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Richmond sending offers to settle meals tax issues, but some business owners are confused

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Posted at 4:39 PM, May 31, 2024

RICHMOND, Va. -- Lindsey Barr has a simple question: "Do you pay money that you don't know what it's for?"

She said the answer should be an easy "no," but she feels it's what the City of Richmond is doing to businesses.

Barr is a certified public accountant representing more than 60 restaurants, some of which were impacted by the city's meals tax issues.

Now, those restaurant owners are receiving settlement offers from the finance department that are leaving her clients puzzled.

"They're confusing, they don't understand them, where the numbers come from, to which periods they relate or what even the main issue is," Barr said. “I don't want anyone getting a refund they’re not due, and I don't want anyone paying anything they don’t owe. It’s just not right.”

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Lindsey Barr

Earlier this year, dozens of restaurant owners started voicing frustrations over surprising and substantial late fees on their meals tax accounts. Basically, the issue stemmed from the city not telling businesses about a delinquency, quietly accruing monthly penalties and interests for years, and then hitting them with an unexpected big bill.

In response to the outcry, the city said the finance department would manually review more than 600 individual accounts to get to the bottom of it.

City spokesperson Petula Burks said each business owner was notified that his or her account was under review when the process began.

"If a business had questions or requested additional information prior to the OIC being mailed, they had the opportunity to meet with a finance representative. At that time, the business owner could bring any additional documentation that spoke to their particular concern about their account," Burks said in a statement.

Now that many of those reviews are complete, the city is sending out letters containing a compromise. For some businesses, the letters state that they've been cleared of penalties and interests.

Barr said some of her clients were told in the letters that they still owe a balance and some were told that they're being refunded a credit.

The problem, she said, is they don't state how the finance department calculated the figures or what triggered the issue on the account in the first place. Additionally, the city's letters state taxpayers have just seven business days to sign a settlement agreement.

“And they don't feel like that's enough time when you don't give the detail or haven't previously informed them of the balance," Barr said.

Barr said one of her clients was told over the phone in April she'd be getting a credit of $13,000. But when that taxpayer received the city's offer in May, it stated she actually owed $7,000.

As the accountant tracking the books, Barr believes her clients should be current and up to date on their taxes, so she doesn't understand why some are being told they have an outstanding balance.

"There's no liability on our balance sheets," she said. "If there was, we wouldn't contact the city and question the amounts. We would just pay it."

Mike Byrne with the Virginia Restaurant Association echoed Barr's concerns and questioned how the city can be sure of how much a restaurant owes since the meals tax is a self-reported tax.

“Why are some people getting refunds and others not? Why are some people getting forgiveness and others not?” Byrne asked.

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Mike Byrne

The city has previously said its mission is to complete all account reviews by July 1, which marks the start of the next fiscal year.

But Byrne said he's not confident in the finance department's ability to accurately achieve that goal by the deadline.

“I see it as a way of just kicking the can down the road until the next mayor comes on board and then that administration inherits it," Byrne said.

The bigger issue, he believes, is more systematic.

He's calling on the city to be transparent about its review process.

"It's a lot of money. The restaurants are working on trying to make a dime on a buck," Byrne said. "Not only is it a lot of money, but it's a lot of livelihoods, and we want it to be right."

Burks said the finance department will give business owners opportunities to address any concerns with their review prior to signing an agreement.

"The City is here to provide comprehensive support throughout this process, ensuring that business owners feel reassured and less anxious about the review of their accounts. We are committed to addressing their concerns and providing them with the necessary information and assistance," she said.

She encouraged business owners to reach out by:

1. Email: mealstax@rva.gov 

2. Online Form

3. 3-1-1 – call and submit a ticket

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