Richmond’s Meals Tax Disaster

Richmond Mayor Levar Stoney

by Jon Baliles

(These reports were published first by RVA 5×5 and are republished here with permission.)

Starting about 25 years ago, Richmond’s restaurant scene began its ascent into the local consciousness as our region’s favorite (and only) professional sport. Offerings expanded and ventured into new directions and opened peoples eyes and expanded our tastes; it drove creative chefs to new heights, and we appeared in list after list of publications that officially put Richmond on the foodie map.

It was also, ironically, not long after that when restaurants became the “Sherpa” of sorts to help fill the city coffers. In 2003, City Council approved a one cent meals tax increase from five cents to six cents to help fund the renovation of Centerstage downtown. Many restauranteurs opposed the funding of an arts center on the backs of their customers by raising the pass through tax to fund one specific project. That deal later was overhauled and refinanced in 2006, but the one cent increase was not repealed as had been promised and it remained on the books as a permanent source of revenue to fund other city needs.

Then fast forward to early 2018 when Mayor Stoney pushed for a 25% increase in the city’s meals tax from six cents to 7.5 cents. It was a highly contentious debate that rightly riled up many restauranteurs who once again saw it as an unfair burden on their businesses alone that made their patrons’ bills higher with each bite and drink. They argued for another funding solution that was fair and spread across the city and not just on their industry.

The increase made it the second highest meals tax in the state but the increase would be specifically directed to new school construction. On that point, the Mayor has kept his promise and three new schools were built (vastly over budget, but that’s another story) and more schools are in the pipeline because of the funding.

But it should be remembered the mayor made some claims back in 2018 that if the tax was increased, he would help the industry. Those claims seem long forgotten now that the tax is in place and the money is flowing. If he was asked about them now, it is doubtful that he would recollect ever saying them. Thankfully, there is the internet.

Stoney told City Council before the vote that was approved 7-2, Stoney said, “To the restauranteurs who supported this proposal and those who had reservations about it, you are part of what makes Richmond a great place to live, work and play. I will continue to be a champion for you, and I look forward to finding ways that we can make it easier for you to do business and continue to thrive.”

At his state of the city speech in early 2018, Stoney bragged, “After years of unmet expectations, neglect and breakdowns in the basics, we restored faith and confidence in city government by improving its efficiency and concentrating our focus on delivering the service our residents deserve. We did the little things that can make a difference in the everyday lives of our residents.”

When an ally of Stoney’s advocated for a boycott of restaurants that didn’t support the 2018 tax hike, he disavowed that idea and said, “As this debate moves forward, I plan to visit restaurants on all sides of this issue, to thank them for what they do for our city, and to learn how, I, as Mayor, can do more to help them grow and thrive in Richmond.

And in a meeting with some restaurant owners in January 2018, Stoney “told the group there would be some concessions to make operating restaurants in the city more appealing.”

So it was considered more or less across the board that money for building schools was a good thing, but it was unfair to target one industry and their customers to fund it. The Mayor and his allies even started a RVA Kids Can’t Waitgroup to guilt/shame people into supporting the increase (kind of like the Casino for Child Care scam the mayor ran last fall before the casino referendum – “Vote for slots, Help the tots!”). And even advocates of the mayor’s 2018 planpledged and promised to push the Mayor for accountability and transparency and things would improve for restaurants.

Except, they haven’t. And those concessions from the Mayor to help restaurants? Not so much.

In fact things for restaurant owners have gotten much worse, and that was never more evident than the flood of stories that came rolling forward this week about the city levying massive fines and late fees on restaurants that pole vault into the realm of absurdity. What’s worse is that after all those promises in 2018, no one at the top seems to have done anything about it or want to fix the problem even six years later.

Case Studies: Dysfunctional Dysfunction

In case you missed the news this week, this summary of the problems that restaurants that have faced with the Finance Department is a downright, paper bag over the head embarrassing.

Kevin Grubbs owns Latitude Seafood Company in Stony Point Fashion Park and was hit with a bill last month for $68,000 because of one missed bill in March 2020 (i.e., when the pandemic shut down his restaurant and the country). But according to Dave Cantor at VPM, Grubbs said the city never notified him that his account was in a deficit while interest and penalties kept building and compounding each month. He received a letter in October 2022 that revealed his $800 late fee had grown to $41,000. Grubbs immediately appealed to Finance Director Sheila White.

