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EXCLUSIVE: O’Leary Seeking Power to Shut Down Deadbeat Restaurants

by ARLnow.com — December 3, 2012 at 11:05 am 5,808 109 Comments

Restaurants in Arlington collectively owe more than $900,000 in unpaid meals taxes to the county. Arlington Treasurer Frank O’Leary is lobbying for the power to shut the worst offenders down.

By law, restaurants collect a 4 percent food and beverage (“meals”) tax in Arlington on top of the 5 percent state sales tax. The meals tax is then to be remitted to the county. But some restaurants — especially restaurants experiencing financial difficulties — simply pocket the money and accrue a debt to the county.

Frustrated by weak enforcement measures, O’Leary is seeking the power to seize and shut down restaurants that continue to accrue large meals tax debts, with no end to the delinquency in sight.

“What we would like to do is get the power to close down restaurants that are going deeper and deeper into debt,” he told ARLnow.com. “What they’re doing is essentially criminal. You can’t charge people tax on their meals and keep it for yourself, no matter how pressing your problems are. That money belongs to the county.”

O’Leary said he has been meeting with members of Arlington’s delegation to Richmond and is hoping to get a law passed in the state legislature’s upcoming session.

The effort is an uphill battle, however; the Republican majority in the state legislature has been reluctant to pass tax-related bills, especially those sought by Arlington County. O’Leary says he plans to argue that the measure could benefit the state’s coffers. He says restaurants that aren’t paying their meals taxes might be skimping on their state sales taxes, too.

Part of the challenge of enforcing the meals tax is the nature of the restaurant business itself. The county can seize property from tax cheats, but restaurants often operate in rented spaces with rented furniture and rented kitchen equipment.

“There’s very little to actually confiscate,” O’Leary said.

Restaurant owners are also able to keep the tax man at bay by offloading their personal property to others. His proverbial white whale, chef and restaurateur Roberto Donna, managed to get away with pocketing some $140,000 in meals taxes — for awhile, at least — in part because most of his personal property, like his McLean mansion, was in his wife’s name. O’Leary took the extraordinary step of having Donna prosecuted, but he avoided jail time and is now paying off his debt at a rate of a mere $500 per month.

O’Leary said he even considered having Donna extradited back to Italy, but decided he’d rather have the famous chef make his paltry debt payments than no payments at all.

Should O’Leary get his way, sheriff’s deputies would be dispatched to a severely delinquent restaurant to post closure notices on the doors and change the locks, so restaurant owners aren’t able to remove any property.

“Nothing else seems to work,” he said. “What we really need to do is stop them from operating. That’s the only thing I can think of to solve the problem.”

Even if his lobbying efforts prove unsuccessful, though, O’Leary has another trick up his sleeve: public shaming.

This month, the treasurer’s office is sending a mailing to tax delinquent restaurants, warning the owners that their tax delinquencies will be publicized in the media and on the county’s web site should they not agree to a repayment plan. Should any restaurants continue to flout the tax laws, O’Leary says he hopes Arlington residents will take note and do as he does: not dine there.

  • http://URL S.Arl.Guy

    Yikes! There are at least 4 restaurants that fall into this category in Shirlington – so sad : (

    • Chris M.

      Maybe, but maybe not. They could be cheats, but they could also be trying to get a struggling start-up off the ground. I say if you’re a small business struggling to make it and your tradeoff is payroll or taxes, pay your payroll and and sort the taxes out later. If you’re getting through a rough patch, power, payroll, and inventory keep your business running, not taxes.

      • awesomepossum

        I say, if you can’t pay your bills, make room for a successful business.

      • Ballston Resident

        Chris M,

        Disagree. Order should be pay your taxes first, then your payroll, then your inventory. If you can’t do this, the county should consider closing your restaurant down.

        • http://URL Restaurant Employee

          Wrong. Payroll taxes belong to the employees not the businessman or woman. Its stealing.

