By Ellen Kanzinger
If you buy two sandwiches with a drink and a bag of chips at the Subway in downtown Lexington, your total bill will be $21.48. The same combo purchased at the Subway on North Lee Highway in Rockbridge County costs only $21.09.
The difference in bills is the result of a quirk in Virginia law, which allows cities to set their own tax rate on restaurant meals, but limits the rate counties can charge. Lexington now adds 6 percent to each meal tab, on top of the 5.3 percent sales tax, for a total of 11.3 percent. The tax in the county totals only 9.3 percent.
That disparity could change in the 2017 General Assembly.
Rockbridge County has joined other Virginian counties in supporting equal treatment of local governments, which could lead to revenue sources other than the property tax.
Under current law, counties do not have the same taxing authority as independent cities and towns. While cities and towns can set their own tax rate on restaurant meals, the Code of Virginia specifies that voters must pass a referendum before counties can do the same. If they pass such a referendum, they may issue a meals tax of no more than 4 percent.
Officials in York County, in Virginia’s Tidewater, are backing a bill that would allow counties to set their own meals tax rate in the same way that cities and towns can. The new legislation would not require each county to raise the tax but, would allow each county board of supervisors to determine how to implement the tax for themselves.
York County Administrator Neil Morgan believes the fundamental issue is equal treatment of local government by the state legislature.
“I challenge someone in the legislature to tell me why Newport News has that right over York County, or Lexington City over Rockbridge County,” he said in a phone interview. “Give me one good reason why counties can’t decide for themselves.”
“I challenge someone in the legislature to tell me why Newport News has that right over York County, or Lexington City over Rockbridge County. Give me one good reason why counties can’t decide for themselves.” -York County Administrator Neil Morgan
The local government structure in the commonwealth differs from the structure in the 49 other states, where cities are a part of the counties that surround them instead of separate entities. Counties, cities and towns in Virginia provide almost all of the same services and functions for their citizens.
Tracy Lyons, the executive director of the local Chamber of Commerce, favors giving the local governments the same opportunities. She believes county supervisors should be able to make the decision that is best for their county.
“Sometimes when you look at the differences, it is hard to be fair,” she said. “You have a county that is so big and a city that is so small and so the square footage, the imprint, is very different.”
Out of the 95 counties in Virginia, 47 have already passed the required referendum to raise taxes. Meanwhile, all 38 independent cities charge an additional meals tax without interference from the state. Lexington and Buena Vista set the meal tax rate at 6 percent, compared to 4 percent in Rockbridge County.
Counties rely on real estate taxes for the majority of their revenue. In the 2014-2015 fiscal year, Rockbridge County collected $24,016,493 in general property taxes and $1,341,603 from the meals tax. An increase of the county’s meals tax by two percentage points could bring in an additional $712,769 in revenue, the county estimates, adding about 1.7 percent to its total revenue.
County Commissioner of the Revenue David Whitesell says a higher meals tax could be a more dynamic and diverse way of collecting money for local government services, in part because it would tap non-residents. Many of the county’s restaurants are near the Virginia Horse Center and interstate exits.
“It’s also a more fair tax in the way that it’s not all a burden on the local citizen,” he said. “You’re collecting tax from people in other states that come here and may use our services somehow and also eat here.”
York County and the Virginia Association of Counties are trying to build a coalition among the local governments to lobby their delegates in the General Assembly. Del. Ben Cline, whose district includes Rockbridge County, did not return multiple calls for a comment.
This specific meals tax would apply to food and beverages provided by establishments such as restaurants and cafes. The law exempts groceries and food from vending machines.
Morgan hopes the meals tax will be a starting point for equalizing the relationship between state and local governments in Virginia.
“This is a bigger issue,” he said. “It affects everyone in the county government and the people who live in it.”