On the heels of discussion over a proposed meals tax in Herndon, the Town Council is exploring the possibility of adding a cellular phone tax. In its March 4 work session, the council charged the town attorney, Richard Kaufman, and director of finance, Mary Tuohy, with studying the possibility and ramifications of adding a monthly tax on the cellular phone bills of the town's residents.
The issue was raised at the work session in response to reports that Fairfax County may try and enact a similar tax.
In April the county will conduct a public hearing on a proposed county-wide cellular phone tax. "The issue is whether the county implements one and the town does not have one on the books, then the town may not be able to implement its own tax or pre-empt the county's tax," Tuohy said.
"If the county is looking at a tax," Councilman Mike O'Reilly said, "then the town should consider pre-empting it so that the money stays within the town."
<b>THE TOWN</b>, like most municipalities, already has an existing tax on landline phones, Tuohy said. "We've had the consumer utility tax for years," the director said.
The current telephone utility tax is 20 percent of the first $15 of a customer's residential phone bill which amounts to $3 per month.
It is unclear whether a cellular tax would be considered a new tax or if it would be deemed a reworking of an existing tax. This is one question the town attorney will be looking at, O'Reilly said.
Committee members O'Reilly and Harlon Reece both stressed that any new tax, be it a meals tax or cellular phone tax, would be part of a larger restructuring of the town's tax code.
"We've got to give residential home owners some relief," Reece said.
This is not the first time the town has looked into the idea of a cellular phone tax. Last year, a finance ad hoc committee was formed by the Town Council. The committee was put together to look into new revenue sources for the town as well as studying the town's current major revenue sources.
<b>IN OCTOBER of 2002</b>, the committee commissioned the town's fiscal advisors to undertake a Tax Projection Study. The study looked at several potential, and untapped, revenues sources, including a cellular phone tax, before settling on a meals tax, Tuohy said.
The advisors estimated that the Town of Herndon has about 8,000 cellular users though Tuohy called the number "conservative." With a rate of $3 per month, a cell phone tax would generate between slightly less than $300,000 per year for the town, the study found.
Since a meals tax was projected to bring in nearly four times the amount of a cellular tax, the committee recommended the meals tax, Tuohy and O'Reilly said. "We did look at the $200,000 to $300,000 revenue," said O'Reilly, who is a member of the committee. "We discounted it as a major source of revenue. There wasn't as much bang for our buck when you compare it to the $2 million a meals tax would bring us."
The 2003 Virginia General Assembly studied proposed legislation that, if passed, would have allowed equal taxing powers among cities, towns and counties. O'Reilly is one of many, who think it is only a matter of time before similar legislation is passed in Richmond. It is unclear how such legislation would affect cellular owners within the town of Herndon or upon the town's ability to enact its own cellular phone tax, O'Reilly said. The question of a town and county cellular phone tax may be moot in as two to five years, O'Reilly said. The telecommunications industry is lobbying the state to make all municipal and county taxes uniform, and O'Reilly said he expects to see legislation passed in the next few years in Richmond.