Richmond’s restaurant industry wasn’t thrilled when the city raised its meals tax in 2003 to help pay for a multimillion-dollar downtown theater complex.
And now the dispute is coming back like a bad case of indigestion, as restaurateurs wonder why they must continue to pay the tax even though the center has been built. Through a Facebook page and local media appearances, the group’s point man is asking where the meals tax revenue goes.
Richmond has long been a relatively expensive jurisdiction for diners. By 1991, the city had tacked on an extra 5 percent to the cost of a meal to help pay for general expenses, such as police and schools. In 2003, the city increased the tax to 6 percent to help pay for CenterStage.
In comparison, there are no meals taxes in Chesterfield, Henrico or Hanover: Voters in all three locales have voted down such levies. However, most other cities in Virginia have a meals tax.
Richmond restaurant owners say the tax raises the price of their products and thus lowers demand and sales. One restaurateur told Richmond BizSense that he lost a catering gig because the client did not want to pay the additional 6 percent, opting instead for a caterer based in another jurisdiction.
“No one knows where the money is going,” said Jake Crocker, owner of F.W. Sullivan’s Bar and Grille and Lady N’awlins in the Fan.
Crocker is stirring the pot with a Facebook page he created in June to rally fellow business owners around getting the tax repealed, reduced or distributed among other merchants.
“People are eating out less, and we’re coming out of pocket to make sure we’re complying,” he said. “Why do the restaurants have to foot the bill?”
In 2009, Richmond collected $24.5 million from the meals tax. Tammy Hawley, the press secretary to Mayor Dwight Jones, said in an email to RBS that in 2009, the city contributed $1.9 million a year to pay for the construction of CenterStage. The city paid another $8.7 million a year for new and renovated school buildings. Hawley said the remainder of the meals tax revenue that is in the general fund is for “general purposes.” The general fund in 2009 brought in $658 million.
The extra 1 percent was initially supposed to expire once CenterStage was built. But the City Council in 2006 voted to maintain the tax and pour the money into the general fund, which is used for most operational costs, according to a 2008 Richmond Magazine story.
In total, Richmond restaurants have been paying 11 percent in meals taxes: 5 percent for state tax and 6 percent to the city.
“I’m supportive of the arts and schools, but where’s the other 5 percent going, and why do we need it?” Crocker asked.
Crocker said that his two restaurants on West Main Street are profitable but that he must send the city a meals tax payment of $17,000 to $18,000 each month.
“We’re selling a lot of little stuff, a $4 drink, a $7 sandwich. We have to sell a lot just to cover rent and payroll,” he said.
Birju Bhagat, who owns Great Wraps on Lombardy Street and Extreme Pizza on West Broad Street, said he has lost some customers to Henrico locations because of the tax.
“The prices are higher here [in Richmond], and a majority of the people think they’re being overcharged,” he said.
Bhagat said a wrap that costs $6.38 (including taxes) at the downtown location would cost just under $6 at the Henrico Great Wraps.
“I’m not getting the customers I should be,” he said. “It’s hurting the business I need to get.”
Fan restaurateur Mac McCormack said it’s harder for city restaurants to compete with places in the surrounding counties because of the extra tax.
“That’s why I feel restaurants in Short Pump and other places that are not as unique are flourishing,” McCormack said. “People are only going to pay so much for a Jack and Coke or a hamburger,” he said.
McCormack has owned McCormack’s Whiskey Grill on Robinson Street for about a year and a half and McCormack’s Irish Pub on North 18th Street for 13 years. He said the meal tax has caused some conflict with customers who are unaware of the rule.
“I had a guy that was going to get me in trouble with the Better Business Bureau for charging the 11 percent tax,” he said.
“Its great that the city has this art initiative, but I don’t see taxing restaurants as a way of paying for it,” he added.
Other restaurant owners in the area aren’t thrilled with the tax but don’t see it making or breaking them.
Bob Cox, owner of Richmond restaurants Conch Republic, Metro Grill and Curbside, said that he has had customers complain but that he doesn’t feel it’s going to cut too deeply into his business.
“People don’t make a conscious decision because of the 6 percent tax, so I don’t see it affecting the business that much,” Cox said.
Cox added that, if the city does decide to keep the extra tax indefinitely, he thinks it should make everyone aware of what the money is going toward.
