A restaurant owner in Virginia described living a 'nightmare' after a mistake left him owing a fee of $68,000.
Kevin Grubbs, of Richmond, opened up his restaurant, Latitude Seafood Co. at Stony Point Fashion Park in 2018.
As the business got going, Grubbs began paying the city approximately $28,000 a month in meals tax payments, which are collected through a 7.5 percent tax on every diner's bill.
Business owners are responsible for reporting and sending the taxes they owe to the city, but Grubbs was late on one payment in March 2020 as his restaurant was forced to close in the pandemic.
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The city offered an amnesty program to waive interest and penalties on certain meal taxes between March 2020 and June 2020, but Grubbs was unaware that he had to apply to the program in order to qualify.
He sent the March 2020 payment during the waiver period, but since he hadn't applied for the program, he was hit with a late fee of $800.
Unfortunately, Grubbs claimed that no one ever notified him of this fee.
Recalling the situation to WTVR, the restaurant owner said: "If we had known, then we would have just settled the $800 right then. We're not going to let this get out of hand."
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But with no idea he even owed a late fee, Grubbs didn't realize things were getting out of hand.
He continued to pay his meals tax payments as usual, and was oblivious to the fact that the city was adding a 10 percent penalty every month for the March 2020 payment.
It wasn't until November 2022 that Grubbs received a notice from the city, which it described as a 'courtesy', informing him that he now owed $41,000.
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Horrified, the restauranter filed an appeal with the Finance Department, which took a year to investigate.
On December 1 2023, Finance Director Sheila White notified Grubbs that his appeal had been denied as 'taxpayers have a duty to investigate the amount of the tax and to pay it, and the failure to do so does not relieve the taxpayer of fault'.
A report from the Finance Department added that Grubbs had been issued a statement informing him of a balance on his meals tax in September 2020, but the balance on the statement was incorrect and much less than what he actually owed.
"While it is regrettable that the statement included the wrong balance, being provided with the statement put the Taxpayer on further notice that its Meals Tax Account was delinquent," the report said.
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By the time he'd learned that his request had been denied, Grubbs owed Richmond $68,000.
He paid the fee, but stressed: “It’s not right. It’s completely immoral."
“The way it was all handled makes Richmond extremely untrustworthy. I can't say I would do business in Richmond again," Grubbs added.
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Andreas Addison, a councilman in Richmond City, has expressed hopes to improve communication between the city and its business owners.
"We need to be supporting [business's] success and their growth and their opportunities to provide more investment in our city," he said.
City spokesperson Petula Burks added in a statement that 'these situations did not occur overnight and are not a surprise to the businesses'.
Burks said it is the business owner's responsibility to pay accurate taxes on time, stating: "Each business operating within the city is responsible for knowing their obligations and for addressing liabilities.
"Information regarding applicable taxes is contained on the city website and is provided to the business when the business license is issued. The city does not produce or mail bills for meals tax.
"This tax is collected just like how sales tax is collected by the state."
Burks went on to say that failure to comply to state and local code for meal tax is 'the equivalent to embezzlement'.
"The City of Richmond is willing to work with business owners to set up payment plans to help them come into compliance," she said.
As for Grubbs, he plans to advocate for systemic change while also challenging the city in circuit court over the late fees.
“It should be a law that changes," he said. "In Virginia, it should be a law that if they're going to accrue [late fees] 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."
Topics: Money, US News, Food and Drink
Emily Brown