          • http://URL Ballston Resident

            Respectfully, this is not about payroll taxes. It concerns the 4 percent food and beverage (“meals”) tax in Arlington on top of the 5 percent state sales tax. The meals tax is to be remitted to the county. But some restaurants — especially restaurants experiencing financial difficulties — simply pocket the money and accrue a debt to the county.

            That is the issue and restaurants that do this on a regular basis should know they will be closed down in Arlington for this illegal activity.

          • http://URL Frito Pie

            Sales taxes belong to the county, not to the business. It is stealing as well.

        • Chris M.

          This makes no sense to me. Are you trying to make some moral argument? Starts-ups often start in a sea of red ink. You have to cover your operating expenses before you pay your taxes, sometimes that can take a while. If they start cracking down too hard we will get fewer local start-ups and more corporate chains with deep pockets.

          • NoVapologist

            I think the point is that these are not taxes levied on the business. These are county taxes that the restaurant collects from diners for remittance to the county. They shouldn’t be treated as revenue that the business can use for other purposes.

          • Ballston Resident

            Chris M,

            Coud not disagree with you more.

            Most start-ups do not start in a sea of red ink. They usually have a business plan and some financial backing. It’s risky being a startup but no business has the right to cheat the county of their taxes – regardless of wether you are a small or big business.

          • Chris M.

            “Financial backing” is red-ink. You have obviously never run your our business and had to get through a rough patch. Small businesses pay their taxes late all the time. The point of collection is irrelevant. A tax is a tax. Running a business can be very hard, and your analysis of the situation is far too simplistic. If this lasts too long, they are done regardless, but this does not necessarily make them deadbeats.

          • Chris M.

            Ballston Resident – “obviously” was a bit too harsh. Sorry

          • http://URL Ballston Resident

            Chris M,

            If you run a business in Arlington, you need to pay your taxes to the county.

            NoVapologist hit it right on the mark by saying: “I think the point is that these are not taxes levied on the business. These are county taxes that the restaurant collects from diners for remittance to the county. They shouldn’t be treated as revenue that the business can use for other purposes.”

            Respectfully

    • AL

      What is your proof, and which ones do you suspect? I’m suspicious of Extra Virgin, Aroma, and Ping.

  • MC 703

    I know there ave been various links to lists of the deadbeats joints, but is there a current one somewhere? I googled unsuccessfully.

    If people start avoiding these places, that will do more to punish this behavior than anything the County can do.

    • Quoth the Raven

      True, but what a cost! Donna’s food was incredible!!!

      • http://URL Justin Russo

        Not at the Crystal City restaurant. That place sucked.

    • http://www.arlnow.com ARLnow.com

      The Treasurer’s office hasn’t published a recent list. They will soon, but not after first warning restaurants and giving them a chance to pay up.

      • SmallBizOwner

        How come ARLnow.com never updated their story about the restaurants on this list from a year ago that paid their past due amounts and have stayed current all of 2012? Were you not able to get updated information? Seems unfair to try to “call out” a small business but then to never let people know that these same small businesses did become and stay compliant.

    • CW
      • CW

        Darn, that’s a year old. Oh well!

        • John Fontain

          Carribean Breeze was on last year’s list. I wonder if the name change to A-Town Bar and Grill had anything to do with an effort to shirk then-outstanding financial obligations such as the restaurant tax.

          The same person also owns Bronx Pizza in Clarendon.

          • nom de guerre

            I was thinking the same thing. We can only hope that he paid his account in full. I find it interesting that most of the businesses on the list are now closed.

    • nom de guerre
    • Shirlington Resident

      I would like to see the list too so I can avoid spending money at these places.

  • Andy

    Hmm, wonder if they could just not renew their liquor license when it comes up. That would have them hopping!

    • http://www.arlnow.com ARLnow.com

      The following code amendment, which the County Board passed last month, may allow the county to deny license renewals to businesses that are delinquent on their taxes: http://arlington.granicus.com/MetaViewer.php?meta_id=104670&view=&showpdf=1

    • JohnB2

      The trouble is the booze license is controlled by the state. The worst the county could do is withhold the county business license, which no one cases about anyway.

