Richmond is proposing big changes to its tax collections policy

Catch up quick: Over the holidays, the owners of Latitude Seafood Co. and Philly Vegan shared that the city said they collectively owed more than $100,000 in meals tax.

• The bills were largely late fees amassed without any notice and, in the case of Philly Vegan, included more than $30,000 in taxes the restaurant said they were told they didn't need to collect.
• Since then, owners of more than a dozen other local restaurants have come forward with similar stories.

Meanwhile, Sen. Bill DeSteph, who represents Virginia Beach, last week introduced state legislation attempting to rein in the massive late fees from meals tax by requiring localities to apply payments to current months.

The big picture: The meals tax issue was shaping up to be a big part of Mayor Stoney's legacy as he ramps up his campaign to be Virginia's next governor.

What's happening now: A lot.

• Council members and city officials have been working hard the past two weeks to come up with some solutions for local businesses and tax payers, City Council President Kristen Nye tells Axios.

In a letter sent to City Council Thursday, chief administrative officer Lincoln Saunders outlined immediate changes to city policy and planned updates to city code, "to be more supportive to our restaurants, small businesses, residents, and other taxpayers."

Immediate policy changes:

Free online paying

Residents and business owners are currently charged a convenience fee, ranging from $1-$2.25.

Online paying for everyone

Right now, accounts that are past due have to pay in person or by mail.

Proposed changes, including changes to city code, which would require council action:

Extended repayment time

Extend the amount of time residents or businesses have for repayment plans from 60 months to 72 months.

• Plus, lowering the down payment amount to enter into a plan.

Amending city code so that payments are applied to the current month as opposed to delinquent amounts.

This one would have the biggest impact on the meals tax issue.

• Under current policy, the city processes monthly payments toward any past-due amount first. This means being late one month can snowball into multiple months — often without any notice.
• Restaurant owners have said this policy, coupled with lack of late notices, is what has made late fees balloon into the thousands of dollars.
• Worth noting: According to current city code, Richmond amended this policy in 2020. It's unclear what changed then, and the city did not respond to repeated requests for comment.

Reduce late fees for car tax payments

The proposal is to lessen late fees and interest for the first month on personal property tax.

• Current policy assesses a 10% penalty and 10% interest beginning the first day the personal property tax is due.
• Change would make the late fee 2% from June 6-30 and waive interest fees until July 1.

Requesting a change to state law on restaurant credit card fee credit, aka "sellers commission"

Under current law, restaurants get a 3% credit on their meals tax payment to cover the credit card fees they're charged while collecting meals taxes. But they lose the credit for the month if their meals tax payment is considered late.

• According to the letter, the city asked Del. Mike Jones (a former City Council member) to introduce a bill allowing localities discretion to continue to give the credit even if a restaurant is late.

Plus, Saunders' letter outlined plans for officials to visit with all local restaurant owners to ensure they understand the city tax policy.

• It also announced plans for a $100,000 media campaign to educate the public about its new, upgraded software, RVAPay.
• And it recommended the city review how it handles late real estate taxes, including better communication and enhanced relief for elderly and disabled homeowners.

What's next: "We're hoping we can get any legislation introduced and passed by the end of February — at the latest," Nye tells Axios.