The Tobacco Company Restaurant is among several eateries in town whose owners say they were blindsided by high bills from the city related to meals tax payments. (BizSense file)
Frustrations that have been simmering among Richmond restaurateurs over penalties and fees tied to city meals tax payments reached a boiling point in recent weeks that’s spilling over into the Virginia General Assembly.
Legislation proposed for this year’s assembly session is aimed at putting a stop to what several restaurant owners in Richmond say has been a problem for years: their monthly meals tax payments being applied to unknown late fees and interest charges that, over time and without notice from the city, in some cases snowballed to tens or even hundreds of thousands of dollars owed to the city.
The issue received new attention last week after Kevin Grubbs, owner of Latitude Seafood Co. at Stony Point Fashion Park, aired his grievances on social media over a $68,000 bill that he said stemmed from penalties accrued from a late payment he made in 2020, when the city was proposing a tax amnesty program in the early months of the COVID-19 pandemic.
Grubbs said he later made that payment in full, and every one thereafter, but never knew until years later that the fees were being applied, month after month. Each tax payment he made was being put toward those fees, leaving the rest of his balance for that month unpaid, and so on.
Kevin Grubbs
“They continued to balloon out of control, and we went through an appeals process. They said they’d complete the appeal in 90 days; they finished the appeal a year later,” Grubbs said in an interview, adding that penalties continued to be applied over the duration of the appeal.
“Long story short, they gave me one hour (on Dec. 28) to pay $67,739 before it would go to $74,000 the next day, they said. I went ahead and paid it, to stop the bleeding,” he said.
The scenario is similar to those seen by other restaurant owners in town, including Jerry Cable, owner of The Tobacco Company Restaurant, who said he went through a comparable experience that resulted in bills as high as $180,000.
“It’s been going on for four years. These bills are ridiculous,” Cable said.
“This problem’s got to be fixed immediately. It’s not fair to the restaurateurs and certainly not an example that the city wants to set,” he said.
Legislation introduced
Cable’s attorney, Kyle Wingfield of Richmond law firm Williams Mullen, helped draft the legislation that was pre-filed Tuesday for this year’s assembly session, which gets underway today.
Senate Bill 294 – a draft of which was shared with BizSense – would require Richmond and any other locality in the state to apply meals tax payments to the tax returns they accompany, or according to written instructions from the taxpayer.
It also would freeze interest on any unpaid balances 90 days after an appeal or legal challenge is filed; notify taxpayers of delinquent meals taxes before issuing any liens or levies to collect them; and allow taxpayers to be awarded attorney’s fees if they prevail in a dispute.
The bill would amend an existing state law that Wingfield said requires localities to apply tax payments against delinquent accounts. Richmond officials have pointed to that law in responding to inquiries from reporters over the past week.
Wingfield is working with a group that includes the Virginia Restaurant Association (VRA) and Sen. Bill DeSteph, who is sponsoring the bill as chief patron. The group said it has more legislators, including a delegate in the House, lined up to support the bill but declined to name them ahead of the bill’s formal introduction.
Kyle Wingfield
“Nobody was hit harder during the pandemic than restaurants,” Wingfield said in an interview. “The city needs to do what they can to try to help these restaurants get their feet back up under them and stay in business, but what they’re doing now is they’re hitting people with bills that are just going to put folks out of business.”
VRA Executive Director Mike Byrne said he’s heard similar tales from more than two dozen restaurant owners in the week following Grubbs’ online missive. He said one restaurant, Beauvine Burger Concept in the Fan, reported a bill in excess of $400,000.
“I’ve been contacted by 25 restaurants basically telling me pretty much the same story,” Byrne said. “They were told they didn’t have to pay their meals tax or they didn’t have to pay the tax on draft beer. The penalty and interest, they couldn’t tell them what it was for.”
Referring to the restaurant owners, Byrne added: “They were willing to pay their tax; they just wanted to know that it was going to the month that they were allocating, and the city couldn’t tell them that. Because of that, they were paying penalty and interest, which in some cases is hundreds of thousands of dollars.”
