Final Report:Task Force to Consider a Meals Tax Referendum

Report Includes:

  • Task Force Purpose
  • Background – Meals Tax in Virginia
  • Meals Tax Referenda
  • Meals Tax Referendum Task Force Membership
  • Task Force Alternates
  • Pros and Cons of a Referendum
  • Timing of the Referendum
  • 2014 General Election – Congressional Elections
    • PRO
    • CON
  • 2015 General Election – Board of Supervisors and Virginia General Assembly Elections
    • PRO
    • CON
  • 2016 General Election – Presidential and Congressional Elections
    • PRO
    • CON
  • Dedication of Revenues
    • PRO
    • CON
  • Possible Dedications of Funds
  • Final Report Appendices

 Task Force Purpose

The Honorable Sharon Bulova, Chairman of the Fairfax County Board of Supervisors, announced the creation of a task force to consider a meals tax referendum at the April 22, 2014 meeting of the Fairfax County Board of Supervisors. During several recent budget cycles, members of the community have urged Chairman Bulova and her colleagues on the Board of Supervisors to put a meals tax referendum before voters. With suggestions from her colleagues, Chairman Bulova invited representatives from a diverse set of business and community organizations to study issues related to a meals tax and report to the Board to share their findings. The task force was co-chaired by former Board of Supervisors Chairmen Tom Davis and Kate Hanley.

The mission of the task force was to recommend to the Board of Supervisors:

  • Whether or not to proceed with a referendum for a meals tax;
  • If it is the recommendation of the group to do so, the task force should recommend the timing (what year?) for the question to be put to the voters;
  • And the task force should return to the Board of Supervisors with a recommendation for how revenue from a meals tax should be used.

Background – Meals Tax in Virginia

The meals tax is a tax imposed on the purchase of all prepared and ready to eat foods and beverages. All restaurants as well as grocery stores, delis, convenience stores, caterers, movie theater concessions, hotel food services and other food service businesses selling prepared foods would be required to collect this tax if it is levied by a locality.

§58.1-3833 of the Code of Virginia provides enabling authority for counties to levy a meals tax if approved by a voter referendum. The referendum may be initiated either by a resolution of the Board of Supervisors or by the filing of a petition signed by ten percent of the voters registered in the county. County staff has not found any records of meals tax referenda advancing by petition in Virginia and, with over 700,000 registered voters in Fairfax County, a petition for referendum would require more than 70,000 valid signatures. If approved by referendum, a county may levy up to a four percent meals tax; this tax would be in addition to the existing state sales tax, which is currently six percent for Northern Virginia.

A 2001 amendment to the Code of Virginia allows a Board of Supervisors or a group of petitioners to direct meals tax revenue by stating a purpose in the language of the referendum considered by voters. If a referendum containing such language is approved, this requirement becomes binding on the locality, similar to a bond referendum.

Cities and towns are provided different authority under state code. They may impose a meals tax without holding a referendum. Additionally, Arlington County, Roanoke County, Rockbridge County, Frederick County and Montgomery County received authority from the Virginia General Assembly to enact a meals tax without a referendum, provided that a public hearing was held before adoption and that the governing body of the jurisdiction unanimously adopted the tax by local ordinance.

Under state law, a county meals tax would not apply within the limits of a town that has its own meals tax.  Since Herndon and Vienna levy their own meals tax, a Fairfax County meals tax would not apply within their limits. 

The Town of Clifton currently does not have a meals tax.  State law also provides that a county meals tax would apply in a town without a meals tax only if the town’s governing body approves. Therefore, a Fairfax County meals tax would not apply to Clifton unless the Town Council allowed it to apply within the town.

Several neighboring jurisdictions in Northern Virginia levy a meals tax. The Town of Vienna levies a three percent meals tax, the Town of Herndon levies a two and a half percent meals tax and the City of Alexandria, Arlington County, the City of Fairfax, the City of Falls Church, the City of Manassas, and the City of Manassas Park all levy a four percent meals tax. Loudoun County and Prince William County do not levy a meals tax. Throughout the Commonwealth, all 39 cities levy the meals tax; 47 of the 95 counties and 104 of the 191 towns in Virginia levied a meals tax during 2013.

Across the Potomac, the state of Maryland, Montgomery County and Prince George’s County do not levy a meals tax but do levy a six percent sales tax. The District of Columbia does not apply the six percent general sales tax to meals but does levy a ten percent meals tax.

The Fairfax County Department of Management and Budget estimates that a one percent meals tax would generate approximately $22.5 million in Fiscal Year 2015. This is roughly equivalent to one cent on the County’s real estate tax rate; one cent of real estate tax is projected to generate $21.86 million for FY2015. If a meals tax were levied at four percent, it would provide approximately $90 million in revenue.

