Manassas delays meals tax collection, city budget to be affected

The Manassas City Council unanimously voted to give local restaurants a break.

In a bipartisan decision at a special meeting Monday night, leaders opted to extend the deadline for city eateries to pay their monthly meals taxes. Originally due this month on March 20, restaurants now have until June 20 to pay their meals taxes accumulated for the months of March, April, and May.

Late fees won’t be applied to those who are paying late. The grace period does not apply for meals taxes owed to the city from January and February.

City Economic Development Director Patrick Small said Manassas has 1,500 businesses and about 125 of those are restaurants. About a dozen of them in Downtown. Most of the highest tax-paying restaurants are not in the city’s core, Small added. Most of them are chain eateries such as Chick-Fil-A, Taco Bell, Starbucks, and McDonald’s.

The city charges diners a 4% meals tax collected when they pay their checks. The tax brought in just over $4.1 million in revenue for the city in 2018 and was forecast to bring in $4.3 million this year.

Manassas City Treasurer Patricia Richie-Folks said 37 restaurants that have paid taxes so far this month, netting about $87,000.

The decision to delay the tax collection came on the same day Virginia Gov. Ralph Northam ordered all restaurants to close their dining rooms starting today, in the wake of the spread of the coronavirus. They may still order takeout or delivery options, per the governor’s order.

City councilmembers held the emergency meeting inside the council chamber in city hall. As they did one week earlier, leaders sat in the seats usually reserved for the audience, socially distancing themselves, adhering to new federal mandates that require people to keep at least six feet apart in public. Two staff members phoned into the meeting, attending it virtually.

Councilman Ian Lovejoy noted the much talked about Federal Government response to the coronavirus being debated in Washington that night.

If approved by Congress and signed by the president, it could be a multi-trillion deal that would send cash to citizens in an effort spur the U.S. economy that ground to a halt when President Donald Trump closed the country’s borders and ordered citizens to stay at home to prevent the spread of the virus.

With no federal stimulus package approved, and with uncertainty as to how the state will use its $1.8 billion rainy-day funds in the recovery of the coronavirus, the meals tax is a tax that leaders can control, said Lovejoy.

Councilwoman Pamela Sebesky said the amount of tax collected will surely be will be lower than normal as restaurants have been forced to close their dining rooms.  

“Yes there will be an impact,” replied Manassas City Manager Patrick Pate said.

How much of an impact? He’s not sure because the highest-paying taxpayers are mostly fast food places, Pate said.

And those fast-food restaurants, most of them still serving customers at drive-through windows, will still pay on time, added Councilman Mark Wolfe.

“The risk of losing $350,000 a month, times three, is lower,” said Wolfe.

It’s more likely the city will lose about $100,000 over the next three months in delayed meals tax collections, he added.