The Town Council approved an ordinance Tuesday night that will pre-empt a Fairfax County tax on cellular phone customers and reinstate a previously suspended tax, directly benefiting the town.
"We were the first [to have a cell phone tax]," said Mayor Michael O'Reilly, "the county, then several months later enacted a cell phone tax and we notified them and said it wasn't applicable for our residents."
O'Reilly said that Fairfax County disagreed with the request to not tax Herndon, saying based on state legislature they could implement their consumer utility tax on local cell phones on top of the town's consumer utility tax, which would have doubled the amount residents would have to pay in taxes on their cellular phone bills.
"In April of 2003 Fairfax County taxed cellular phones," said Town Attorney Richard Kaufman, at the Town Council meeting. "The Town Council in September 2003, by ordinance, suspended the [town's] tax in order to allow for a possible legislative solution in the General Assembly."
After a year and a half the legislation was reworded.
"Procedurally it was awkward," said O'Reilly of the state legislation, adding that because it was so unclear the town could not prove that its residents were exempt from the county tax.
THE CONSUMER UTILITY tax legislation states that cellular phone users would be taxed 10 percent for the first $30 of their bill, approximately a $3 tax each month.
The money gained from the tax goes to county funds, which means Herndon residents do not see all of the money because it is divided throughout Fairfax County.
"Legislation was passed last January or February that said the town tax would pre-empt the county," said O'Reilly of the recent rewrite of state legislation. "The town tax will be back in place ... which requires residents to pay $3 and the money then goes to the town. We might as well have it to use as opposed to the county."
At the public hearing, one resident asked if families with more than one cellular phone per household could be put on a family plan that would offer a cheaper tax rate.
Councilman Steven Mitchell reminded the resident that the tax is not new, and that "the county currently is imposing it, it's just a shifting of the tax to Herndon."
ONLY RESIDENTS who live in incorporated Herndon, and receive their cellular phone bills to that address will be taxed.
Although their bills will not change, the money that the tax generates will be apparent in the town's general revenue fund.
"The net impact on the citizens should be zero, but the net income for the town should be somewhere around $150,000," said O'Reilly.
Mary Tuohy, director of finance for the town of Herndon, said at the Town Council meeting that the actual revenue is projected to be $168,000 starting Dec. 1, 2004.
O'Reilly explained the general revenue fund is the money that is collected from various sources such as speeding tickets, hotel taxes and permit fees, among many others. The money collected then goes into the budget for the town and is distributed appropriately.
Although Fairfax County originally said they would tax Herndon on top of the town's tax, when the legislation was rewritten O'Reilly said, "they didn't have vocal opposition to it ... to them it's such a small amount of money."
Kaufman said the tax change to the town will take effect Dec. 1, 2004.