Grubbs told CBS6, “If we had known, then we would have just settled the $800 right then. We’re not going to let this get out of hand.”

But he didn’t know. So, Grubbs said he sent his meals tax payments as usual, not knowing that the city was tacking on a 10% penalty every single month for the March 2020 payment.

White rejected the appeal more than a year later in December 2023 while acknowledging that the bill sent in October 2022 was incorrect — and yet the city kept compounding fees and interest while under review and the bill rose by more than $20,000.

The Finance Director also cited that Latitude was told there was a balance on their meals tax in September 2020 when the business license renewal was due, but also admitted the balance was incorrect and much lower than the actual owed amount.

VPM reports that: In the decision, White wrote that Grubbs was notified in September 2020 of the penalty. But the department head said that the initial bill was inaccurate.

In the denial of appeal, she wrote that the incorrect “amount on the statement to the Taxpayer would have directly contributed to the taxpayer not understanding the amount of interest due since less interest would have accrued on a lower balance amount. While this does not excuse the Taxpayer’s failure to pay the delinquent tax amounts, the City’s failure to provide an accurate balance may have caused the Taxpayer to not understand how much interest was due.

So the city’s “failure to provide an accurate balance” clearly caused confusion, but they wouldn’t budge on helping or adjusting the restaurant’s balance. Grubbs owns several other locations in the region and has said when his lease is up, he is moving the city location elsewhere.

“I’ll move two minutes up the street, and I will retain all of my people,” said Grubbs, who added that his Stony Point Fashion Park location pays about $22,000 each month to the city for the meals tax. “So, you’re not going to get anything, and I will lose nothing.”

Meanwhile over in Manchester, the owner of Philly Vegan take out shop Samuel Veney was sent a bill for almost $40,000 for back taxes even though he was told he was exempt because his shop was take-out only. The city even admitted to the mistake, according to documents obtained by WRIC (see picture below).

“She said, ‘Stop collecting meals tax.  Do not collect this, because you’re take-out only,’ and she filled out our paperwork,” Veney told WRIC. “She did not check out the ALM [meals tax] box, and wrote ‘take-out only.’”

Nine months later (March 2023) he was told it was a mistake and he needed to collect and pay the tax, which he began doing immediately. Veney hired an attorney to help him talk with the city to negotiate but was ignored by the city. Finance Director White declined to meet with him. Last week, after Veney put a video on social media to bring attention to his dilemma and these stories blew up, Chief Administrative Officer (CAO) Lincoln Saunders said he would meet with Veney and others.

Veney told NBC12 that the city offered to waive late fees, but he still owes the amount of money he should have been collecting for nine months — even though a city official told him he was not liable to collect it and for which he has proof. He says he would rather take that money and expand and hire more people.

Veney told NBC12 something that should seem pretty basic about local government:
“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 by myself and be able to open up my business properly and get everything taken care of without worrying about the city messing it up and then me being penalized,” Veney said.

And over in Shockoe Bottom, Richbrau Brewery showed Tyler Layne at CBS 6 dozens of pages of documentsconcerning their three year battle with the city.

“It’s been a nightmare to the point where I would not open up another business in Richmond, because of how their tax department runs, their finance department runs,” said manager Matthew Mullett.

He provided a document with a notation from the Finance Department in 2019 that says: “Meals tax 7.5% due on prepared food, not draft.” But a year later they received a notice that they should be collecting the tax on draft beers and the brewery began collection the tax and payment immediately. The city told Richbrau to pay up for the time it was not collecting the tax (and had been told it didn’t have to) along with penalties and interest – more than $50,000 in total.

Richbrau appealed and some of the penalties were waived but were told they still owed $14,000 in taxes even though Finance Director White cited in her rejection that a former employee “erroneously instructed” the taxpayer not to collect the meals tax. However; she added that finance representatives are “not the taxpayer’s personal accountants or lawyers and the taxpayer has a duty to know its own legal obligations.”

When Richbrau appealed to the state Tax Commissioner upon Director White’s suggestion, the Tax Commissioner Craig Burns said his department was not authorized to consider such appeals and added the city should’ve known this and that White’s advice to the taxpayer was “made in error.”

At least someone is willing to admit something was done “in error.”