  • Joehoya

    I have little faith in the effectiveness of public shaming.

    • http://URL WeiQiang

      While the County publishes a list (which hasn’t alleviated the problem), O’Leary clearly focuses on closing them – or initiating action to close them. Looks like O’Leary agrees with you.

    • CottonMather

      We should erect a pillory at the new Clarendon Metro Plaza.

  • Show me the money!

    I actually applaud O’Leary for this. We, as patrons of these resturants, are paying the required taxes, but the restaurant owners are pocketing the money instead of passing it onto the county. The county is facing a budget shortfall; the restaurant owners should pay up!

    And while the county is at it, they should take a pass through my building’s parking garage and charge all the private citizen tax cheats for not paying the personal property tax. (I know, I know — I could report them but I choose not to mess with karma).

  • ACDC Hack

    Hmmm, this coming from the guy who promised that the wouldn’t run again for re-election two election cycles ago.

    Where is the penalty for that ??

    • Hmmm

      um, looks like he changed his mind. Oh, the horror, he surely should be punished.

      • drax

        Yes, if the voters cared about that promise, they could have simply refused to re-elect him.

      • ACDC Hack

        “um, looks like he changed his mind. Oh, the horror, he surely should be punished.”

        Is that your euphemism for “lying” ??

        And yes, I would prefer that person who is occupying this position not be a liar.

        I would think that the personal integrity of a person in this postilion would be important but I guess not for you.

        • Captain_Obvious

          politicians never lie, by the way.

        • http://URL drax

          When you change your mind, does that mean you lied?

          • ACDC Hack

            “When you change your mind, does that mean you lied?”

            If I did so in an effort to get re-elected with no intent of following through, YES !!

          • drax

            Sorry, no, you can’t just decide that only certain cases of changing your mind is lying but others aren’t. That’s self-serving crap.

          • ACDC Hack

            So you are down with lying….do you need a person to manage whatever money you might have ??

            I can promise you wonderful returns !!

            Just let me know what your account numbers are and we are good to go .

  • Kay

    Arlington’s restaurateurs are the real 47% of mooches, apparently. Extradition to Italy for county tax evasion, however? A bit extreme. Only in Arlington.
    ps: The car tax is ridiculous – a penalty on an already purchased item which has already been taxed enough once.

    • Show me the money!

      I chuckled at the extradition comments as well. But the guy owed $140k+ and is paying it back at $500/month. That’s like a 20 year repayment plan — for money he stole (and presumably spent).

      I totally agree that the car tax is BS, but I assume the rationale is that there are a lot of renters in Arlington, so the county assesses this BS property tax to make up for some of that lost property revenue. That said, we taxpayers aren’t allowed to line item veto the law. I pay it because it is the law and there are a lot of people in the county who don’t.

      • Buckingham Bandit

        Renters pay property tax every month when they write a check to their landlord; the owner of your apartment is charged a property tax, obviously, and he passes it along to you in the form of rent.

    • Charlie Heston

      And the dim-bulb Red Staters downstate swallowed hook, line and sinker Jim Gilmore’s claim that he would eliminate the car tax.

      • Arlingtonian

        Gilmore and his fellow Republicans tried to eliminate the car tax, but the Democrats (including Arlington’s) would not let him go that far. That is why Arlington residents still have to pay personal property taxes unless if they don’t like to drive old cars.

    • drax

      The 47 % don’t pay income tax because they don’t owe any income tax. Slightly different.

  • KalashniKEV

    1) Perhaps the restauranteurs are simply “Opting Out” of the tax the same way Arlington has “Opted Out” of enforcing other laws?

    2) Why is there a county food and beverage tax? What does that pay for? Is the county providing something that has to do with meals?

    • speonjosh

      My guess is that if the state let them, many local jurisdictions in Virginia would simply charge a sales tax. Local sales taxes typically go for public transportation and similar infrastructure which obviously benefits local businesses as much as it benefits local residents.
      The food and beverage tax may be all that VA allows.