Added Matt Benka, a lobbyist for VRA: “This is clearly a case where the city has been mismanaging their responsibility to execute the meals tax. As a result of that, we’ve got restaurateurs that have finally gotten together and shared their frustrations and experiences. They’re more widespread than we had possibly imagined.”
Following the law
In responding to the increased attention to the issue, city officials have maintained they are only complying with existing state law that requires that tax payments be applied to the oldest liability first. Late payments are applied a 10 percent penalty, and interest is applied at a rate of 10 percent.
In a Q&A with reporters last week, Chief Administrative Officer Lincoln Saunders said he could not speak on individual cases but said the city is aware of restaurant owners’ concerns and is working to address those that it can.
Lincoln Saunders
“The challenge that the city often is stuck between is our desire to support and assist our businesses and the strict confines of the law,” Saunders said in response to one reporter’s question. “State code is very specific and direct about how taxes are to be collected, when assessments are made.”
Saunders noted that the city had implemented two separate amnesty programs, in 2020 and in 2021, on penalties and interest applied to certain meals taxes and other taxes. The programs required that restaurant owners apply to see their penalties and interest waived and did not apply to or reduce the principal tax amount due.
During those programs, Saunders said the city was not pursuing tax collections aggressively and therefore did not notify restaurant owners of delinquent tax bills until collections ramped back up in mid-2022.
“In an instance where a business felt that they were not subject to the meals tax… the state code is pretty clear that the assessment must stand, that there is an assessment,” Saunders said. “That said, I think we can and should look for any and all ways to help rectify things when there are honest mistakes.”
City officials have also said that restaurant owners are made aware of delinquent accounts when they apply for an annual business license, which is withheld until an account is in good standing.
Richmond introduced its meals tax in 1969 and most recently increased it in 2018 to its current rate of 7.5 percent. The additional 1.5 percent provides funding specifically for new school construction and renovations.
Leaving the city
In his online posting in late December, Grubbs said the experience was prompting him to relocate Latitude Seafood outside the city. This week, he reiterated that plan, adding that he is eyeing a move to Chesterfield or Henrico counties.
“I fully intend to leave the city of Richmond. We pay them $288,000 in meals tax per year, and they have taken $68,000. I think that’s very short-sighted,” Grubbs said. “They’re going to lose a significant amount of income. It’s not a good thing for Richmond, especially if we’re ‘the backbone’ of the city.”
Grubbs isn’t alone.
Alex Graf, co-owner of ZZQ Texas Craft Barbecue with husband Chris Fultz, said their experience dealing with the issue has turned them off from opening more restaurants in Richmond. They also own Eazzy Burger next door to ZZQ.
Alex Graf, right, with husband and ZZQ co-owner Chris Fultz. (BizSense file)
When she applied for the 2021 amnesty program, Graf said she was informed that nearly $6,000 in penalties from a late payment the year before had accrued and – as was the case for Grubbs – needed to be paid within 24 hours. Graf said she paid the bill to avoid additional penalties.
While their bill involved a smaller price tag than others, Graf said the experience has been no less disheartening.
Describing interactions with city staff and administrators on the issue, Graf said, “It’s always like they just can’t even figure it out. They’re understaffed, their programming isn’t up-to-date; it’s all kinds of lame excuses.”
“I know other people have much bigger bills that they’re facing, but we generate a lot of tax money for the City of Richmond through this meals tax from both businesses, and I feel like we do our part,” Graf said. “It’s self-reporting, we report what we get, and I just don’t think they’re a very good partner.
“We will not open another business in the city of Richmond,” she said. “We do intend on opening more businesses, but we won’t do it here in the city.”
The Tobacco Company Restaurant is among several eateries in town whose owners say they were blindsided by high bills from the city related to meals tax payments. (BizSense file)
Frustrations that have been simmering among Richmond restaurateurs over penalties and fees tied to city meals tax payments reached a boiling point in recent weeks that’s spilling over into the Virginia General Assembly.
