By Carol Vaughn —
The Corner Bakery in Onancock can continue to pay the town’s meals tax as it has in the past while the Town Council considers whether to change the ordinance governing the tax, according to Mayor Fletcher Fosque.
Four council members spoke in support of the bakery’s contention that some items it sells, such as a whole cake or a dozen doughnuts, should not be subject to the tax.
The bakery’s practice has been to charge the tax on items such as a doughnut and a cup of coffee, which could be considered a meal, but not on bulk items.
Sales figures submitted to the town for the period during which the meals tax was suspended due to the pandemic, together with previous meals tax submissions, indicated the bakery was collecting the meals tax on around 1/3 of its sales, according to Town Manager Matt Spuck.
“No one likes taxes — no one does. However, to enjoy our parks and receive services like police protection, they are necessary,” Spuck said during the April 26 council meeting.
After becoming town manager, Spuck noticed many tax accounts were in arrears, “so we wanted to make a concerted effort to collect unpaid taxes of all kinds before they became more of a problem. That’s how this issue began.”
Early this year, the town began contacting businesses about delinquent taxes.
On Jan. 22, the town sent a letter to the Corner Bakery reminding the owners they had not paid the meals tax since March 2020.
The tax was suspended from April through June 2020.
After getting no response to the letter, Spuck called the bakery Feb. 19, and the town received payment for all unpaid taxes shortly thereafter.
Included with the payment were total sales figures for April through June, which were much higher than the average sales on which the business had paid meals tax in previous periods.
“The difference in monthly sales prompted me to look at the town ordinance for meals,” Spuck said before reading aloud sections of the ordinance.
The ordinance exempts from the meals tax food sold in bulk, like a whole cake.
“It doesn’t seem reasonable to me that cakes and packaged products made up nearly 70% of the bakery’s sales. I felt it warranted further clarification,” Spuck said.
Spuck had the town attorney review a letter he wrote to the bakery before he delivered it by hand to the bakery April 6.
Corner Bakery owner Pete Smith replied by email April 8, saying he would forward both his letter and the town’s to his attorney.
On April 13, Spuck wrote Smith, offering to meet in person to discuss the matter and saying “the town supports the requirement that your bakery collect the pass-through meals tax.” He noted other Shore towns require bakeries to collect the tax on non-factory-packaged products.
Spuck said his hope was the two attorneys “would craft a revision to the ordinance to remove any ambiguity. This revision would be presented to Town Council and we would all move forward from there.”
The bakery on April 21 in a Facebook post requested support from their followers about the matter, resulting in many people contacting council members.
Spuck asked the Town Council to review the ordinance and “give thought to revising it to remove the ambiguity.”
In the meantime, he recommended the town ask the Corner Bakery to collect and remit meals taxes “as they have in the past.”
“I am not, was not, and would not look for a fight or even a negative exchange,” Spuck said, adding, “My hope is simple: through respectful communication with Onancock businesses and with Town Council, we remove any ambiguity from the ordinance to allow administration to equitably enforce the ordinance in place.”
Council member Bob Bloxom said he endorsed Spuck’s approach, but said the ordinance needs to be reviewed.
“When this first dusted up, what I did was read the ordinance and noticed several ambiguities,” he said, adding, “…I also believe, based on the Smiths’ internal procedures, that they were doing their best to interpret it as they thought it was to be interpreted.”
“I hope to avoid something like this in the future,” said council member Joy Marino.
Council member Maphis Oswald said the town has “accepted along the way what the Corner Bakery has been paying as their correct amount. To suddenly turn around and say this is incorrect and needs definition, to me is not really what we need to do.”
Council member Ray Burger said he thinks the bakery’s interpretation of the ordinance is correct.
Fosque said Cape Charles’ meals tax ordinance does not include the bulk sales exemption.
“We don’t need to take any action. …The bakery is going to continue doing what they are doing,” he said, adding it would be a council decision whether to change the ordinance.