“I don’t know how they can justify taxing everyone on something that not everyone attends,” Cox said. “I would love to see it gone, but if they are going to continue to charge us, then tell us where it’s going.”
Richmond’s restaurant industry wasn’t thrilled when the city raised its meals tax in 2003 to help pay for a multimillion-dollar downtown theater complex.
And now the dispute is coming back like a bad case of indigestion, as restaurateurs wonder why they must continue to pay the tax even though the center has been built. Through a Facebook page and local media appearances, the group’s point man is asking where the meals tax revenue goes.
Richmond has long been a relatively expensive jurisdiction for diners. By 1991, the city had tacked on an extra 5 percent to the cost of a meal to help pay for general expenses, such as police and schools. In 2003, the city increased the tax to 6 percent to help pay for CenterStage.
In comparison, there are no meals taxes in Chesterfield, Henrico or Hanover: Voters in all three locales have voted down such levies. However, most other cities in Virginia have a meals tax.
Richmond restaurant owners say the tax raises the price of their products and thus lowers demand and sales. One restaurateur told Richmond BizSense that he lost a catering gig because the client did not want to pay the additional 6 percent, opting instead for a caterer based in another jurisdiction.
“No one knows where the money is going,” said Jake Crocker, owner of F.W. Sullivan’s Bar and Grille and Lady N’awlins in the Fan.
Crocker is stirring the pot with a Facebook page he created in June to rally fellow business owners around getting the tax repealed, reduced or distributed among other merchants.
“People are eating out less, and we’re coming out of pocket to make sure we’re complying,” he said. “Why do the restaurants have to foot the bill?”
In 2009, Richmond collected $24.5 million from the meals tax. Tammy Hawley, the press secretary to Mayor Dwight Jones, said in an email to RBS that in 2009, the city contributed $1.9 million a year to pay for the construction of CenterStage. The city paid another $8.7 million a year for new and renovated school buildings. Hawley said the remainder of the meals tax revenue that is in the general fund is for “general purposes.” The general fund in 2009 brought in $658 million.
The extra 1 percent was initially supposed to expire once CenterStage was built. But the City Council in 2006 voted to maintain the tax and pour the money into the general fund, which is used for most operational costs, according to a 2008 Richmond Magazine story.
In total, Richmond restaurants have been paying 11 percent in meals taxes: 5 percent for state tax and 6 percent to the city.
“I’m supportive of the arts and schools, but where’s the other 5 percent going, and why do we need it?” Crocker asked.
Crocker said that his two restaurants on West Main Street are profitable but that he must send the city a meals tax payment of $17,000 to $18,000 each month.
“We’re selling a lot of little stuff, a $4 drink, a $7 sandwich. We have to sell a lot just to cover rent and payroll,” he said.
Birju Bhagat, who owns Great Wraps on Lombardy Street and Extreme Pizza on West Broad Street, said he has lost some customers to Henrico locations because of the tax.
“The prices are higher here [in Richmond], and a majority of the people think they’re being overcharged,” he said.
Bhagat said a wrap that costs $6.38 (including taxes) at the downtown location would cost just under $6 at the Henrico Great Wraps.
“I’m not getting the customers I should be,” he said. “It’s hurting the business I need to get.”
Fan restaurateur Mac McCormack said it’s harder for city restaurants to compete with places in the surrounding counties because of the extra tax.
“That’s why I feel restaurants in Short Pump and other places that are not as unique are flourishing,” McCormack said. “People are only going to pay so much for a Jack and Coke or a hamburger,” he said.
McCormack has owned McCormack’s Whiskey Grill on Robinson Street for about a year and a half and McCormack’s Irish Pub on North 18th Street for 13 years. He said the meal tax has caused some conflict with customers who are unaware of the rule.
“I had a guy that was going to get me in trouble with the Better Business Bureau for charging the 11 percent tax,” he said.
“Its great that the city has this art initiative, but I don’t see taxing restaurants as a way of paying for it,” he added.
Other restaurant owners in the area aren’t thrilled with the tax but don’t see it making or breaking them.
Bob Cox, owner of Richmond restaurants Conch Republic, Metro Grill and Curbside, said that he has had customers complain but that he doesn’t feel it’s going to cut too deeply into his business.
