Meals Tax Mess: Council addresses 'mixed messages' to restaurant owners, says Richmond needs 'culture change'

RICHMOND, Va. -- Richmond City Council laid out its expectations in addressing ongoing meals tax frustrations from business owners, while also attempting to right the ship pertaining to how the city has responded to their concerns.

“I’m definitely more optimistic than I was," said Kevin Grubbs, co-owner of Latitude Seafood Co. in response to the legislative body's recent action and public statements. “They seem like they really care and they're really trying to fix the issues.”

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Restaurant owner calls Richmond 'completely immoral' over $68,000 late fee

Tyler Layne

CBS 6 first profiled Grubbs at the beginning of the year, after he expressed concerns over how the city was handling the collection and application of the meals tax.

Richmond's Finance Department charged Grubbs $68,000 in late fees after he missed one payment during the pandemic as the city offered a COVID-19 meals tax amnesty program to restaurants.

However, Grubbs' payment was still considered late, and the finance department never told him. They allowed penalties and interest to pile on month after month, again with no notice, and Finance Director Sheila White even denied Grubbs' initial appeal for his penalties to be forgiven.

So, Grubbs ended up paying the balance after he said the city threatened to raise it even more.

After CBS 6 shared Grubbs' story, other business owners came forward with similar experiences, demanding answers and accountability from the city.

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Now, progress is being made to address the issues.

“I think that's a ‘closed mouth doesn't get fed’ type situation. I think once we all started speaking out together, they started listening," Grubbs said.

This week, Richmond council members passed new legislation that amends the city code in a way that allows the city to apply tax payments to the current month that the taxpayer is submitting payment for.

The finance department has previously been applying current payments to delinquent accounts by default, causing the taxpayer to not fully cover the balance and fall into a cycle of delinquency – oftentimes without notice.

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“We really feel like we want to fix this meals tax problem. We want to support our restaurant owners, and this is the first of many steps that we're taking to do that," said City Council President Kristen Nye.

While the council provides oversight and creates local laws, it does not manage the day-to-day operations of City Hall. That responsibility is instead managed by Chief Administrative Officer Lincoln Saunders who was appointed by and reports to Mayor Levar Stoney.

In a statement released Thursday, the full council referenced how the administration has recently responded to business owners' meals tax concerns saying there were "barriers for honest responsive dialogue" and that the city "needs a culture change that establishes, engenders, and supports ongoing real and direct lines of communication to resolve real issues."

In previous statements, the city administration suggested restaurant owners were "embezzling" from the city by not complying with tax laws and "overstating" their issues.

“I think there's been some mixed messages coming from City Hall," Nye said. “I just think we really need to just show compassion and empathy, and not initially assume that everybody coming to us with a problem is wrong.”

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Asked whether she's been satisfied with the meals tax response from the administration, Nye said, "I think that the administration really does want to find solutions to this problem, and I do think they are working around the clock to find those solutions. I think there have been some missteps in external communication and communication directly with these business owners, and I think we are trying to make a course correction."

Moving forward, councilmembers said they want timelines and accountability for "plans for all accounts to come into compliance, with detailed policies for an appeals process, forgiveness, refunds, and payment plans."

“There's a lot of confusion about, is there an appeals process going on? What does that look like? Who can apply? Where can I go to to ask my questions? There's just not a lot of clarity in that space right now," Nye said.

The council expects to receive another progress update from the administration at its March 4 meeting.

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Grubbs said he feels hopeful to see plans in place, yet cautious about execution.

"City Council has done a great job responding, and City Hall has not," Grubbs said. “If they can make City Hall follow through, then it's going to fix all the problems.”

He added, "I do think City Hall needs to start over. They need to break it all the way back... It's not like they haven't known about the problem."

A statement on Friday from City Hall spokesperson Petula Burks read, "The city remains committed to working with our restaurants to rectify possible delinquencies stemming from the 2019 process change. We are working to put additional measures and initiatives in place to ensure that our businesses feel seen and heard. We’re proud that City Council is a willing partner in the fix and applaud their vote this past Monday to improve how the city collects meal taxes."

At this point, Nye said fewer than ten restaurant accounts with meals tax issues have been settled with the city. Reviews are still ongoing on an individual and manual basis.

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