Mullet at Richbrau said bluntly, “It doesn’t register to me that there’s anybody in that finance department that really cares about small business and what they can do for the community,” Mullett said. “It’s more like, ‘You owe this. It’s your fault. Pay up.’ And it’s the invoicing, the accounting, the billing. It’s a mess over there. It’s dysfunctional.”

And then there is the dilemma endurance of Patrick Stamper, owner of Beauvine Burger Concept in the Fan. He has been dealing with the city’s dysfunction for almost four years. He was late on a meals tax payment in February 2020 and then struggled to keep the doors open during the pandemic.

The city offered a Covid amnesty program that waived late fees on meals tax payments between February through June 2020 and Stamper thought he was covered. But for some reason, the amnesty did not apply automatically to restaurants — owners had to enroll (even though Covid affected literally every business under the sun).

So, Stamper’s payment was considered late. The city began accruing penalties and interest on the late payment, but Stamper said no one ever told him that. It wasn’t until the summer of 2021 until he got the first notice from Richmond’s Finance Department that he had an outstanding balance.

And Stamper’s balances were all over the map. Stamper showed CBS 6 all his documentation and communications with the finance department. Each notice he received contained vastly different balances, and some notices didn’t contain a balance at all. At one point, Stamper said the city stated he owed $424,000.

He believes his latest balance is $86,000 but is unsure because he can’t get an answer from anyone in the Finance Department.

“We generate a lot of revenue for the city, and there’s no urgency to fix this,” Stamper said. “It’s endlessly stressful, and the fact that, almost four years in, I still don’t know who to call, who to email, how this ends, how this gets resolved, and no one does.”

These are but four examples of how City Hall is treating small businesses in the city. These owners and the reporters have talked with other owners who have shared similar horror stories but are too worried about retaliation to come forward in public.

Veney made a pretty appealing appeal to NBC12: “This is a family business. Why don’t you care about the families in the city of Richmond? Why don’t you care about the community in the city of Richmond? Why doesn’t the city of Richmond actually care about the city of Richmond?”

Those are great questions.

Instead, our city “leaders” are deflecting blame, giving small business owners bad (or wrong) advice, compounding their bills without telling them, rejecting their appeals, and then sticking them with six and seven-figure bills that could go toward expanding business and hiring more people and producing even more long-term revenue.

But instead, as the Mayor said, we are The Capital of Compassion. He sure knows how to show it.

Jon Baliles is a former Richmond city councilman. This column is republished with permission from RVA 5×5, where you can read an expanded version of this report.

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8 responses to “Richmond’s Meals Tax Disaster”

  1. walter smith Avatar
    walter smith

    Hey, but No Monument Avenue has helped, amirite?

    1. James Wyatt Whitehead Avatar
      James Wyatt Whitehead

      Stoney can send Devon Henry with some heavy equipment to pry loose the owed restaurant tax money.

  2. Lefty665 Avatar

    Several years ago I ran into similar incompetence and stubbornness in dealing with the Richmond Department of Public Utilities. They repeatedly got things wrong and refused to correct them. Fortunately the dollar amounts were far smaller than those reported here. I paid the amount that was not actually due just to resolve the issue and be shed of the City. Little did I know what a wise decision that was. It was several hundred dollars well spent.

  3. Stephen Haner Avatar
    Stephen Haner

    And Feckless Leader wants to be our governor next.

    Local tax administration has long been Virginia’s real economic achilles heel, but it is easier to take bones from Dobermans than to lessen the power of local tax collectors.

    1. Lefty665 Avatar

      With Stoney and Spanberger as prospective candidates Sears should feel her prospects are looking up.

  4. DEI in action.

  5. William O'Keefe Avatar
    William O’Keefe

    Excellence is a habit just as mediocrity is. Richmond has a history of poor city management. So, Stoney is just the latest in a long line of incompetents and that also goes for the City Council.
    The residents and business get the government that they find acceptable. If they want better, they have to demand it at the ballot box.
    As for the owner of Latitudes, his claim of not knowing that he had missed a payment and was subject to accumulating penalties rings hollow to me.

  6. I’m a lifelong FDR, New Deal Democrat. Stoney is not qualified for any elected office, anywhere, anytime.

    My problem with him stems from his behind-the-scenes ouster of the Richmond General Registrar of Voters and replacing her with one of his cronies who is just a bit smarter than a fence post. The Registrar who was replaced was well-known and respected among Registrars and Electoral Boards across the state.

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