RICHMOND, Va. -- Andrew Clarke, co-owner of 821 Cafe located in the middle of VCU's campus, credits longevity in the restaurant business to good food, prime location, and having a passion for the job.
“I’m really, really happy to have been doing what we do for 20 years, and I want to do it for 20 more years," Clarke said.
Another key ingredient to a successful business – paying the taxes on time.
“We thought everything was great. You pay it on the 20th and it's pretty mindless. You have your accountants who do a great job, and that's all you have to do," Clarke said.
But like many others, Clarke is in the middle of a meals tax mess with the City of Richmond.
“Keeps you up at night sometimes, for sure," Clarke said.
The problems began six months ago when Clarke said he got a call from the finance department saying they had reviewed his meals tax account and found he was due a refund.
Considering media coverage at the time of other restaurant owners who expressed frustrations with the city's handling of meals tax collection and surprise late fees, Clarke filed his refund notification under the "too good to be true" category.
And, he was right.
Shortly after that call, Clarke said he received a compromise letter stating the city had actually assessed 821 Cafe as owing $188,000 in meals taxes from 2021-2024. But, according to the letter, since there was "substantial doubt" regarding the actual liability, the city asked the owners to pay about $25,000 instead.
The document contained no further information about why the restaurant owed that amount.
“So that was kind of a red flag to us and our accountants," Clarke recalled.
Clarke said he contacted the city, and after several meetings with finance department leaders, he eventually found out that the issue did not date back to 2021 as stated in the letter, but to 2017 and 2018 when the department could not account for two payments the cafe remitted.
One of those checks finance mistakenly credited to a different business's account, which triggered snowballing late fees that compounded every month for years.
“I'm just not sure why it took so long to bring that to our attention. Had it been brought to our attention immediately, then it wouldn’t have been an issue. We could handle it and get straight now," Clarke said.
City spokesperson Margaret Ekam confirmed the error to CBS 6 and said the current finance team has since corrected the restaurant's account.
But still, there are two more missing payments from during the pandemic which 821 Cafe and the city do not have records of.
“We are pretty sure that we paid them. There's some doubt on our part. I'm going to be really honest about that. But on top of all that stuff, it makes me think like, what if that check is sitting on a desk or didn't get credited to the right place or got lost?" Clarke said.
CBS 6 obtained a recent audit of the finance department that found staff failed to process business forms and had more than 1,000 unfiled business documents and more than 700 unprocessed mail records.
Checks have been found sitting on employees' desks, and the audit also showed that poor data integrity led to inaccurate service for businesses.
Other restaurants including the Greek Taverna share Clarke's concerns about the city's meals tax letters.
Owner Toula Panos received a compromise offer asking her to pay more than $5,000 but said the city has not been able to provide proof of when the business missed a payment.
"Why do I owe this? I just want to know why," Panos said. "Just start over. It's a mess, an accounting nightmare."
Local accountant Lindsey Barr said she has 18 restaurants that also received settlement offers from Richmond, but zero of them have been resolved.
Since CBS 6 first interviewed Barr about the letters in May, she said the city has continued changing the amount of money her clients owe.
One of her clients was offered a $7,000 refund from the city and signed the compromise letter. But then the city came back and said that amount was incorrect, and the business would be getting a $1,000 refund instead.
While the finance department has produced reports from its system for taxpayers, she said they are "difficult to understand" and "different from our records" because of the way the city applied the payments.
"If I can't understand and have questions about their reports, I can only imagine how difficult and frustrating it is to restaurant owners themselves," Barr said.
According to a report Finance Director Sheila White gave to the city council earlier this month, the city has sent out 279 total meals tax compromise letters. CBS 6 first began hearing about restaurants receiving them around May.
As of September, 147 settlements have not been completed.
"The City works with business owners where there are discrepancies to ensure all records are corrected and determine whether the taxpayer owes the City or they are owed a refund," Ekam said.
For Clarke, he's just hopeful for a resolution that seems fair for both parties, but months of meeting with finance staff, producing years of documents, and pulling up old bank statements is no easy task for a small business owner trying to run a restaurant.
“I think there needs to be some grace and forgiveness on the side of the city. I think there needs to be some flexibility on the sides of the business," Clarke said.
Until then, it's, "kind of in limbo of knowing, what do we do? How do we move forward?"
Ekam said the city is actively working with 821 Cafe to respond to the owners' concerns, and the city is also waiting for answers to its questions as well.
After CBS 6 reached out to Ekam for this story, Clarke said the city set up another meeting on Thursday to discuss a new offer.
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