DirecTV satellite television customers who turn to channel 246 will be greeted with what may be a surprise to most of them - a warning to "STOP THE UNJUST SATELLITE TAX" in Virginia.The tactic is a foreshadowing of a looming tax reform battle over how to tax television and telecommunications services in Virginia. Legislators hope the 2005 session will bring nothing short of a complete overhaul of the way telecom services are taxed in Virginia.If successful, beginning in July Virginia state and local governments will collect a new flat 5 percent tax statewide that will replace a long list of taxes and fees. Consumers would get easier-to-read and cheaper phone bills, but some untaxed services like Internet-based calling, paging and satellite television would become subject to the 5 percent levy.A major change of the telecom tax landscape also would represent a major victory in the effort to improve how taxes are levied and distributed in Virginia. For years, state legislators have been examining ways to tax similar services equitably and reduce burdens on citizens and businesses.But the proposal has stirred concern from a wide range of constituencies that will fight over the details, including local governments and competing elements of the telecom and television industry with deep pockets.The groups have been meeting for three years with a legislative study committee headed by Del. Preston Bryant, R-Lynchburg, to hammer out the details. The product of negotiations that lasted through this week is a bill submitted Friday by Del. Samuel A. Nixon Jr., R- Richmond.Under the current system, companies like Verizon collect taxes at different rates from customers in every Virginia locality. The companies then separate the taxes from each customer's bill payment and write monthly checks to the localities."If you're a statewide provider of telecom services, you would be required to fill out over 4,300 tax forms in Virginia" in a year, said William Allcott, spokesman for a broad coalition of often-warring telecom companies supporting the bill.The administrative costs of collecting the taxes add to the cost of telecom bills, said Allcott. Further, it provides a headache for consumers and the customer service departments of companies that must explain the charges.The biggest fights may be over the addition of taxes for satellite television. The industry, which has banded together to fight bills in numerous states, claims there are 700,000 Virginians who subscribe to satellite service.DirecTV and DishNetwork banded together to create www.stopsatellitetax.com, a Web site that has been used to fend off taxes in other states. The DirecTV channel directs people to the site, which directs customers to call legislators and fire off forms letters."It's been a very effective and efficient way for us to let our customers know," said Bob Marsocci, a DirecTV spokesman.The industry argues that it does not use the public right-of-way to tear up streets and property, which is why cable companies pay franchise fees to local governments nationwide."They place a burden on that public infrastructure and pay for the right to do that," said Marsocci.Local governments are worried that they could lose some of the taxes they now collect if for example, a 20 percent local tax is replaced with a 5 percent tax. So legislators have spent years finding a way to make sure the local governments won't face new deficits.Bryant said it's gotten easier over the last couple of years to sell the changes to local governments, which have seen the number of local landline phones that are taxed plummet. Consumers are replacing those phones with untaxed wireless and Internet-based calling.To bring local governments on board, the plan will ensure they get the same amount of revenue they collect now. So even though local taxes will go up slightly or down drastically for some consumers to 5 percent, local governments will still get the same amount. But localities are worried about state government raiding the fund."It's something they're pretty wary of because of past experience with other taxes," said Virginia Municipal League lobbyist Roger C. Wiley. "When money comes to Richmond, it has a tendency to stay here."So the bill included a provision allowing the state ax department to establish a trust fund and pay the local governments monthly without going through the legislative process - essentially barring lawmakers from raiding the fund.Local governments have also realized that as the number of phone landlines is declining in favor of untaxed wireless and Internet-based calling, so are the revenues. Localities see that the flat tax will replace a local tax base that is shrinking, said Wiley.In order for the state to still collect enough money to make the changes revenue-neutral for local governments, other services will need to be taxed.Some legislators argue that it is unfair to tax some similar services at different rates or not at all.Besides the flat tax, there will be a 75-cent tax on each of the 9.8 million local and wireless phone lines statewide.Taxes that would no longer be line-items on a bill include: taxes on local and wireless phone services, a local license tax, state and local E-911 taxes and fees and the tax that funds the Virginia Relay Center that helps deaf people communicate with telephone-like devices.
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