Communications Sales and Use Tax Update – Fails to Proceed in House Finance

January 30, 2018

HB 1051 (Watts) would have updated the Communications Sales and Use Tax (CSUT), which was established in 2006 to replace a variety of local telecommunications taxes, to reflect modern consumer choices.  The bill would have placed similar services on a level playing field by eliminating the current exemptions for streaming and prepaid wireless services.  As discussed in a 2015 report completed by the Department of Taxation at the request of the General Assembly, eliminating these carveouts would treat similar services similarly and help to address the CSUT’s disappointing performance as a revenue source for localities. The CSUT generated approximately $75 million less for distribution to localities in FY 2015 than it did in FY 2008.

VACo Executive Director Dean Lynch spoke in favor of the legislation in front of the House Finance Committee on January 29. Lynch said that modernizing the CSUT is necessary after 12 years of changes in technology have eroded its tax base. In the end, the Committee rejected the proposal even though the CSUT has seen a decline in annual revenue from $472 million in 2008 to $392 million in 2015, according to the report.

VACo is grateful to Delegate Watts for initiating the conversation on what a fair telecommunications tax structure should look like in the 21st century and looks forward to continuing the discussion as legislators consider overall changes to the state’s tax system.

VACo Contacts: Dean Lynch, CAE, Katie Boyle and Joe Lerch, AICP

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