Legislation proposed for this year’s assembly session is aimed at putting a stop to what several restaurant owners in Richmond say has been a problem for years: their monthly meals tax payments being applied to unknown late fees and interest charges that, over time and without notice from the city, in some cases snowballed to tens or even hundreds of thousands of dollars owed to the city.
The issue received new attention last week after Kevin Grubbs, owner of Latitude Seafood Co. at Stony Point Fashion Park, aired his grievances on social media over a $68,000 bill that he said stemmed from penalties accrued from a late payment he made in 2020, when the city was proposing a tax amnesty program in the early months of the COVID-19 pandemic.
Grubbs said he later made that payment in full, and every one thereafter, but never knew until years later that the fees were being applied, month after month. Each tax payment he made was being put toward those fees, leaving the rest of his balance for that month unpaid, and so on.
Kevin Grubbs
“They continued to balloon out of control, and we went through an appeals process. They said they’d complete the appeal in 90 days; they finished the appeal a year later,” Grubbs said in an interview, adding that penalties continued to be applied over the duration of the appeal.
“Long story short, they gave me one hour (on Dec. 28) to pay $67,739 before it would go to $74,000 the next day, they said. I went ahead and paid it, to stop the bleeding,” he said.
The scenario is similar to those seen by other restaurant owners in town, including Jerry Cable, owner of The Tobacco Company Restaurant, who said he went through a comparable experience that resulted in bills as high as $180,000.
“It’s been going on for four years. These bills are ridiculous,” Cable said.
“This problem’s got to be fixed immediately. It’s not fair to the restaurateurs and certainly not an example that the city wants to set,” he said.
Legislation introduced
Cable’s attorney, Kyle Wingfield of Richmond law firm Williams Mullen, helped draft the legislation that was pre-filed Tuesday for this year’s assembly session, which gets underway today.
Senate Bill 294 – a draft of which was shared with BizSense – would require Richmond and any other locality in the state to apply meals tax payments to the tax returns they accompany, or according to written instructions from the taxpayer.
It also would freeze interest on any unpaid balances 90 days after an appeal or legal challenge is filed; notify taxpayers of delinquent meals taxes before issuing any liens or levies to collect them; and allow taxpayers to be awarded attorney’s fees if they prevail in a dispute.
The bill would amend an existing state law that Wingfield said requires localities to apply tax payments against delinquent accounts. Richmond officials have pointed to that law in responding to inquiries from reporters over the past week.
Wingfield is working with a group that includes the Virginia Restaurant Association (VRA) and Sen. Bill DeSteph, who is sponsoring the bill as chief patron. The group said it has more legislators, including a delegate in the House, lined up to support the bill but declined to name them ahead of the bill’s formal introduction.
Kyle Wingfield
“Nobody was hit harder during the pandemic than restaurants,” Wingfield said in an interview. “The city needs to do what they can to try to help these restaurants get their feet back up under them and stay in business, but what they’re doing now is they’re hitting people with bills that are just going to put folks out of business.”
VRA Executive Director Mike Byrne said he’s heard similar tales from more than two dozen restaurant owners in the week following Grubbs’ online missive. He said one restaurant, Beauvine Burger Concept in the Fan, reported a bill in excess of $400,000.
“I’ve been contacted by 25 restaurants basically telling me pretty much the same story,” Byrne said. “They were told they didn’t have to pay their meals tax or they didn’t have to pay the tax on draft beer. The penalty and interest, they couldn’t tell them what it was for.”
Referring to the restaurant owners, Byrne added: “They were willing to pay their tax; they just wanted to know that it was going to the month that they were allocating, and the city couldn’t tell them that. Because of that, they were paying penalty and interest, which in some cases is hundreds of thousands of dollars.”
Added Matt Benka, a lobbyist for VRA: “This is clearly a case where the city has been mismanaging their responsibility to execute the meals tax. As a result of that, we’ve got restaurateurs that have finally gotten together and shared their frustrations and experiences. They’re more widespread than we had possibly imagined.”
Following the law
In responding to the increased attention to the issue, city officials have maintained they are only complying with existing state law that requires that tax payments be applied to the oldest liability first. Late payments are applied a 10 percent penalty, and interest is applied at a rate of 10 percent.
