Fairfax County is exploring a food and beverage tax as part of a broader strategy to diversify its revenue sources and reduce reliance on real estate taxes, which currently account for a majority of the county’s general fund revenue.
This initiative is in response to the Board of Supervisors' direction to explore options that support essential services and community priorities. Below, you’ll find details on the food and beverage tax proposal and its potential benefits.
What is a Food and Beverage Tax?
- Definition: A food and beverage tax is a levy on prepared food and beverages sold by restaurants including food establishments such as cafeterias, food trucks and coffee shops.
- What it applies to: Prepared foods, including those from grocery store deli counters and beverages served with meals.
- Exemptions: Groceries, vending machine items, and unprepared food are not subject to the tax.
Why is Fairfax County Considering a Food and Beverage Tax?
- Revenue Diversification: The county relies heavily on real estate taxes, with residential properties comprising over 75% of the real estate assessment base. Diversifying revenue sources reduces this dependence.
- Projected Revenue: Each 1% of a meals tax is estimated to generate approximately $35 million annually. If implemented at the maximum advertised rate of 4% on Jan. 1, 2026, midway through the fiscal year, the tax is projected to generate $65.1 million in the first half-year alone. There are no restrictions on how this revenue can be used.
- Visitor Contribution: An estimated 34% of food and beverage tax revenue would come from non-residents, such as visitors and commuters, providing additional funding without only burdening county residents.
How Would the Revenue Be Used?
The revenue from a food and beverage tax would support key community needs, such as:
- Reducing the reliance on property taxes.
- Maintaining high-quality public schools and infrastructure.
- Funding resident priorities.
Regional Comparisons
Neighboring jurisdictions already have food and beverage taxes in place, ranging from 4% to 6%, including:
- City of Alexandria: 5%
- Arlington County: 4%
- City of Fairfax: 4%
- City of Falls Church: 4%
- Prince William County: 4%
These comparisons show that residents and visitors are familiar with this type of tax, and Fairfax County would align with nearby localities.
Projected Timeline
If approved, the food and beverage tax would not go into effect before Jan. 1, 2026, allowing time for system updates and outreach to affected businesses.
Key steps include:
- March 18: Authorization to advertise a tax ordinance.
- April 22-24: Public hearings and Board consideration.
- May 13: Final Board action during budget adoption.
Questions
No. The tax applies only to prepared meals and beverages, not groceries or unprepared foods.
The proposed tax is designed to diversify the county’s revenue sources, reducing an overreliance on property taxes, which currently account for 66% of general fund revenue. This shift helps alleviate the burden on homeowners, including those with lower or fixed incomes. Additionally, approximately 34% of food and beverage tax revenue would come from visitors and commuters, ensuring a broader and more equitable distribution of the tax impact.
Neighboring jurisdictions including the City of Alexandria (5%), Arlington County (4%), and the City of Fairfax (4%), have successfully implemented food and beverage taxes without harm to their dining industries. Fairfax County’s proposed rate aligns with these areas, ensuring the county remains competitive for local businesses. Furthermore, the additional revenue will support essential services and infrastructure improvements that benefit residents, businesses, and the local economy.
What is often described as a “budget surplus” is actually carryover funds—unspent allocations from the previous period that are earmarked for the next budget cycle. While carryover can provide short-term flexibility, it is not a sustainable long-term funding solution. A food and beverage tax would provide a stable revenue source to fund essential services like schools, public safety and infrastructure improvements while reducing reliance on property taxes.
Real estate taxes represent about 66% of the county’s general fund revenues, and diversifying the revenue stream is a priority. Voters rejected the food and beverage tax in 1992 and 2016, however, the Virginia General Assembly has since given county boards the authority to enact the tax directly, reflecting a recognition of the need for counties to have more flexibility in managing their limited options to raise revenue sources to meet evolving community needs. The tax would help address current funding challenges in a way that balances fairness and fiscal responsibility.
The county remains committed to transparency and accountability in how public funds are managed. Tax revenue, like all county funds, would be tracked and reported annually, ensuring it is used to address key community priorities, such as education, public safety, and infrastructure. By creating a more diversified and reliable revenue stream, the food and beverage tax helps ensure the county can meet residents’ needs efficiently and responsibly.