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Auditor says 38% of Richmond restaurants were late on meals tax payments

The Richmond finance department
Shaban Athuman
VPM News File
The Richmond finance department is seenon Tuesday, February 27, 2024 inside City Hall in Richmond, Virginia.

A review of how businesses were notified covered July 2022 to February 2024.

Richmond City Auditor Riad Ali recently published a report on how businesses were notified of late meals tax payments.

The review looked at notifications between July 12, 2022, and Feb. 13 — a span of time during which local business owners made their experiences dealing with the city’s finance department public.

Ali wrote that on Feb. 27, 673 accounts had delinquent meals tax bills — out of about 1,750 in the city. That’s 38% of restaurants, though the auditor noted in an email to VPM News that “given non-filers and those that may not be on the City’s radar,” there could be a higher number of businesses operating in Richmond.

Two-hundred eighty-three businesses did not receive notification, and 98 others were exempted after entering into a payment plan with the city or declaring bankruptcy, among other reasons.

The bills — which include taxes owed, penalties and fees — totaled $10.9 million. Fees account for 21% of the outstanding payments, according to the report. Richmond’s Fiscal Year 2024 budget counts $6.8 million in penalties and interest for all taxes as income for the city.

When asked if that was “a good or reliable” source of revenue, city spokesperson Petula Burks wrote: “Good is a subjective term and financial experts do not define city revenues as good or bad.”

She also said to “please read the report” when asked if it offered new information pertinent to work the mayor’s office, council and the finance department are engaged in.

During the period Ali looked into, the city continued to first apply meals tax payments to any delinquent account balance, as opposed to the month’s bill that funds were sent with. In early February, City Council voted to require payments first be applied to the bill they accompany, not a delinquency.

The city finance department’s lack of regularly communicating accurate or timely bills to business owners prompted the January complaints from city restaurants.

The Department of Finance implemented a process to communicate outstanding account balances to businesses in June 2022. And while Ali wrote the department began sending out notices about those balances, a 2023 audit indicated that previously “businesses were only notified … if selected for a tax audit, when tax enforcement or delinquent collection efforts were initiated, or they requested an account reconciliation.”

That resulted in some restaurants being offered "incomplete information," the audit said.

Businesses operating in the city of Richmond also are not currently notified if their accounts have credits. Burks previously told VPM News the city doesn’t know what accounts might have overpaid or by how much.

The auditor’s report concluded by saying the office won’t offer recommendations at this time, because “the City is already committed to the process of informing delinquent account holders of their outstanding balance.”

“When my office performs a full audit of the meals tax program … [it] will include follow-up on our prior findings and recommendations, the process and progress of reviewing delinquent accounts and evaluation of the commitments made to address the problems, and the process in place for billing and collection using RVAPay,” Ali wrote in an email to VPM News.

A full audit of the meals tax program is planned following RVAPay’s implementation, which is expected by the end of the year. Sheila White, head of the finance department, said in a recent audit committee meeting that the platform could be ready by November.

Dave Cantor has been an editor with VPM News since 2022, juggling daily digital and broadcast stories.
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