In a Q&A with reporters last week, Chief Administrative Officer Lincoln Saunders said he could not speak on individual cases but said the city is aware of restaurant owners’ concerns and is working to address those that it can.
Lincoln Saunders
“The challenge that the city often is stuck between is our desire to support and assist our businesses and the strict confines of the law,” Saunders said in response to one reporter’s question. “State code is very specific and direct about how taxes are to be collected, when assessments are made.”
Saunders noted that the city had implemented two separate amnesty programs, in 2020 and in 2021, on penalties and interest applied to certain meals taxes and other taxes. The programs required that restaurant owners apply to see their penalties and interest waived and did not apply to or reduce the principal tax amount due.
During those programs, Saunders said the city was not pursuing tax collections aggressively and therefore did not notify restaurant owners of delinquent tax bills until collections ramped back up in mid-2022.
“In an instance where a business felt that they were not subject to the meals tax… the state code is pretty clear that the assessment must stand, that there is an assessment,” Saunders said. “That said, I think we can and should look for any and all ways to help rectify things when there are honest mistakes.”
City officials have also said that restaurant owners are made aware of delinquent accounts when they apply for an annual business license, which is withheld until an account is in good standing.
Richmond introduced its meals tax in 1969 and most recently increased it in 2018 to its current rate of 7.5 percent. The additional 1.5 percent provides funding specifically for new school construction and renovations.
Leaving the city
In his online posting in late December, Grubbs said the experience was prompting him to relocate Latitude Seafood outside the city. This week, he reiterated that plan, adding that he is eyeing a move to Chesterfield or Henrico counties.
“I fully intend to leave the city of Richmond. We pay them $288,000 in meals tax per year, and they have taken $68,000. I think that’s very short-sighted,” Grubbs said. “They’re going to lose a significant amount of income. It’s not a good thing for Richmond, especially if we’re ‘the backbone’ of the city.”
Grubbs isn’t alone.
Alex Graf, co-owner of ZZQ Texas Craft Barbecue with husband Chris Fultz, said their experience dealing with the issue has turned them off from opening more restaurants in Richmond. They also own Eazzy Burger next door to ZZQ.
Alex Graf, right, with husband and ZZQ co-owner Chris Fultz. (BizSense file)
When she applied for the 2021 amnesty program, Graf said she was informed that nearly $6,000 in penalties from a late payment the year before had accrued and – as was the case for Grubbs – needed to be paid within 24 hours. Graf said she paid the bill to avoid additional penalties.
While their bill involved a smaller price tag than others, Graf said the experience has been no less disheartening.
Describing interactions with city staff and administrators on the issue, Graf said, “It’s always like they just can’t even figure it out. They’re understaffed, their programming isn’t up-to-date; it’s all kinds of lame excuses.”
“I know other people have much bigger bills that they’re facing, but we generate a lot of tax money for the City of Richmond through this meals tax from both businesses, and I feel like we do our part,” Graf said. “It’s self-reporting, we report what we get, and I just don’t think they’re a very good partner.
“We will not open another business in the city of Richmond,” she said. “We do intend on opening more businesses, but we won’t do it here in the city.”
Good on these people for speaking up. The city is a mess. And 10% interest!?! They don’t let landlords charge tenants anywhere close to that kind of penalty. This is a money-grab from the city plain and simple. Shame on them.
It is high but I think it has always been (even on real estate taxes) 10% penalty for late payment and interest of around 10-12% a year. City leadership hasn’t cared since Jones about citizens, business owners, or anyone except their donors.
Someone like this comment to the 100 level, okay? Its a new standard!
It’s not 10% interest. It’s a penalty equal to 10% of each month’s meals tax liability until you find out your balance and pay it. This can run to 1000s of times the initial bill; the amount of penalties has nothing to do with the original bill, it’s dependent on how much meals taxes you pay every month. That’s how an $800 bill can become $68000 in a year or two. This has affected hundreds of restaurants in Richmond.
