Brewery manager calls Richmond finance department 'dysfunctional' amid meals tax issues: 'It's a nightmare'

RICHMOND, Va. -- The number of Richmond business owners raising concerns about how the city manages collecting meals tax payments continues to grow as some said they've faced unexpected penalties and a lack of clear communication with the finance department.

"Since COVID hit, we've been doing nothing but battling with the city," Matthew Mullett, a manager of Richbrau Brewery, said.

Mullett showed CBS 6 dozens of pages of documents detailing the ongoing battle to resolve a meals tax issue that he believes is the fault of 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," Mullett said.

It began when Richbrau Brewery opened in 2019, and a tax representative with the finance department told the business it did not need to collect the meals tax on draft beer.

The employee even wrote it down: "Meals tax 7.5% due on prepared food, not draft."

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So, Mullett took that advice.

Then, in March 2020, right as his business was beginning to feel the impacts of the pandemic, a city auditor reached out to inform the business that it actually should have been paying meals tax on draft all along.

Mullett said the brewery immediately started collecting the tax and sending current monthly payments to Richmond.

The auditor told Mullett, as documented in a finance department appeals investigation, that the current payments beginning March 2020 would be applied to those respective months – and would be kept separate from the previous months in which he was not collecting the meals tax.

However, after a few months of new payments, he said the city took the current payments and applied them to an outstanding balance.

The city wanted Richbrau to pay up for all the months it was told not to collect the tax – in addition to penalties and interest accrued for those months.

Mullett said, with penalties and interest, he was asked to pay more than $50,000.

So, he filed an appeal.

In response, Finance Director Sheila White admitted 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."

White ultimately decided to waive some of the penalties against Richbrau but determined the brewery was still responsible for paying $14,000 for meals tax that should have been collected from July 2019 to March 2020.

Since Richbrau did not impose a meals tax on draft during those months, at the advice of the tax representative, that money would have to come out of Mullett's own pocket.

Mullett said he appealed White's determination to the state Tax Commissioner, after Sheila White suggested he do related to penalties on a business personal property tax issue.

In response, Tax Commissioner Craig Burns said his department was not authorized to consider appeals on the meals tax or the application of penalties on business property tax issues. He added the city should've known this and that White's advice to the taxpayer was "made in error."

Mullett's issues remain unresolved to this day.

"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."

He has joined a growing list of business owners who've said they had terrible meals tax experiences with Richmond.

Kevin Grubbs, owner of Latitude Seafood Co., said he had to pay the city $68,000 in penalties after he said the finance department never notified him that he was late on a meals tax payment in March 2020.

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“The way it was all handled makes Richmond extremely untrustworthy," Grubbs told CBS 6. "I can't say I would do business in Richmond again.”

John Giavos, who owns ten restaurants and six markets across Richmond including Stella's, said it took him three and half years to get a business license due to a holdup related to an incorrect meals tax payment that he was never notified about.

“I just wish our city would fix the problems that they've been telling me they're going to fix for years," Giavos told CBS 6. “Because there's no transparency for them to show you that you've been late. Like Henrico County, you can go online and you can check the computers, and you can know where you're late. And you can pay it online and you can move forward. There's none of that with the City of Richmond.”

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CBS 6 asked Richmond Mayor Levar Stoney's office to address the concerns raised by business owners, but we have not heard back for two days in a row.

However, Richmond City Council President Kristen Nye acknowledged that business owners are struggling to get real time updates and accurate information about their accounts-- allowing issues like missing a meals tax payment to snowball into a dramatic late fee penalty.

“We’ve heard from restaurant owners on and off for years that there's some challenges with our existing system," Nye said. “I think within the finance department, there's a lot of room for growth."

Nye said she believes many of the finance department's problems can be linked back to "outdated systems."

She added the city is launching a new online billing system called "RVApay" for meals tax payments by the end of the year, which she hopes will help resolve a majority of issues.

In the meantime, she said she and Chief Administrative Officer Lincoln Saunders will be personally meeting with restaurant owners to address their problems in the coming days and weeks.

"We need to get there, and we need to get there yesterday," Nye said.

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Mullett also hopes Richmond gets there, for the sake of keeping businesses in the city.

“From what I've seen, a lot of people leave the City of Richmond and go to work for the surrounding counties, because the systems and the processes are in place. If you don't have good systems and processes, you're bound to fail," Mullett said.

Mullett said he previously tried contacting his council representative for help on his specific matter and was told his inquiry was forwarded to the mayor's office. He said he never heard back from anyone in the mayor's office.

Now, he's turning to the community.

"The community needs to demand change," he said.

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