Jan 4, 2024 - News

2 Richmond restaurants say they owe thousands in incorrect meals tax fees

an illustration of a 100 dollar bill on a fork

Illustration: Aïda Amer/Axios

Two Richmond restaurant owners took to social media over the holidays to share their frustration over massive meals tax bills levied by the city that they say largely consist of late fees amassed without any notice.

  • The bills for the two restaurants collectively amount to more than $100,000.

Why it matters: Local restaurant owners and members of City Council have long complained that late fees on the city's meals tax are often assessed erroneously and without any communication and tend to add up to thousands of dollars.

  • Plus, an internal audit last year found major issues with how the city's finance department manages meals taxes, including sending inaccurate delinquent notices to restaurants.

What's happening: Two different things.

Latitude Seafood Co. in Stony Point Fashion Park just settled up a $68,000 meals tax tab with the city, one that started as an $8,000 bill due in March 2020 and one the restaurant paid late because of the city's COVID tax amnesty period, owner Kevin Grubbs tells Axios.

  • Turns out Latitude, like other Richmond restaurants, didn't know businesses had to apply to participate in the amnesty program; it wasn't automatic.
  • Mayor Stoney publicly announced tax amnesty for restaurants in March 2020, but the details weren't shared until the plan passed Council a month later and included a stipulation that restaurants had to apply and meet specific requirements to participate.

Grubbs acknowledges the mistake and said he'd gladly pay the initial $800 late fee, or $1,100 with interest.

  • His issue is that the one late March 2020 payment triggered a 10% late fee, plus an additional 10% annually for each day late, per city code, making every subsequent payment late — and resulting in even more fees that added up to, well, an additional $60,000.

Meanwhile, Philly Vegan, a vegan cheesesteak shop that opened in 2021 in Manchester, posted on Instagram that the city told them they didn't have to pay meals tax when they opened.

  • The city acknowledged the error, according to documentation the restaurant posted, and after nine months in business, Philly Vegan started paying its meals tax.
  • Yes, but: The restaurant owed roughly $8,600 from the unpaid nine months and was unaware it was due until it got a recent bill for around $37,000 — due immediately.

How it works: The city levies a 7.5% tax on all prepared food and beverages restaurants sell.

  • Customers pay the tax on each bill, and the restaurant serves as a kind of middleman, collecting, calculating and remitting a lump sum to the city each month, due by the 20th to avoid a late fee.
  • Restaurant owners' gripes with the process are being the middleman and the lack of an online system or any automated process that lets them know if the payment has (or hasn't) been received.

What they're saying: The city can't legally speak to specific tax information or situations, Petula Burks, a spokesperson for Stoney, tells Axios.

  • Burks did share that the city is rolling out a new, upgraded software RVAPay — a long-overdue update highlighted in last year's audit. It should be ready for restaurants and meals tax next year.

The latest: Philly Vegan said it will likely have to shut down over the large amount it owes.

Grubbs at Latitude, who spent the better part of last year going back and forth with city hall over the issue, said he's planning to leave the city when his lease is up and move his restaurant down the road to Henrico.

  • "I don't have a problem with late fees or paying them. I want to pay what I owe. What I have an issue with is the lack of transparency," he tells Axios.

What we're watching: Newly sworn in City Council President Kristen Nye says she's aware of the issue, and that she and the city's chief administrative officer Lincoln Saunders are planning to meet with the affected restaurant owners.

  • "The heart of our city is our small business owners. We want to do what we can do for them," she tells Axios.
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