Is anyone surprised by the City?
There is no desire for transparency or accuracy anywhere, or efficiency.
Just let them keep pushing for a casino and paying to cut the same plots of grass 3x in one day.
Maybe folks running businesses will start to actually move out of the city limits.
“…..of the people, by the people, for the people….” Can someone remind city bureaucrats of this? Seems they’ve forgotten.
If the Richmond restaurant/culinary scene goes away, it will not be good. We’ve got to do better! What in the world?
I believe I saw that Latitude is leaving when the lease is up. Tobacco Company endured the large fire, went through repairs and rehab, and then reopened. I wonder if they’re in it for the long haul in the City given that reinvestment.
Nothing to see here, same old, go back to what you were doing, vote for Mayor Stoney when he runs again. Rinse repeat. (Some businesses may not be here next year).
@ Frank Smith … even worse , he is running for Gov of VA next time !
Blue team tax and spend!
To all the folks in the city restaurants, the GA is in and the they will be out being wined and dined. You will have their ear. Please tell your stories…this has to be changed.
This is a valid point! Tobacco Company is a great restaurant and also right there in walking distance to those in session which starts today at noon. I’ve definitely enjoyed a few business lunches at Tobacco Company when I used to be downtown.
Sad part is anyone notice who is carrying the bill for the group that is targeted to (would be statewide) Richmond restaurants???? A Virginia Beach legislator. I am sure the delegation will now ALL jump on to co-patron it.
This system of not alerting business owners to missed payments and then keeping accounts delinquent despite all future taxes being paid on time and in full also applies to the business license tax. I’m a one-woman business owner in the City, and my story sounds exactly the same as these restaurant owners, albeit on a smaller scale. I’ve talked to several people at the Finance Department, and all but one of them was willing to investigate, yet she still struggled trying to explain how payments were recorded. Sheila White, the Finance Director, and Mayor Stoney don’t respond. It’s a hopeless… Read more »
It’s the same for real estate taxes/supplemental taxes. The finance department is a nightmare.
I had an issue when I moved into the city. They sent the old owner the tax bill which was forwarded to them. I was charged a $400.00 penalty since they had not recorded the transfer in their books.
Oops, typo. I meant “all but one of them weren’t willing to investigate.” So, I was lucky to get the attention of one person who tried to help solve the issue, but I still don’t have a resolution.
I just want a mayor/city council that prioritizes fixing administrative items like this, like permits and inspections, like leaf cleanup… I don’t need a casino or downtown arena… just fix the basics and make it easier to live and work in the city please. that’s all you got to do to get my vote.
What I don’t understand is you people keep voting for this guy.
Exactly. How long do we need to have disastrous results before, gee I don’t know, maybe people start voting different?
He won the last election with only 37% of the vote. A largely unknown progressive challenger managed to capture 26% of the vote to come in 2nd despite having essentially no backing, up against Stoney who had the support of the full state Democratic party machine. So people are already voting differently. It’s not like our electoral systems failing to represent the will of the people is new or isolated to Richmond; you’re just taking pot shots.
Anyone else think it is ironic that the City that can’t handle meals taxing program, has a hard time overall with tax revenue, and can’t ever seem to file its financial audits on time (has the FY23 was filed with the state in Dec late as usual) wanted to get in bed on a casino development deal with a business owner who alway has problems filing forms and monitoring his finances. Great minds think alike they say, too bad all the great minds in politics have left the jurisdiction.
When Mayor Stoney took office, he indicated that all departments would be reviewed within, I believe 120 days. Needless to say, this department either wasn’t included, or no action was taken. Restaurants can access their meals tax information on-line in Henrico County. The City of Richmond won’t be able to do that at least until the end of this year, due to the fact that it has outdated computer systems. This isn’t the only department in the city that has experienced this type of a problem. It’s just the latest to be publicly identified. If the Mayor can’t fix these… Read more »
As an owner of 2 restaurants in the city, I can attest to the extreme frustration in dealing with the city. We’ve had the same meals tax issues as described in the article. However, we actually overpaid a tax in early 2022 and are still waiting on the $8000 refund, after dozens of emails and calls asking for an update and trying to get it resolved. Apparently we are still in a “billing review” that is taking 2 years or longer. That’s right, something that would take a call center rep (Comcast, Verizon, Dominion Power, etc.) about 30 seconds to… Read more »
Sorry to hear it. This is what happens when a department’s employees don’t care about their jobs. Very prevalent in the city where it’s near impossible to fire anyone regardless of how bad they are at their job.