    • drax

      1. What laws have Arlington opted out of enforcing?
      2. Taxes have to come from somewhere.

      • KalashniKEV

        1. Secure Communities.
        2. Not on my restaurant tab, thanks.

        • drax

          1. Arlington has not opted out of Secure Communities.
          2. Life’s tough.

  • John Fontain

    Kudos to the Treasurer’s office for their efforts. Non-payment of the restaurant tax is stealing, plain and simple. These businesses should be shut down or subject to asset seizure.

    In the meantime, the list of non-paying restaurants should continue to be well-publicized.

    • KalashniKEV

      Taxation is stealing.

      • http://URL Hank

        Settle down there, Ruby Ridge.

        • John Fontain

          LOL.

      • Traffic Jammin

        Inflammatory hyperbole aside, what do you, personally, feel is the greater sin: “stealing” by the government in the form of taxes approved by elected representatives, or “stealing” by a private restaurant fraudulently adding a “tax” surcharge to their advertised prices and then retaining the customer’s money as profit?

        If you think these restaurants are patriotic tax protesters, why aren’t they omitting the “tax” in their transactions with with private citizens?

        • KalashniKEV

          Good question, and one that deserves an honest answer. I believe that every dollar withheld from this County government- one which does NOT act in the interests of the health, safety, and prosperity of the citizens of Arlington- is a Patriotic and Moral act.

          I’d rather see that dollar stay in the restauranteurs pocket, get spent, and have it remain in the private sector than see it transferred to the public sector and get spent on nonsense by this tax-drunk regime.

          • http://URL drax

            Talk about self-centered. You shouldn’t have to pay your taxes because you don’t like the decisions made in a democratic process. You should take your ball and go home because you don’t like losing.

          • http://URL dk (not DK)

            Are you kidding? I guess patriotism really is the last refuge of a scoundrel. The restaurant owner is not playing moral patriot with HIS money, he’s doing it with MINE. If he’s charging me for “taxes” but not paying that tax, then he is stealing from me, plain and simple. That dollar should be in MY pocket, not his. There is nothing moral or patriotic about this.

          • Traffic Jammin

            You skipped over the part where the restaurateur committed fraud against me, the consumer, by increasing his advertised cost under the guise of a tax surcharge when he intended to retain that money for himself before the dollar reached his pocket and therefore could “stay in the restaurateurs pocket.” So you didn’t answer my question.

          • KalashniKEV

            How do you know what his intentions were?

            Maybe he’s a business owner in Courthouse who had the intention of paying all along and changed his mind when he saw what Evil was in store for his business and it’s patrons?

            I’m strongly considering opting out of the sticker this year. I hope others join me as well. Maybe we’ll even make this clown’s facebook page…

          • Traffic Jammin

            “changed his mind when he saw what Evil was in store for his business.” So if I put some goods in my shopping basket at the store, walk around for awhile intending to pay for them, then decide I am morally opposed to the store’s “evil” labor policies, I’m justified to walk out and shoplift the goods?

          • drax

            If you think taxes are evil, Kev, you should not “strongly consider” opting out of a few. You should stop paying all taxes immediately, or else you are participating in evil. Talk on an internet forum is cheap. You’re no coward – live up to your principles. Stop paying all county taxes (or maybe all taxes) NOW. Otherwise you’re just another internet tough guy.

      • The Bible

        Mark 12:17

        King James Version (KJV)

        And Jesus answering said unto them, Render to Caesar the things that are Caesar’s, and to God the things that are God’s. And they marvelled at him.

        • Captain_Obvious

          heard that’s a good book…how does it end ?

  • Sgt. Hulka

    Lighten up, Francis

  • Anon

    Why is Arlington so bad in collecting these taxes? Can they not place liens on the restaurants that actually get paid? Is this a problem with other non-restaurant businesses? And if not, why? Where is the flaw in the process?

  • JimPB

    White collar crime pays! And there’s little justice for white collar crime, e.g., Roberto Donna is paying $500/mo. on a pocketed (stolen) $140,000 — the $500/mo. payments are barely covering the interest on the stolen money. No jail time. And what is ARLCo going to do if Donna ceases to pay $500/mo.? Deport him to Italy. No jail time. If Donna had stolen $140,000 from a bank, he’s be doing real time behind bars.