Meals Tax Referenda

Fairfax County voters last considered a meals tax referendum during a special election in April of 1992. It was defeated 58% to 42% with approximately 25% of the registered voters participating. Of the neighboring jurisdictions which do have a meals tax, none have received it through a referendum.

The City of Alexandria (1975), the City of Fairfax (1985), the City of Falls Church (1977), the Town of Herndon (2003), the City of Manassas (1988), the City of Manassas Park (since at least 1995), and the Town of Vienna (1989) all have enacted a meals tax by local ordinance as allowed under state law. Arlington County is among a limited number of counties which have received authority from the General Assembly to enact a meals tax by unanimous vote of the Board of Supervisors on a local ordinance. The Arlington Board of Supervisors unanimously enacted such an ordinance in 1991.

Regionally, referenda failed in Loudoun County in 1992, 1998 and 2008. A referendum failed in Prince William County in 1995.

In recent years, meals tax referenda have met with mixed results throughout Virginia. Since 2007, voters in nine counties approved meals tax referenda (Pittsylvania County in 2007; King William County in 2008; Rockingham County in 2009; Southampton County in 2009; Bath County in 2009; Halifax County in 2011; Louisa County in 2011; Middlesex County in 2013; Henrico County in 2013). Over the same period of time, a majority of voters in ten counties opposed meals tax referenda (Fauquier County in 2008; Loudoun County in 2008; Culpeper County in 2008; Sussex County in 2009; Accomack County in 2010; Campbell County in 2012; Buckingham County in 2012; Brunswick County in 2012; Patrick County in 2012; Chesterfield County in 2013).

Eleven of these nineteen referenda included a specific purpose for the revenue from the meals tax, such as dedications for schools, capital projects or real estate tax relief. Six of these referenda were approved. Three out of the eight referenda which did not include a binding dedication in the language of the referendum were approved by voters.

Meals Tax Referendum Task Force Membership

Pros and Cons of a Referendum

 In order to assist the Board of Supervisors in making a decision about whether to put the question of levying a meals tax in Fairfax County on the ballot, the Task Force developed arguments both for and against doing so.  The task force makes no recommendation whether or not to proceed with a referendum. The following statements summarize that discussion, condensed into several categories. Not every member of the task force agrees with every aspect of this report. On June 11, the task force voted to accept this report and send it to the Board of Supervisors, with one objection.


A.     The County needs more revenue. The County’s growing population, including rising student enrollment and increasing student needs, and changing land use patterns incur additional costs to maintain a high quality of life. During the recession important services have been cut, county and school salaries have stagnated, and schools have been underfunded.  Recently the budget requests from the School Board have not been fully funded, and along with unfunded human services needs for our most vulnerable citizens, the County has unfunded needs in health services, parks, libraries, the arts, tourism promotion and public safety. 

Revenue from the meals tax could be allocated to address county infrastructure needs generally or to school system capital improvements in particular.  The workforce infrastructure of both the School Division and the County government requires additional investment as well.

State and federal cuts and unfunded mandates continue to strain the county budget.  Additional revenue from the meals tax could offset those losses and/or provide funds for such things as required funds to improve the election process.  As well, revenues could be a multiplier in drawing down federal or state matching funds.

If the question on the ballot includes specific dedication of revenue to a specific area or areas, it would be binding on the Board of Supervisors and it is a guarantee to voters on how the funds would be spent.

 B.      A meals tax would diversify the County’s revenue stream.  Currently 63.5% of the County’s revenue is generated by the real estate tax, placing most of the tax burden on the County’s homeowners.   A meals tax is one of the few ways the county can broaden the tax base.  Because non-residents would pay a meals tax, the source of revenue is more diverse. A meals tax could replace existing revenue without augmenting it. The state limits the ability of the Board of Supervisors to impose different types of taxes or fees and/or sets limits on the rates that can be levied. 

C.      Estimates are that 28% of those who would pay the meals tax are non-county residents.  Those who benefit from county services while in the county could help defray those costs.   Events in Fairfax County that draw huge crowds of visitors, such as the upcoming World Police and Fire Games, provide an opportunity for increased revenue. 

Arlington, Alexandria, Fairfax City, Falls Church City and the towns of Herndon and Vienna in Fairfax County, all impose a meals tax.  Fairfax County residents pay that tax when eating or purchasing prepared food in those jurisdictions.  There is little evidence that consumers decide where to eat based on whether there is a meals tax or not.  Diners seem not to notice the differences in meals tax rates.   However, the meals tax is discretionary.  The consumers can decide not to eat out or purchase prepared food, and therefore, not pay the tax.

