Telecommunications

Senate passes bill to create flat 5% tax

RICHMOND --The Senate voted Wednesday to approve legislation that replaces a variety of communications taxes with a flat 5 percent tax that applies to satellite television, satellite radio and other technologies never taxed before.

House Bill 568 repeals several existing taxes and replaces them with a uniform 5 percent rate on local and long-distance telephone service, wireless communications, cable and satellite television, and voice-over Internet service.

Cities and counties will no longer collect local versions of the taxes, but instead be reimbursed by the state for their shares of revenue -- about $425 million.

"This is a good policy for Virginia, and it's a good system to put in place to look toward the future in terms of how we deal with new technologies," said Sen. John Watkins, R-Chesterfield County.

The bill was opposed by a coalition of rural and urban legislators.

Sen. Creigh Deeds, D-Bath County, said he opposed it because there's no link between satellite service and government.

"Many of the people I represent don't have public water, they don't have public sewer, and they don't have cable," Deeds said. "This bill is akin to putting a tax on private wells, private springs and private septic tanks. There's no nexus whatsoever between the service that's delivered by a satellite dish and this tax, or any service that's going to be delivered from the government because of this tax."

Sen. Jeannemarie Devolites Davis, R-Fairfax County, said the legislation will set a dangerous precedent for taxing new technologies, including the Internet.

"What disturbs me most in a technology sense is this has us down the path of taxing content," Devolites Davis said. "If you're going to tax the Internet, that's a different debate. But you should tax the stovepipe, not start taxing the content."

The bill passed on a 25-11 vote, with two Senators abstaining and two absent.

--Mason Adams

BACK-TO-SCHOOL

House dampens sales tax 'holiday'

Back-to-school shoppers in Virginia may not get the kind of sales tax break on clothing and school supplies that many lawmakers wanted to give them.

The House of Delegates on Wednesday reluctantly agreed to a compromise version of a bill (HB 532) that would waive the state's 5 percent sales tax on certain school-related purchases during a three-day period beginning on the first Friday of each August. The tax exemption would apply to school supplies that sell for $20 or less per item and to clothing and shoes that sell for $100 or less per item.

Del. Harry Parrish, R-Manassas, expressed disappointment with the compromise, which is far less generous than his original proposal. Parrish, chairman of the House Finance Committee, wanted to apply the tax break to school supplies that sell for $100 or less, to clothing and footwear that sell for $100 or less, to computer systems that sell for $1,500 or less, and to computer hardware and software and calculators that sell for $500 or less.

The Senate amended Parrish's bill and sent it back to the House. A separate, Senate-sponsored bill remains alive in a conference committee, meaning a more generous tax break still could emerge. But Parrish asked the House to pass his bill, saying Senate leaders made it clear they will not support a larger tax break. A small tax break would be better than none at all, Parrish reasoned.

House Majority Leader Morgan Griffith, R-Salem, agreed, saying: "At least this way, we got a piece of the loaf instead of no loaf."

Del. Ward Armstrong, D-Henry County, said lawmakers can push for additional exemptions next year.

"There's no reason why we can't try to add computers to this next year," said Armstrong, who sponsored similar legislation. "Sometimes progress is incremental. Let's get our foot in the door, and we'll kick it open a little wider next year."

-- Michael Sluss