City of Richmond staff respond to influx of meals tax payment issues

RICHMOND, Va. (WWBT) -A $37,000 bill here, a $68,000 bill there, as several Richmond restaurant owners are fuming over the hefty bills they received for unpaid meals taxes, which they say the city is to blame for their mistakes.

Staff with the city are now acknowledging some areas for improvement.

Each restaurant is its own case and needs to be handled differently, with unique solutions. The underlying factor to them all comes down to miscommunication with the city and its finance office.

“Clearly there’s, there’s more we can do we need to do to improve communication,” Richmond’s Chief Administrative Officer Lincoln Saunders said.

Saunders admits there were times city staff may have offered advice when it was not their place.

That’s what the co-owner of Philly Vegan says happened in his case when he went to apply for a business license. He says an employee in the finance office told him they did not need to create a meals tax account because they were takeout only. Nine months later, they found out that was not the case and then later on were hit with a bill of $37,000 of unpaid fees.

Saunders says the city is now going to work with the impacted restaurants.

“I’m planning to sit down with some of the business owners. I intend to sit down with the staff at Philly Vegan to hear their side of the story and see how we can find resolution,” Saunders said.

Mayor Levar Stoney agrees the problems will be resolved.

“We believe that small businesses are the backbone, the front bone, and the middle bone of the Richmond economy. And so, we’re going to do everything possible to rectify if there are any of these issues,” Stoney said.

The resolution may not be what the restaurants wanted. Co-owner of Philly Vegan Samuel Veney told 12 On Your Side he wants the city to get rid of the fees they say he owes because he says it was the city’s mistake that led to his situation.

“I should be able to walk into the Department of Finance by myself, not with a lawyer to make sure that employees are doing the correct thing,” Veney said.

Saunders says it gets complicated legally regarding a meals tax because of the Virginia code. He explains it is not as simple as waiving the fees because a restaurant did not know they had to pay them.

“Where the law tends to be a little tougher is when we’re talking about the statutory assessments,” Saunders said.

Virginia code is still forcing them to collect payment, even though restaurants were not charging customers that additional fee on their meals. Veney says they were not doing that because it is what a city employee instructed them to do.

“I don’t think we should be advising a business on what taxes apply to them and what do not. It’s really up to their CPA, essentially their business, to know the law and what applies to them specifically,” Saunders said.

Saunders says there would be more mistakes if the city were instructing everyone what to do when it comes to their individual restaurant. In response to other restaurants, whose meals tax problems came from missed bills, Saunders says the city started handing out late notices again in 2022. He also says when a restaurant is missing payments and becomes delinquent by state code, it complicates the solutions they can provide.

Restaurants can apply to appeal their added-on charges for missing payments, but Veney told 12 On Your Side he stopped hearing from the finance office, and they would not overturn what he owed. Saunders defended the Finance Director Sheila White, saying there were problems in the system before her time, and it is something they are updating.

Saunders says the city’s system used for businesses’ billing has been manual. This could have led to restaurants missing payments, which the city is trying to fix moving forward, though it does not resolve their prior problems.

“The challenge for us is that the law doesn’t absolve the business of the responsibility for collecting a tax if it was supposed to be assessed,” Saunders said. “And so that puts the city in a difficult place. So, it’s better, I believe, for the city not to advise businesses on their practices and what they need to do, but find out other ways that we support them with certainly, you know, making sure that we are improving our communication for what our processes are, and other ways that we can support and lift up, particularly our small businesses.”

Saunders said the city is moving its payment system to ‘RVA Pay,’ an online space to make it easier for businesses to stay up to date. He says they have been working on it for the past few years, and it should be ready later this year.

“One of the major advantages of that is that business owners and particularly those doing multiple businesses will have a much easier time viewing their account seeing what is either assessed or reported, making sure that if they have made payments that they’ve been applied, or know that they need to make a payment,” Saunders said. “So, having an online portal that’s accessible for businesses, I think, is just a 21st-century step the city needs to take.”

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