The Supreme Court of Virginia issued an opinion in Norton v. Bd. of Supervisors, Record No. 201028 (May 27, 2021), concerning changes to taxes and zoning made by Fairfax County. The majority of the opinion concerned the zoning changes. As for the taxes, Fairfax County levied a 2% transient occupancy tax on the cost of short-term lodging. The owners of the dwellings challenged Fairfax County’s authority to impose this tax. In general, Dillon’s Rule prevents local governments from exercising powers unless they are specifically delegated by the state. Dillon’s Rule applies in Virginia. The dispute is whether Virginia Code § 58.1-3819(A) grants Fairfax County the authority to impose this tax. In pertinent part, Virginia Code § 58.1-3819(A) says
Any county, by duly adopted ordinance, may levy a transient occupancy tax on hotels, motels, boarding houses, travel campgrounds, and other facilities offering guest rooms rented out for continuous occupancy for fewer than 30 consecutive days.
The owners argued that their properties (dwellings) are distinguishable from the types of properties covered by this section. However, the Court said that those distinctions are irrelevant as the section describes the manner in which the property is used. Therefore, it upheld the imposition of the tax.
Christian Tennant is a Virginia tax attorney and former employee of the Virginia Department of Taxation. Mr. Tennant regularly speaks and writes on Virginia taxation. In his private practice he advises and represents businesses and individuals on a range of tax matters.