    • Hey Pebs

      Be sure to wish our favorite Captain happy birthday today.
      He is 80 going on sixteen !!!

  • http://URL Kay

    9 percent is a lot of tax for a meal. Renters do pay taxes via their checks to landlords (who own the property) and it is no excuse that Arlington has a lot of renters so this tax is to be expected. This entire area is transient; DC has a lot of renters, and they lose out on property taxes for embassies, many government buildings and non-profit hospitals. Restaurants should pay the taxes they collect from diners and be held accountable. The question is, why such a high tax and at what lengths is the county willing to go to collect?

    • Hmmm

      Disagree. The rate is no higher than other counties in Virginia, even those out in the middle of nowhere, so I wouldn’t complain too much about the rate, given the higher cost of living here. This has nothing to do with renters and everything to do with deadbeat restauranteurs. JimPB is right, white collar crime pays. It’s stealing, plain and simple.

      • http://URL chris

        You are wrong. Fairfax county doen not have a meals tax. Also Arlington County lobbied the state legislature to not have the meals tax as part of a referendum as stated as the law was written. Countys needed to put the meals tax to a popular vote, cities did not. It used to be that any time a meals tax was put on a ballot during a regular election it never passed. Counties would hold special election to get it to pass.

      • NoVapologist

        While the additional 4% tax on meals may not be out of line with other Virginia localities, it is way higher than most U.S. cities. No additional meals tax in NY or San Francisco. ~1% or less in Boston, Chicago, and Seattle.

      • nom de guerre

        I would guess that a lot of people don’t realize that the meals tax is also imposed on items purchased from a grocery store-sandwiches, prepared soup, roasted chicken, salad bar to name a few.

      • Anon

        I disagree. This isn’t about deadbeat restaurants. There will always be deadbeats. It is about the county’s inability to collect taxes — it’s about their failure to have a deadbeat-proof process. We should be blaming the county, not the restaurants.

        • Ballston

          Similar to how we should blame the homeowner for not building a thief proof house instead of the burglar for taking advantage of the situation?

          Seriously, you’re blaming the county for not fixing a problem in the comments section of an article about the county trying to fix the problem.

          • http://youhavemorethanyouthink.org Shawanda

            Where’s the “like” button when you need it?

        • Hmmm

          I think there is blame to go around. The county should enforce the laws in a “deadbeat-proof process” AND the restaurants should pay their taxes at the appropriate time. The restaurants are not without responsibility here.

  • Peter

    What has the Chamber of Commerce, BIDs, and County Government done to help restaurants succeed?

    • NoVapologist

      Written parking tickets on those pesky food trucks.

    • Reg

      what have the Romans ever done for us?

    • drax

      Tried to kill food trucks, of course.

  • 7548

    The Headline should read:

    “EXCLUSIVE: Treasurers office seeking authority to Shut Down Deadbeat Restaurants”

    I have never in my life seen a more self-promoting public official. Its important that a civil servant represent the office, not the other way around. May be we should call him Boss Hogg or Big Daddy to satisfy his ego. If you really want to have a chuckle, check out his professionally comissioned Wikipedia entry.

    • KalashniKEV

      Wow… I wish you didn’t direct my attention to that.

      How about we just call him “the face of Evil?”

      • 7548

        I’m sorry but if you have ever lived out side the beltway this is just the type of bureaucrat that really pumps up all of those tea party people. Civil service (elected or appointed) is an opportunity to serve not to leverage for your own gain be it financially or professionally. I know that is not always the case on the other side of the river but he really comes across as both entitled to the office and putting him self above and beyond his position. But I do hope that he (Francis O’Leary) personally gets the power to go after the scofflaws who are having trouble making payroll and paying vendors as opposed to “just pocketing” the money.

        • ID

          Richmond is not going to give it to him. Guaranteed.

