Feb 28, 2024 - News

More meals tax relief comes for Richmond restaurants

Illustration of Richmond City Hall with lines radiating from it.

Illustration: Brendan Lynch/Axios

The city of Richmond is rolling out another big-deal policy change to try to correct the ongoing meals tax debacle.

State of play: Richmond is freezing interest and penalties on all past-due meals tax balances as it manually reviews every delinquent local restaurant account to check for — and possibly refund — excessive late fees or interest.

Why it matters: It's the city's most recent concrete policy change in roughly two months to address massive late penalties that restaurant owners say they've been assessed erroneously and without notice.

  • Restaurant owners have been flagging the issue for years, but it came to a head in January, the start of the last year in office for Mayor Stoney, who is also ramping up his run for governor.

The latest: Starting Friday, restaurants that have an outstanding balance will not be assessed interest and fees while they're under review.

  • Restaurant owners should also receive a letter in the coming weeks letting them know their account is under review, a process the city hopes to have wrapped by July 1.
  • There's no need for restaurants to contact the city to be reviewed, chief administrative officer Lincoln Saunders tells Axios. (They can feel free to email with questions, though, he added.)

Meanwhile, the city is moving up the timeline for shifting meals tax accounts to its new, upgraded software, RVAPay.

  • The new system should be available for restaurants to use for meals tax payments by the end of the year, if not sooner.
  • Initially, RVAPay was planned to roll out for restaurants next year, after real estate taxes.
  • Officials say the new software will let users look up their account, balance and payments history, which they can't do now.

Catch up quick: Over the holidays, two Richmond restaurant owners shared that the city said they collectively owed more than $100,000 in meals tax.

  • Each initially owned around $8,000.
  • Since then, more than a dozen local restaurant owners have shared similar stories.
  • The city in January found that a 2019 change in how it processes tax payments resulted in late tax payments that often ended up snowballing for multiple months.

By the numbers: It's unclear how many restaurants have been affected, but a VPM review found more than 45% of Richmond restaurants were considered late in the later half of 2022.

  • Earlier this month, the city said it was reviewing "around 500 cases;" Richmond did not respond to a request for an updated count.

The intrigue: While the city's 7.5% tax on prepared food and drink might seem like a small amount on a restaurant bill, it adds up to real money for the city's coffers.

  • Prepared food is the third highest grossing tax for the city budget each year, behind real estate and personal property (car) taxes.
  • For fiscal year 2022, the most recent year available, meals tax revenue brought in just under $46 million.
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