The change created a standardized five percent tax on all types of communications across the state that will go into effect in January. Under the current tax model, localities across the state charge the bulk of taxes on communications. Supporters of the proposed change say the current model, which is more than 50 years old, needs updating.

Virginia has the highest telecommunications taxes in the country, according to a 2001 report by the Council on State Taxation, a Washington-based research group. According to the report, Virginia localities charge an average tax of 27 percent, while the state charges only three percent. The combined total, 30 percent, is almost double the national average.

But the bill would make up for the average 25 percentage point drop in revenue by also taxing newer technologies: satellite TV and radio, phone calls over the Internet and long-distance calling, none of which are taxed under the current model. The bill would also standardize the monthly fee for 911 access to be 75 cents for both land lines and cell phones. Currently, only cell phone users pay the fee.

Telecommunications taxes now bring in $425 million per year to the state. Supporters believe that by taxing new technologies, the state can maintain the same amount of revenue. But the Virginia Department of Taxation could not confirm this at the House hearing.

Earl Bishop, vice president of the Virginia Telecommunications Industry Association, believes that the tax is progressive enough to grow with changing technologies, which would add new sources of revenue for the state. The association, which represents mainly traditional land line phone companies, supports the law.

“We think [tax revenue] will stay the same and possibly even increase as the telecommunications services that customers buy continue to grow with new innovations: wireless, land lines, and broadband. As communications services grow, and people buy them, this is a sales tax that will grow with it,” he said.

State Delegate Ben Cline, who represents the Rockbridge area, voted against the measure in the House because he believes it will hurt rural Rockbridge County residents who use the Internet to make phone calls.

“This is bad for rural counties. The Internet is a savior to rural areas like mine, and this would have a major impact,” he told The Washington Post. Cline added that rural residents who use satellite TV would be hit with taxes they did not have before.

Verizon Wireless conducted a study of Virginia consumers that affirmed metropolitan counties would generally save more than rural counties. A resident in Fairfax County who has a land line phone, long-distance service, cell phone and cable TV will save $5.35 per month, the report said. However, a resident in rural Clark County, located on the northwestern border with West Virginia, who has satellite TV instead of cable will pay $1.55 more per month for the same services.

The same analysis shows that residents in nearby Amherst County who use a land-line phone, long distance and a cell phone will save about $1.60 per month.

“Anytime there’s a re-balancing, there’s some people that are going to pay more,” Bishop said. “Over 95 percent of residential customers should save money.”

Bishop also said that a standardized tax will make it easier for telecommunications companies to keep track of taxes.

“Currently people have to know exactly where they live--city, county, or town. There are several hundred tax districts in the state, so we have to keep track of how to apply taxes,” Bishop said. “This will make it easier to administer because we won’t be having to administer to all the different cities, counties and towns.”

He added that he believes it’s unfair that some service providers currently have no tax burden: “We think it’s more efficient because we can include new technologies as they come along.”

Produced by Washington and Lee journalism students.

Lead supervisor:      Prof. Claudette Artwick

Reporting supervisor: Prof. Doug Cumming

Editing supervisor:  Prof. Pamela Luecke

Technical supervisor:  Michael Todd