D.     There are economic benefits from levying a meals tax.  Diversifying the tax base by relieving the existing reliance on the real estate tax could benefit commercial land owners as well. Low real estate tax rates encourage businesses to locate or expand in Fairfax County and provide additional jobs.  Increased compensation for county and school employees increases their ability to purchase goods and services, adding to the economic base.  Many of the needed county and school services and supplies are provided by the private or non-profit sector, and the additional revenue would increase those procurements.  An adequately funded school system is important in creating a well-educated workforce that is important to businesses that are interested in locating in Fairfax County.

E.      A referendum on levying a meals tax gives voters a direct opportunity to decide the issue.  Opinions change over time and a significant amount of time has passed since the voters have had a chance to address the question. The last time this issue was presented to Fairfax County voters, state laws did not permit the listing of purposes for the revenue that would be received on the ballot if the referendum passed.  


A.     The County does not need more revenue. A main driver of Fairfax schools and county budget increases is employee compensation. In any case, the projected revenue would not cover all of the suggested uses.  Instead the County needs to manage existing resources more efficiently.  Already the populace is overtaxed.  The impacts of growing real estate assessments and the past two years’ tax rate increases of 1 cent and 0.5 cents were substantial. The funded salary increases for eligible county and school employees show that the county is not underfunded.  Businesses are also struggling. 

B.      Fairfax County already has mechanisms to fund county services.  The Board of Supervisors could use those mechanisms to address needs. A meals tax would be an additional tax on county residents. If it provides $90 million in revenue, a meals tax would only diversify the $3.7 billion County General Fund by 2.4%. Studies have shown that the tax burden is already highest on lower income brackets who are most likely to be affected by a meals tax.  Therefore the meals tax may shift the tax burden to lower income residents and senior citizens who eat out more often.  Statistics indicate that the number of people in poverty in Fairfax County increased from 43,396 in 2000 to 64,600 in 2012.  Meals taxes are not deductible for federal tax purposes, real estate taxes are.  Surveys such as the one in Braddock district, have shown the meals tax to be unpopular.   The addition of a 4% meals tax on top of the existing 6% sales tax would increase the tax on the meal by 67%.

C.      The meals tax unfairly targets one industry, food services.  It is a single industry tax.  There is little correlation between the county’s needs and the food service industry. The success rate for restaurants is already very low.  Nationally, in the last five years only seven out of one hundred succeeded.  In the weak economy, a meals tax would make the situation worse for restaurants and other food service businesses.  In implementing a meals tax, food service businesses would have to bear onerous implementation and on-going administration costs which would add to other increasing costs such as proposed higher minimum wages, healthcare costs, credit card transaction fees and rising prices for meat and other commodities.  

As good corporate citizens, the food service industry’s opposition to a referendum does not mean that the food service industry does not support government services and county employees.

A meals tax in Fairfax County would reduce Fairfax’s current competitive advantage versus those jurisdictions that have meals taxes. Fairfax restaurants could lose business to those jurisdictions such as Prince William and Loudoun that do not. Loss of business negatively impacts restaurant employees.

 D.     A meals tax in Fairfax County could have a negative impact on the economy and a negative impact on the food service industry.  According to one restaurant company, when the meals tax was levied in Arlington in 1991, the number of jobs at their Arlington location decreased.  Restaurants and the food service industry generate approximately 40,000 full time and part time jobs in Fairfax County, and a meals tax could reduce the number of jobs they support and create and could have a negative impact on employee earnings.  The meals tax could impact Fairfax’s ability to compete with non-taxing jurisdictions locally and nationally for tourist and event business.  A new tax could affect spending habits.

A meals tax could send an anti-business message.   Because of the perception of a more burdensome tax environment, new investment would be discouraged, affecting economic growth.  As well, a referendum creates uncertainty for small business planners.

E.      Putting the issue on the ballot incurs some cost for taxpayers, whether or not the referendum is successful.  There are also political consequences of an unsuccessful referendum, because it is unlikely to be on the ballot again for some time, and the General Assembly could continue to resist giving Fairfax permission for levy a meals tax without a referendum.  The voters already said no to a meals tax in 1992 and no to a general sales tax increase in 2002.

Timing of the Referendum

Some members of the task force oppose a referendum under any circumstances, regardless of the timing selected. Assuming the decision to put a referendum to voters has already been made; here are the pros and cons of including a referendum during the 2014, 2015 and 2016 cycles.

