Restaurant group pushes state legislation to address Richmond meals tax issues: 'They're in financial jail'

RICHMOND, Va. -- Many in Richmond's restaurant industry are calling for change after several business owners found themselves in a messy meals tax situation. And they're looking for solutions from not just the city, but also the state.

Michael Byrne, the director of the Virginia Restaurant Association, said he's connected with at least 25 business owners just this week to hear their concerns about the management of the meals tax.

"It's like watching a trainwreck," Byrne said. “I can tell you after 40 years of being in the business, and owning and operating restaurants, I've never heard of anything like this.”

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As CBS 6 has reported, business owners have said they either received bad advice from the city's finance department or missed a meals tax payment for whatever reason and then discovered they're facing a dramatic outstanding balance.

They said the finance department did not notify them of an issue or delinquent payment, started accruing penalties and interest without notice, and the business owners didn't find out until many months or even years later as monthly late fees piled on.

At Latitude Seafood Co, it was $68,000.At Philly Vegan, it was $37,000. At Richbrau Brewery,it was $50,000.At Beauvine Burger, it was more than $400,000 at one point.

Byrne said the common denominator is that businesses are sending in payments respective to the current month, but not realizing the city is applying those payments to an unknown outstanding balance. He said it creates a cycle of businesses continuously falling behind.

“These restaurants are in financial jail, and they can never get out because they're always delinquent, because they don't know when the payment is being posted for," Byrne said.

Now, these business owners are pushing for change at the state level.

“In Virginia, it should be a law that if they're going to accrue it that way, then they send you a notice and say, ‘Hey, we're going to accrue this,’ because so many of us have no idea," said Kevin Grubbs, owner of Latitude Seafood.

“This is an ongoing, systematic problem that needs a legal solution. We need to change the laws so that this can't happen," said Matthew Mullett, manager of Richbrau Brewery.

And that's what the Virginia Restaurant Association aims to do.

“What we've done is the Virginia Restaurant Association has put in legislation into the General Assembly to help correct some of these problems," Byrne said.

Byrne said a bill has already been filed and that, generally, it would call for finance departments or tax collectors in Virginia to do several things, including:

• Post taxpayers' payments to their respective current monthly balance
• Pause interest for 60-90 days if a taxpayer appeals a potential error
• Require a notifications process for delinquent payments

Byrne did not share who is sponsoring the bill. As of Friday evening, the bill had not been posted on the General Assembly's legislative website.

“My sense is, there are thousands of bills that are being filed, and my gut is someone is probably paying attention to this," said Governor Glenn Youngkin.

CBS 6 relayed the business owners' concerns to Governor Glenn Youngkin Friday and asked for his thoughts on improving the systems in place for these taxpayers.

“Last year, we were successful in passing bipartisan legislation to make sure individuals at the local level understood that there were penalties associated with being late. I think it’s helpful for people to know what’s late and what’s not. I don’t know the process of what notifications go to whom when, but of course, more transparency is always a good thing," Youngkin said.

Byrne said it's unclear exactly how big the meals tax issue is in Richmond, but he believes it's greater than a "handful" of cases, as the city's Chief Administrative Officer said Thursday.

"It's not a handful of restaurants, as it appears. I'm one person, and I've got 25 restaurants that have come to me since Tuesday," Byrne said.

Byrne encouraged any other business owners with concerns or questions about the meals tax to reach out to the Virginia Restaurant Association.

The group is planning to bring restaurant owners to the state capitol when the General Assembly session begins to lobby for change.

"We just want a solution," Byrne said.

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