Town Will Increase Meals Tax

Published 4:07 pm Thursday, April 7, 2011

FARMVILLE – The Town of Farmville is expected to increase its meals tax from 6.5 to eight percent, effective July 1.

And Town officials are going to begin enforcing the meals tax, too.

A public hearing on the increase, meanwhile, will be held in conjunction with Town Council's May 11 meeting.

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The proposed meals tax increase would generate approximately $400,000 in additional revenue for the Town.

During Wednesday's Town Council work session, it was noted that raising the meals tax was fairer on town residents than raising the real estate tax because a substantial percentage of the former revenue comes from people who live out of town.

Raising the same amount of money would require the Town to at least double Farmville's real estate tax, and that is something Town Council is not going to do.

“Our meals tax, we take in $1.5 million,” Town Manager Gerald Spates said during the work session discussion.

“It's huge,” agreed council member Tommy Pairet. “I know the number's up there.”

That $1.5 million is generated with a 6.5 percent meals tax, Spates noted, “so if you add another 1.5 percent to this…

“You'd be close to $400,000 in increased revenue,” said council member and budget committee member David E. Whitus. “And if you did the reverse math you'd have to take the real estate tax up more than double to generate that.”

Every one-cent of real estate tax generates $50,000 for the Town.

“We take in about $490,000 (in real estate tax) at 10 cents,” Spates said.

Raising the meals tax, which is paid by travelers and others who eat in Farmville restaurants but live out of town, is seen by town officials as a better alternative than putting the entire burden on those who own real estate in Farmville.

“We're trying to stay away from the real estate tax because of a lot of reasons,” council member and budget committee member Dr. Edward I. Gordon said. “Everything was brought up for discussion but we're really trying to stay away from that because…it's a way of getting people going through town, people who use the town…”

And, observed Whitus regarding the meals tax, “it's not a forced tax. You don't have to go out to eat.”

“It's a choice,” several council members said simultaneously.

“Where with the real estate tax,” Whitus said, “there's no choice.”

And it is a tax Farmville residents pay in other communities.

“You pay it everywhere,” Spates pointed out.

Nor does it have a negative impact on Farmville restaurants, according to Town officials.

“I asked one of the restaurant vendors here in town if people ever complained about the impact of the meals tax (on their bills). And he said, 'Not really, they just pay their bill.'”

Noting the percentage of meals tax revenue paid by individuals from out of town, Whitus pointed to the number of people attracted into Farmville by Hampden-Sydney College and Longwood University.

“Tons of team buses,” Whitus said, regarding NCAA athletic competitions, “and tons of outsiders.”

Likewise, noted Pairet, when the Field Of Dreams hosts youth league tournaments the number of people coming into Farmville is “astronomical.”

And they buy meals at Farmville restaurants, Town Council's discussion pointed out.

The Town is faced with the need to generate additional revenue, an imperative made even more vital, officials believe, as the Town's number one revenue source, the BPOL, or Business License tax on gross receipts, has been increasingly targeted statewide in the General Assembly by those who want to eradicate it.

“We have got to talk about his unpleasant subject,” Dr. Gordon said. “That BPOL tax is going away and when the decision is made for it to go away there will be a huge hole that we better have ready to fill somehow.”

Better to have something in place than be found flat-footed, Town officials believe. “We're trying to be a little bit proactive here,” Dr. Gordon said. “This isn't us trying to be gluttons.”

Meals Tax Enforcement

Whitus said the budget committee had a “lengthy discussion about enforcing the meals tax. We want to be sure that all the restaurants are collecting it. Not only that they're collecting it but that they are remitting it to the Town.”

That prompted Spates to tell council members that he was out to eat recently and “they didn't ring it up….”

Pairet quickly chipped in, “I've had that same experience.”

Spates said a call has been made to the State Department of Taxation, the town manager explaining that if a restaurant were not to include the meals tax in the bill that would be not only “cheating us out of the meals tax, they're cheating the state out of it and the federal government…

“So I think we need to start monitoring these businesses,” Spates said. “Put some people in there to watch and see if they do ring it up.”

The same sort of monitoring should be done with the BPOL tax too, Whitus added.

“You (businesses) report whatever you want to report” as gross income for the year, he said. “And the town collects tax on it. There are ways to monitor the BPOL, as well, and I think in the current economic times we're going to have to monitor it to be sure we're getting the revenue.”

Spates told council that the Town's ordinance allows for audits of businesses.

“But we've never done it,” the town manager said.

Not yet.

“We need,” Whitus replied, “to look into that.”