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

By ARLnow.com

Monday - 12/3/2012, 11:05am  ET

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.