The dreaded Dillion Rule cast its shadow ove the floor of the state Senate the other day as legislators debated the otherday as legislators debated the wisdom of letting James City County levy a 2 percent tax on meals served at restaurants

In some states, a county that wants a meals tax can go right ahead and charge it. In Virginia, however, such a proposition runs headlong into something called the Dillon Rule: a century-old legal decision named after an Iowa judge who held that states have supreme authority over their local governments.

For years, the Dillon Rule has been the bane of Northern Virginia's localities. Because of it, local officials must plead their cases before the General Assembly each time they want to do anything different: regulate condominiums, raise salaries for school board members, even install four-way stop signs at intersections.

"We need the opportunity to solve our problems as they arise," complains Fairfax County Supervisor Martha Pennino. "The Dillon Rule prevents this."

On small issues or those peculiar to a single county, lawmakers here sometimes are willing to bend Dillon's Rule, parceling out new powers to localities on a case-by-case basis. But the ultimate power, held by the legislature and protected by the Rule, is jealously preserved--particularly when it comes to matters of taxation.

So went the arguments in the Senate the other day over the "little old James City County bill" proposed by Sen. William E. Fears (D-Accomac). To allow one county to impose a tax on restaurant meals would be to make an exception, and exceptions run the danger of disproving the Rule.

Fears, conscious of the powers of the Rule, sought to limit the exceptions. First he fended off an attempt to extend the right of a meals tax to Roanoke County. He won. Then he found his bill threatened with an amendment to give that taxing power to all of Virginia's 96 counties. That, he told the Senate, would be perceived in the lower house as an outright challenge to one of the state's most sacred cows.

"There's a land mine over there in the House known as the Dillon Rule. I don't want to step on that thing and have it blow up in my face," said Fears. "If I can go over there alone, I might have a chance. . . . I'm just trying to save my hide from that land mine over there."

The Senate went ahead with the amendment anyway and passed the bill 28 to 10. Some senators argued it was only fair to allow all counties to levy a 2 percent meals tax. Others, though voting for the bill, apparently expect it to die in the House, where they think it will be clobbered on one hand by the restaurant lobby and on the other by jealous protectors of the principle of the Rule.

At this point, James City County is at a loss to figure out the principle of the Dillon Rule. The county, with a population of 23,700, borders Williamsburg, which last March adopted a 2 percent tax on restaurant meals as well as a 2 percent tax on hotel and motel rooms. Neither tax had to be cleared by the legislature.

That's because Williamsburg, like most of Virginia's 41 cities, already had written into its charter the right to levy certain taxes--a right denied county governments by Dillon's Rule. Not all cities have chosen to levy these taxes; at this date, 16 Virginia cities levy a meals tax, 24 tax motel and hotel rooms and 21 have a local cigarette tax. For most, these taxes are options that can be exercised without ever having to cross the threshold of the state capitol.

For James City County, which now shares a school board, a courthouse, a jail, a library and recreation facilities with Williamsburg, the distinction made by the Dillon Rule borders on the absurd.

"There is virtually no difference between Williamsburg and the county as far as the tourist industry goes," said Allen Turnbull, county administrative analyst. "If you were to drive down the Richmond road, you couldn't tell where the city begins and where the county ends."

Besides, noted Turnbull, an annexation move expected to be completed within the year will put most of the county's restaurants well within Williamsburg's city limits anyway.

James City County's problems would find a sympathetic ear in Northern Virginia. Both Fairfax and Arlington counties became two of seven counties several years ago to win the right to impose a local tax on hotel and motel rooms, but not without a fight. Pennino remembers when Fairfax had to abandon a tax on theater admissions because of the legislature's objections.

By amending Fears' James City County bill from a special to a general law, the Senate has made it easier to grant counties the authority to enact meals taxes. Special bills require a two-thirds majority in both houses while general laws need only a simple majority.

Some local officials also feel that this year, in the era of New Federalism, legislators should be more sympathetic to giving local governments the taxing sources they say they need to provide services.

Besides, said Fears the other day: "There are some new members (in the House) who don't even know what the Dillon Rule is."