Mayor Stoney is running for Governor. Good luck getting Richmond, especially restaurant owners, behind your campaign.
How much has The Mayor personally paid in taxes to the city of Richmond for Real Estate, and Personal Property over the past 7 years? Inquiring minds would like to know!
The man’s name is “Stoney” lower that bar
I’ve been all over West Texas and South Texas, Terlingua to Blanco, El Paso to Poteet, and ZZQ definitely needs another outpost. As does Andalusia distillery;-) … jus’ sayin’
I love how all this tax money is supposed to go to schools. There shouldn’t be any schools in the city without resources and none of them should be falling apart!!!!
> City officials have also said that restaurant owners are made aware of delinquent accounts when they apply for an annual business license, which is withheld until an account is in good standing. I didn’t find out my error on my beginner’s tax for the business license (after a city employee told me to ignore the section when I went there because I was confused by the form) on the second year until the fifth year (and two cashed, issued business licenses later) along with $2,000 in interest. I was furious but I paid it. Nothing like these people but… Read more »
This is exactly what I’m dealing with. Got my first business license in 2018, and the person helping me told me to ignore a portion of the form. So, I missed an $185 payment in early 2019. In November 2023, I got a bill for almost $3,000 even though all my other business license taxes were paid on time in full. I’m wasting so much of my time fighting it. It’s absurd and frankly embarrassing for the city of Richmond.
Yeah that’s exactly how it went down for me a few years ago. I was confused about the beginner’s tax because the form is really strangely laid out and it seemed like I was paying tax on the same year’s gross receipts twice, which I guess is just how it works, so I went to City Hall and they said to ignore it. It was a trivial amount, but when I found out about it 3 years later they had tacked on an extra $2,000 in fines in the meantime without notifying me, I sure was mad but what am… Read more »
It’s not just the meals tax that’s a mess, it’s the real estate tax collection too. When I closed on my property in October, the seller had to pay overdue taxes, which he did at closing. But in January, I started getting delinquent notices, despite my mortgage company paying the first half taxes. Turns out, the city retroactively revoked the tax abatement on the property AFTER closing and with no notification. My payment wasn’t applied to my bill, but unknown interest and penalties, triggering additional late fees and risking forfeiture of additional abatement. I was stuck with a large tax… Read more »
It’s the Mayoral election process that’s broken. It was established in a way to insure that that a minority candidate would likely be elected regardless of his ability to lead through the morass and now we’ve had 12 years of ineptness. Stoney, elected with only 38% of the vote, promised that he’d straighten this mess out in his second term and he’s done nothing but hold fundraisers for his next campaign and push for a casino. These restaurant owners, the lifeblood of this foodie city, are still crippled by the tax, covid, and the absence of daytime traffic due to… Read more »
Its 2024. The city should have had a web portal 10-15 years ago that would have just displayed the exact billing status of every restaurant in the meal tax program. Then it would have been the restaurants fault if they never logged in to check on their status in a timely fashion. But because the city has such a low bar of service and a lack of transparency they have fostered a situation where their is chaos and they get the deserved bad PR. They always make things harder on themselves in the long run by refusing to create the… Read more »
After reading all the comments here it certainly would be great if some of the city council members were actually business owners in the City. Doing a quick internet search I couldn’t find any that were other than one that had a “drone video” business. I think having a council whose prior work experience is almost all in city and state gov’t, education, public policy, social services and non-profits is not the best makeup when it comes to setting financial policy that effects hundred’s of thousands of people and thousands of business’s.
Somebody get Lincoln Saunders a comb!