County mulls meals, motel taxes

Published 8:41 am Wednesday, March 25, 2009

COURTLAND—Southampton County is looking to the motel rooms and restaurants in the county for alternative sources of revenue.

Two taxes — a transient occupancy tax at lodging facilities and a meals tax at restaurants — would provide additional revenue for the county and help minimize increases to property taxes. Most of Southampton’s neighbors already levy both taxes.

The county’s Board of Supervisors approved a motion Monday directing County Administrator Michael Johnson to advertise a transient occupancy tax ordinance for public comment in April. The board also told Johnson to investigate the meals tax further and prepare a resolution calling for a referendum on the matter.

The two proposed taxes must follow different paths before being enacted.

Johnson said state law, specifically the 1950 Code of Virginia, permits counties to levy the transient occupancy tax on lodging facilities at a maximum rate of 2 percent. The tax would not apply to motels within the limits of any towns in the county, unless the towns granted the authority to the county.

“While it is not likely to generate substantial revenue immediately, it is an untapped resource that can only grow as Southampton County continues to develop,” Johnson told the board Monday.

Meanwhile, a meals tax would apply to food served at restaurants, but would also be applicable to grocery and convenience stores selling prepared food at a delicatessen. According to Johnson, the tax would not apply to food and beverages sold from vending machines. Food prepared and sold in public school cafeterias, nursing homes and hospitals, or by churches, civic groups, fire departments and rescue squads, would also be exempt from the tax.

Voters in Southampton County would need to pass a referendum to give the county board the authority to levy a meals tax. If approved, the county would then enact an ordinance for the meals tax. State law caps the maximum tax that a county can levy at 4 percent. By contrast, cities can go up to 6.5 percent and towns 8 percent.

Currently, 63 of the 95 counties in Virginia impose a transient occupancy tax, and 40 counties levy a meals tax. In our area, Greensville and Isle of Wight counties, and the cities of Franklin, Suffolk and Emporia, have both taxes. Franklin levies a 6.5 percent meals tax and an 8 percent transient occupancy tax.

Enacting new meals taxes has not been a popular concept elsewhere. Voters in six Virginia counties — Bath, Culpeper, Fauquier, Loudoun, Rockingham and Smyth — rejected referendums to give their counties the authority to levy a meals tax in November. The tax was approved by voters in a seventh county, King William, but only by a slim margin: 45 votes, with more than 7,800 total votes cast.

The Board of Supervisors may decide to include language in the referendum that says what the additional tax revenue would be used for.

“That’s something to think about if you’re serious, and may enhance your chances of success,” Johnson told the board.

Regardless, the taxes weren’t getting favorable reviews from the lunchtime crowd at Drake’s Shopping Mart in Newsoms.

“I’m surprised that Southampton hadn’t done it before,” said Carolyn Drake, the store’s co-owner. “But it’s just extra work for collecting it and reporting it. It would be extra work on the mom-and-pop stores.”

When asked if she thought the tax would affect business, Drake said yes.

“I’m sure it will,” she said. “I think everybody’s taxed enough right now, (especially) with the recession and everything else. I’m sure people will complain when I add four cents to the dollar. Have you ever seen taxes raised and people not complain?”

Larry Holloman, a resident of Newsoms, wasn’t enthusiastic of the idea.

“A meals tax?” Holloman asked after purchasing a sandwich at Drake’s. “I don’t want no tax of any kind. We pay enough taxes.”

Stewart Drake of Newsoms concurred. “I think we’ve got enough taxes right now, to tell you the truth,” he said.

The parking lot of the Courtland Inn was empty when Manager Dan Shah was asked about the transient occupancy tax.

“Business is very slow,” Shah said, adding that only four or five people stay at the motel during a typical week. Shah said the most people he had seen at the motel were 10 to 15 people in a week. He wasn’t sure if the transient occupancy tax would have an effect on business.