Meals tax concerns continue

Free Press staff report | 2/1/2024, 6 p.m.
Andreas D. Addison is calling on City Hall to refund all of the money in taxes, penalties, and fees that ...
Mr. Addison

Andreas D. Addison is calling on City Hall to refund all of the money in taxes, penalties and fees that restaurants and other businesses have been forced to pay because of the city’s “bad customer service.”

In a statement provided to the Free Press, the 1st District councilman wrote that the headlines about the city imposing huge tax bills on businesses are damaging Richmond’s reputation with entrepreneurs and investors and will prove more expensive to the city in the long run as they go elsewhere to invest their money.

“We need to make whole all the businesses with outstanding tax payments with accruing penalties, fees, and interest,” Mr. Addison wrote. “Whether this is a tax amnesty program or an appeal application process, we need to provide a way forward.

“We do not balance our budget on accruing penalties, fees and interest,” he continued. “While we need tools to enforce compliance and timely payments, this current problem has gone on for far too long and needs to be fixed. While legislation is needed, these issues need to be included in our plan to fix this issue once and for all,” he stated.

Mr. Addison, who has indicated he may run for mayor, issued the statement as the nine-member council joined Mayor Levar M. Stoney in rushing to usher in change in the way the Finance Department handles payments going forward.

On Jan. 17, the Government Operations Committee led by 2nd District Councilwoman Katherine Jordan cleared an ordinance that would authorize the Finance Department to apply business payments for meals taxes and other taxes to current bills rather than to the most delinquent amount.

The move is aimed at reducing the penalties that businesses have racked up when they have a delinquency from a previous month.

Under the current practice sanctioned by state law, some or all of a payment for a current bill is used to pay off the oldest past due amount first, which already has had a 10% penalty applied. The result is that the payment for the current amount is short, allowing the city to add a fresh penalty.

The practice of paying off the oldest bills first was begun in 2019 with little notice to businesses, according to Sabrina Joy-Hogg, deputy chief administrative officer for finance and administration.

The change would prevent the application of a 10% penalty each month once the ordinance is officially passed, which is set to happen on Monday, Feb. 12.

But that does not take care of the past application of penalties, Mr. Addison noted.

Others on the council also are pressing Mayor Levar M. Stoney’s administration to provide retroactive relief, particularly during the period March 2020 to June 2022 when the Finance Department stopped sending out notices to businesses of penalties for late or delinquent payments.

The result: Late payments turned into tax bills of up to $68,000 after penalties and interest were applied.

Lincoln Saunders, the city’s chief administrator, told the Finance Committee last week that he is open to considering retroactive relief.

However, no one on City Council has introduced legislation to direct retroactive relief, even though a state law enables the governing body to provide it. Meanwhile, some of the 1,000 restaurant owners in Richmond are beginning to ratchet up pressure on the council and the administration to refund penalties and interest.

Mr. Addison, who owns a private gym, stated that he learned about the challenges that businesses face when he went through the permitting process and found it “daunting, confusing and complex.”

While updating and modernizing old policies is important, he stated, “The customer experience must be present and our priority. We must make it seamless, easy and predictable to work with City Hall.”

Meanwhile, a group of Richmond restaurant owners demanded their money back from the City of Richmond on Wednesday.

The Virginia Restaurant Association said the City of Richmond has accrued at least $2 million in unfair or incorrect meals tax late fees against at least 30 businesses over the years, according to a report aired by CBS6.

“The owners of Latitude Seafood, Philly Vegan, Beauvine Burger, Richbrau Brewing, Helen’s, ZZQ, and Eat Restaurant Partners, which runs more than a dozen Richmond restaurants like Pizza & Beer of Richmond, Boulevard Burger & Brew, and Osaka Sushi & Steak, gathered at the Tobacco Company on Wednesday for a press conference,” the news station reported.

They shared similar stories about how they’ve been harmed by the way Richmond’s finance department collects the meals tax.

Mike Byrne, with the Virginia Restaurant Association, said the issues stemmed from mismanagement in the finance department, a lack of transparency, and basic accounting failures, according to CBS6.

“We want our money back, the penalties and interest,” Mr. Byrne added. “Everyone here pays the meals tax. That’s a given. But the penalties and interest are unforgiving.

“The common thread is money,” he continued. “Not the 7.5% current meals tax we collect and pay, but the incorrect and out of control penalties and interest, mismanagement, and lack of transparency process by the city’s understaffed and outdated finance department.”