1.       There is a consensus among members that a special election should NOT be held.  The costs of such an election could total over $100,000.  Additionally, turnout for such elections shows lower voter participation rates.

2014 General Election – Congressional Elections


-          One reason advanced for a referendum this November is that the money is needed now, so why wait and lose up to $90 million for needed services that could help people immediately?

-          There is likely to be a higher turnout in 2014 than in 2015, so more voters will participate in the process.

-          This issue is currently an item of media discussion.  We need to act now, while there is attention to this issue and not let the momentum dissipate.

-          A 2014 referendum, if successful, would put a meals tax in place for 2015 events.

-          There is time by November to construct a ballot question, build a constituency and educate voters.


-          This November is too short a time to construct a ballot question, build a constituency and educate voters. 

-          There is a built-in solid NO constituency that will turn out at the drop of a dime.  Building a YES constituency takes time and strong organizational efforts.

-          2014 is a national election with a national focus.  A meals tax could not compete with the money spent on the Senate and House campaigns and would not get the oxygen it needs for support.

-          A defeat in 2014 carries over to the 2015 budget and supervisor campaigns and can bring with it a defining momentum into the 2015 supervisor races.

-          Enacting a meals tax immediately preceding major tourism events could send the wrong message to potential visitors.

2015 General Election – Board of Supervisors and Virginia General Assembly Elections


-          Local issues dominate this cycle and a meals tax is inherently local.  It will give both sides ample opportunity to organize and educate.

-          This can help increase the turnout for local elections, which will better served by higher participation.

-          There would be time to construct a ballot question, build constituencies and educate voters


-          Historically, this election cycle has the lowest general election participation rate and 2015 is likely to show the lowest turnout of the general election alternatives.

-          See second PRO above; the meals tax could become the defining issue of the off year and could influence outcomes in other non-related races or ballot questions.

-          The County would miss out on any potential 2015 revenue.

2016 General Election – Presidential and Congressional Elections


-          This cycle has the highest participation rate among voters and will yield the broadest electorate in which to make a decision.

-          The 2016 cycle gives even more time to build a coalition, and activate many beneficiaries of the increased revenues.

-          The Board of Supervisors would have more time to address needs through existing mechanism and more time to analyze expenditures.


-          The current BOS cannot bind future boards and the intervening 2015 election could change the composition of the Board of Supervisors, so no decision on a 2016 referendum can be made until a new board is sworn into office in January of 2016.

-          The voters’ focus will be on the Presidency and National issues, so the meals tax may not get the appropriate attention of the electorate.

-          2016 will also have other local referenda on capital projects which could either jeopardize their passage or detract from the meals tax needs.

-          The County would miss out on any potential 2015 or 2016 revenue.

Dedication of Revenues

Some members of the task force oppose a referendum on a meals tax under any circumstances. Assuming the decision to put a referendum to voters has already been made, here are pros and cons of structuring the referendum to designate meals tax revenue for specific purposes.

The consensus among task force members who support a referendum is to dedicate proceeds to specific uses and not put the money into General Fund.  This gives the voters a choice of costs and benefits.


-          Most referendums that pass have dedicated the funds to specific uses.  Dedicated funds are generally more successful at the polls.

-          Dedicated funding gives clarity to the voters as to what their actual choices are.

-          Dedicated sources of revenue are more predictable for budget planning and for recipient reliance.

-          Dedicated funding energizes those groups who know they will receive the proceeds.  This provides a positive nucleus of support for any referendum.

-          A dedication can include several different proposes and could appeal to different groups.

-          A dedication could include a sunset provision

-          A dedication could allow the county to leverage additional state or federal matching funds


-          Groups not included in the dedicated funding will be less enthusiastic about approving a new tax for someone else when their own funding needs are not met.

-          Groups not included in the dedicated funding may view the referendum as competing with their needs for total available funding.

-          The referendum will have a narrower appeal to voters, thereby diminishing possible beneficiaries.

-          A dedication gives future Boards of Supervisors less flexibility in utilizing the money generated where it is needed most.

-          General fund dollars would still be flexible and could be reallocated away from a service that receives a new dedicated revenue source. Without a maintenance-of-effort clause, the issue will still be attacked as giving more money to the County’s General Fund.

Possible Dedications of Funds (Alphabetical order, not order of priority)

  • Administrative Cost Offset for Food Service Industry
  • The Arts
  • Capital Improvements
  • Debt Service
  • Economic Development
  • Education
  • Human Services
  • Parks/Open Space
  • Public Safety
  • Public Libraries
  • Tax Reduction
  • Tourism Promotion
  • Transportation
  • Any combination of above

 Final Report Appendices


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