RICHMOND, Va. -- A new audit revealed hundreds of Richmond business owners were delinquent on remitting meals tax payments, and a large portion were never notified by the city.
City Auditor Riad Ali completed a review of data from the Finance Department, at the request of the city council, and found that 673 business accounts had an outstanding balance.
Richmond's Chief Administrative Officer Lincoln Saunders initially said that a "handful" of businesses were impacted.
The combined delinquencies totaled $10.9 million as of February 2024. $2.2 million of that were interests and penalties.
Of those restaurants that were delinquent, 283 of them, or 42% were not notified by Richmond's Finance Department. Ali noted that 98 accounts were excluded from being notified because of bankruptcy, a payment plan, an account review, or they did not make a payment.
The auditor found that the rest did receive at least one letter from the city indicating an outstanding balance. However, those letters did not include detailed information about how much money the businesses actually owed.
Before June 2022, the city did not have a process in place to notify restaurant owners of outstanding balances. They could only find out if they inquired if they were audited, or if collection efforts were initiated.
As CBS 6 has previously reported, restaurant owners began voicing concerns at the beginning of the year about what they considered an unfair tax collection process.
They said the Finance Department did not tell them that they were delinquent, quietly accrued penalties and interests, and hit them with a big bill later down the road. Those bills sometimes reached tens of thousands of dollars.
According to Ali's audit, at least three businesses owed more than $200,000 in meals tax payments and late fees.
Matt Mullett, manager at Richbrau Brewing, was among the first to speak out about the issues. He said the city told him not to collect the meals tax on draft beer. Then, the city later said he actually should have been collecting it the whole time and charged him for it.
Mullett said the city considered his account to be in bad standing, which prohibited him from accessing grant money. Nearly four months after bringing awareness to his problems, he said he arrived at a resolution with the city.
On Monday, Mullett said Finance Director Sheila White personally called him to present a deal-- the city would clear his tax delinquencies and credit him for the grant money he should've been eligible for years ago.
At the time, Mullett said he would've used the funds to cover expansions to his production facility including tanks, a labeler, and a canning line.
"It was just a long, drawn-out process that really didn't need to take anywhere near this amount of time," Mullett said. “If things go the way they said it's going to go, then this matter will be resolved. We're kind of still cautiously optimistic.”
The city auditor noted that a committee is currently reviewing delinquent accounts, and in the meantime, the finance department will freeze all late fees on those accounts. The city aims to complete all reviews by July.
CBS 6 asked Monday how many reviews have been completed so far, and city spokesperson Petula Burks has not yet responded.
“I think, really, what needs to happen is some larger, quicker solution that allows the city not to go under such an intensive review of every single account and can just rectify the issue across the board," Mullett said.
Mullett believes he likely would not have ended up with a positive outcome had it not been for public pressure and the help of his council representative Cynthia Newbille.
“I do want to give credit where credit's due in resolving this problem. Between the media and between the council people, they've done a good job in moving this forward," Mullett said.
Ali's report did not recommend any new actions, because he said the council and administration have already taken several steps toward solutions including changing the way tax payments are applied, improving communication with business owners, and hiring more employees in the finance department.
The auditor will complete a larger-scale audit after the city implements its new online billing system RVAPay. That's expected to happen by the end of the year.
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