“People don’t make a conscious decision because of the 6 percent tax, so I don’t see it affecting the business that much,” Cox said.
Cox added that, if the city does decide to keep the extra tax indefinitely, he thinks it should make everyone aware of what the money is going toward.
“I don’t know how they can justify taxing everyone on something that not everyone attends,” Cox said. “I would love to see it gone, but if they are going to continue to charge us, then tell us where it’s going.”
What are CenterStage’s finances?
It’s way past time for the curtain to be lifted.
It is incredible that Richmond has a number of very good(and apparently successful) restaurants given the fact that their clientele must contend with higher taxes—and often challenges with parking inadequacy as well. When you add the burdens of dealing with uncooperative City Building, Zoning and Planning staffs it could be said that Richmond City Restauranteurs are more than a little CRAZY to believe they can succeed in the first place—Thank goodness they keep trying! It is a shame that there is not an audit commission for City Government like the Joint Legislative and Audit Review Commission operates with State Government.… Read more »
From the viewpoint expressed in the article, it appears that the restaurant tax is inappropriately accounted for in the city. I have been a resident of the city for 3 years and love dining at the local restaurants, but at times, I do decide where to dine based on the jurisdiction. I am proud of the local businesses for demanding the allocation details on the tax. Does anyone have the link to the Facebook page? Can I become a fan?
Its a shame that some people want to keep equating the City’s decision to continue a 1% increase in a 10% tax with the CenterStage project. Fight the City on the correct principal that their 6% tax on meals is too high, and be done with the rest. Before 2003, the 5% tax was too high in comparison to the other localities. (And to represent another viewpoint, Neither I nor any of my friends have EVER decided to go to another jurisdiction for a meal because the City tax is too high. If the restaurant is good, we’ll go to… Read more »
Once that sweet tax money starts coming in, it sure is hard to let it go, isn’t it? “Oh, they’ve paid it so far, why not just let them keep paying it?” But in the end it’s always the business owners that get pinched.
This has happened because the counties have sucked the economic life out of the city for 50 years. Once the middle class moved to the counties the city has to scramble for revenue. All the problems are created by the counties and the people living in the counties. Lay the blame correctly. Hanover county contributed no money to the diamond but they get access like anyone else. The suburbs are the problem in Richmond.
The meals tax opponents have never bothered to check their facts. So here are a few for your consideration: * 78 localities in Virginia have a meals tax. * 8 localities have a higher meals tax rate than Richmond: Norfolk, Newport News, Hampton, Franklin, Suffolk, Portsmouth, Emporia, Lynchburg * 5 localities have the same meals tax rate as Richmond : Norton, Bristol, Harrisonburg, Stanton, Martinsville * There is one locality with a 2% meals tax. The rest are at 4% or above. That’s why the argument that the anti-performing arts center people made that Richmond had the highest sales tax… Read more »
^^Joe, so why do people move to the County? Free markets dictate this stuff. People find better value in the County. If they found more value in the City, maybe they would move back.
The counties are better run than the City and this why the City is in this trap. End of story.
To the poster who suggested people don’t avoid city restaurants because of the absurd meals tax – you are incorrect.
While I agree that the meal tax should be lifted, it is misleading to say the restaurant owners are paying it out of pocket. The restaurant collects the sales tax(es) from the customers, then pays it to the state/city. It is never technically the restaurant’s money. I wholeheartedly agree that the tax should be lifted. If its intent was to pay for CenterStage, then its job is done, and it’s time to re-level the dining arena for the customers. But I think we can all agree they city is less than efficient in anything it does as related to the… Read more »
As one who runs a local restaurant in the city I can say that true, the taxes we collect do not belong to us. We are merely the collectors. However,recently I had to raise our prices for the first time in 3 years because several of our vendors have increased prices by up to 30% , so it had to done, we needed to recoup some of that money without passing all of it on to our customers. Raising prices with the knowledge that you have to tack on 11% on the end could price us right out of the… Read more »
As a Richmond City resident, I do not feel we should continue to pay a tax for something that has already been paid off. I could even take the City saying the money is now being collected for a new ballpark.
On related note, I have had a number of clients go with a Caterer who has a business address outside of the City so that they could save a couple hundred dollars on their Catering cost.