A proposed tax rate increase could impact businesses in Prince William County.
Last month, Board of County Supervisors (BOCS) Chairman Corey Stewart proposed that the board direct the County Executive to advertise a “proposed tangible personal property tax rate” on computer equipment and peripherals that a trade or business uses.
Today, the tax rate is $1.25 for businesses, including data centers. Stewart suggested the rate increase to $3.70, the same tax rate the county charges Prince William residents.
“If we make this fair and we charge them the same amount of money that we’re charging to our residents … that will generate approximately $20 million annually for the county,” Stewart said.
The board passed the proposal in a 6-1 vote, with Supervisor Marty Nohe in opposition.
Nohe suggested that the county increase its commercial tax base by growing the business community, instead of raising taxes.
“I just don’t think that raising a commercial tax rate — tripling a commercial tax rate — in order to grow our commercial tax base is the way to do it,” Nohe said. “I think it sends exactly the wrong message to the business community, and I think it makes it dramatically more difficult for us to attract the kind of businesses that we want to bring into this county.”
Currently, companies pay for their business licenses. In March, they are taxed on the amount of income they generate annually. In October, they pay property tax on equipment they use, such as office furniture.
Citizens pay personal property tax on their vehicles, but aren’t taxed on personal items, such as computers.
If the county starts taxing electronic items, businesses will be required to set aside even more revenue for tax purposes.
This could lead some businesses to pass the additional cost on customers.
“No matter what the government does when new taxes or fees come out, we may absorb it at the very beginning, but all that does is raise the prices of everything,” a business owner who wished to remain anonymous said. “In the end, the consumer pays for it.”
Some county supervisors, Shaw said, may be in favor of the proposed tax rate increase, because neighboring localities have higher rates.
The personal property tax rate is $4.57 in Fairfax County and $4.20 in Loundoun County.
Brendon Shaw, the Prince William Chamber of Comerce’s director of government relations thinks that the rationale is a bit “short-sighted.”
“Here at Prince William County, I think that folks tend to forget we aren’t just competing with Loundoun County, for example. We’re competing with the entire state of Indiana, the entire state of Ohio, entire other countries that want these facilities,” Shaw said. “And if we get to a point where we’re really impacting some of our more significant value propositions in terms of economic development, we’re going to do some damage that we’re not going to be able to recuperate.”
It isn’t the first time that raising the tax rate on computers equipment and other technology has been brought up. Two years ago, Supervisor Pete Candland proposed an increase.
The Chamber, along with its industry partners and the Virginia Technology Council, defeated it by expressing their concerns about how the tax rate increase would impact the county’s economic development.
The organizations were taken back when the proposal re-emerged.
“This year, to see it come up again, it really is surprising to us, because I think that — not just at the chamber, but the tech council, some of our other regional partners — we thought we were in a really good place where the … chairman understood the impact that this could have,” Shaw said.
The $1.25 tax rate was approved 25 years ago to draw data centers to Prince William County.
The action was successful.
Since the rate was implemented, the data center industry has brought billions of dollars in capital investments to Prince William.
“It’s a significant generator of revenue back to the county, which then goes to schools, it goes to public safety, it goes to other county services,” Shaw said. “So, really, it does an excellent job of sort of rebalancing where revenue is coming from. If that revenue didn’t exist, for example, the county would have to get it from somewhere to support the residents.”
Taxing the data centers on the computers and peripherals they use could lead to complications, according to the anonymous business owner. The devices could be installed in the data centers by other companies.
“So you’re wanting to tax the data center, but if you’re really wanting to tax the peripherals, who actually owns the peripherals? And where are those companies?” the business owner said. “So you could have a company in California that has a server in Prince William County, but they don’t have a business here.”
The board has not adopted the proposed tax rate increase. A decision will be made on the proposal when it takes action on the proposed budget on April 24.
