sales tax rates that reach 9%, specifically, the cities of Portsmouth, Suffolk, and Virginia Beach. Moreover, the combined sales tax and transient occupancy tax rates have reached 9% in both Portsmouth and Arlington. A large number of cities impose these two taxes while counties are prohibited from taxing meals and only seven counties have been granted the local authority to impose a transient occupancy tax and only five actually impose the tax. The Joint Subcommittee acknowledges the unfairness of allowing some localities the option to impose the tax while others are not granted the same option. The Joint Subcommittee has observed that the two taxes are special taxes on a single industry and does recognize that high taxes do have an impact on the two industries because of their competitive nature. The representatives of the two industries have argued the inequity of singling out the restaurant and lodgings industries for special treatment. The Joint Subcommittee has heard from localities who believe that all localities should be treated the same and all should be afforded the same flexibility to impose the taxes if the locality believes them to be appropriate, with no maximum ceiling tax rate. Based on these considerations, the Joint Subcommittee has voted to recommend legislation which would allow all cities and counties the option to impose a local meals tax as well as a local transient occupancy tax, with no maximum tax rate ceilings. The Joint Subcommittee believes the taxes are special taxes applied to the restaurant and lodgings industry but the Joint Subcommittee does not believe that it would be appropriate to take away the authority of those localities which already impose the tax unless some alternative source of revenue is forced. The Joint Subcommittee, although it considered some proposals, has been unable to find a suitable alternative source of revenue. As a result, the Joint Subcommittee believes that since some localities have the tax it would only be fair to extend the authority to impose these to taxes to all cities and counties so that each locality can decide whether either of these two taxes are appropriate for the locality. |
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