    • Anon

      I think the headline should be “Treasurer fails to collect taxes”

  • http://URL Peter

    BTW, I an 66 years old, employed full time, do not collect Social Security, receive almost nothing from Medicare Part A and Part B (for which I pay $1200 a year in premiums) because I am and have been covered by a comprehensive medical health insurance program through my employer. Yet I am countered among the 47%..

    Who is counting how much in corporate welfare giveaways are awarded to corporations located in Arlington County?

  • http://URL Justin

    Whatever way you look at it, this is theft to both the county and the person paying the bill. If I am paying restaurant tax I assume it is a tax and not extra money for the restaurant. I had no idea about this, I agree Mr. O’Leary should get this power to protect both the county and the individual paying the bill.

    • K

      +10
      I pay my taxes when settling my check; I can’t pay it later. I’ve never authorized a loan against a meals tax payment, nor has the county authorized a loan against those funds.If a business diverts and misuses these payments for another purpose, they should face serious consequences. Doesn’t seem like much gray area on this one.

  • http://URL Ed

    Re. “extradite him to Italy” — to be extradited, you have to be wanted in that place for a crime, right? Is Donna charged in Italy for something? Or is Leary trying to say “deport”? I’m assuming a county treasurer cannot just deport people; it would make for some entertaining posts, though, I guess.

  • http://URL chris

    Does this mean there will be 30 restaurants in Arlington all called O’Leary’s?

    • 7548

      If he had his way, yes.

    • malaka

      yay! more faux Irish pubs – just what Arlington needs!

      • Ed

        Have some respect, or else he will extradite you.

  • JT

    Arlington Catering and Restaurant Vero had the same owners – and they owned Tap & Vine, all on Lee Highway. Add it all up, and they would be approaching 1st place amongst the worst offenders – what’s the status on their repayment of taxes?

  • Joe

    Arlington continues to be a very unfriendly jurisdiction to businesses, especially small businesses.

    • Arlingtonian

      Arlington is exceedingly friendly to businesses, especiallly snall businesses. The County Board recently voted to permit businesses to clutter sidewalks and intersections with “temporary” signs and to encroach on distant views by permitting rooftop signs on tall buildings.

      As many residents know, the County government’s unofficial motto is “The public be damned. The businesses be helped.”

    • Ballston

      I agree! Stupid county preventing business from stealing from its customers! How dare they?!

  • Alx

    In Arlington all businesses are to provide 4 % percent of the gross income; whether the business makes a profit or not, before state, federal, and all other taxes. This 4% is not a tax, it is a business license fee. In addition, a business in Rosslyn and Crystal City also have the requirement to pay the local development percentage of gross income. There is no business risk by Arlington, so, it seeks the power to shut the business down if it does not get its royalty fee.

    • Bluemont 09

      The highest BPOL rate I could find in Arlington is $0.58/$100=0.58%. How did you get 4%?

  • bobbytiger

    Go get um Frank.
    They don’t pay, they don’t stay.

  • Andrew

    Hammer them with the health code, tax collection, and liquor laws. The worst are surely leaving Arlington, the state,and their landlords with nothing while they use the laws for toilet paper.

  • JimT

    Not only should the county post the names of restaurant cheats in the media, they should post signs on public property identifying a given tax cheat.

    And then patrons should simply refuse to pay the 4% after they eat the meal. (Mail the check to the county if you like.)

  • http://what-towear.blogspot.co.uk/ Sam

    yeah got get ‘em

  • http://youhavemorethanyouthink.org Shawanda

    If a restaurant collects a sales tax from their customers, they need to pay that sales tax to the state and the county. That money is not for you to fund your operations or invest in new capital. You do that with profits, debt, or cash raised through equity offerings. If the owner can’t figure out how to run a business without stealing from their patrons and the county in which they operate, I’m all for shutting them down.

  • Carol_R

    In my opinion Restaurant taxes are horrible. I make a point to eat at Falls Church restaurants and other jurisdications that do not charge it. A 9% tax on prepared food to me is disgusting. Why bother eating out at all?

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