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Attorneys anticipate hearing

Restaurants, Front Royal file motions for summary judgment in meals tax litigation

By Ben Orcutt -- borcutt@nvdaily.com

FRONT ROYAL -- A hearing in Warren County Circuit Court regarding motions filed by the town and plaintiffs in the U.S. 340-522 corridor meals tax lawsuit could be on the horizon.

"We're not going to comment on the substance of the case," plaintiffs' attorney William L.S. "Sandy" Rowe, of the Richmond law firm of Hunton & Williams, Rowe, said on Monday. "We hope that the court will hear this matter in the next couple of months."

The town's attorney, Carter Glass IV of the Richmond law firm of Troutman Sanders, spoke in a similar vein in a Monday e-mail.

"Within the last 10 days, the restaurants and the Town each filed with the Court a motion for summary judgment," Glass says. "The parties have informally agreed upon a briefing schedule over the next 60 days, and we are now seeking a hearing date during the month of November. We hope to have that date nailed down this week."

Rowe filed a lawsuit in January in Circuit Court on behalf of Cracker Barrel, Applebee's and T.G.I. Friday's challenging Front Royal's collection of the meals tax from restaurants in the corridor, which is located outside town limits.

Rowe says in the court filing that the town's interpretation of its 1998 corridor agreement with Warren County is in error, and that the town does not have the authority to levy a meals tax as part of fees it collects from businesses north of Interstate 66 in exchange for water and sewer service.

Currently, the town -- in the form of user fees -- and the county each collect a 4 percent meals tax from restaurants in the corridor.

In the town's response to the lawsuit, Glass and co-counsel Stephen C. Piepgrass assert that the 1998 corridor agreement between the town and the county allows Front Royal to collect all fees in lieu of taxes, including the 4 percent meals tax, as if the business were located within town limits.

Rowe filed a motion for summary judgment on behalf of plaintiffs in the case on Aug. 24. In the filing, Rowe says the facts of the case are not in dispute.

"As will be more fully set forth in briefs to be filed in an agreed upon briefing schedule and in oral argument, Plaintiffs are required to include in the calculation of the monthly fee for water and sewer service only taxes they would pay if located in the Town of Front Royal," Rowe states.

However, Rowe adds that, "The Town's meals tax is not such a tax because it is paid by, and collected from, customers. It is not a tax imposed on Plaintiff restaurants."

In the town's motion for partial summary judgment, Piepgrass says "the Town has correctly calculated monthly service charges for the Restaurants."

Piepgrass says that the plaintiffs' claim that the town has violated state law regarding "uniformity and reasonableness" because under the 1998 agreement, corridor restaurants pay much more for water and sewer service than businesses who do not sell food "is without merit."

Piepgrass says the state laws that the plaintiffs cite "authorize the Town to charge and collect any compensation from businesses outside its boundaries as 'may be contracted for between the town and such user.'"

In an amended complaint filed with the court in April, the plaintiffs assert that, "The Town's Meals Tax is not a tax that the restaurants would pay to the Town if they were located within Front Royal."

Lawyers for the plaintiffs say that if the restaurants were located within the town, the restaurants would collect the meals tax from its customers and in turn, remit it to the town.

"By the plain language of the Town's ordinance, the Town's Meals tax is a tax the restaurants' customers would pay," the plaintiffs say. "Accordingly, this payment is not required under the plain language of the Service Agreements."

The plaintiffs also assert that state law does not allow them "to pass this cost on to their customers as a separately stated tax."

The town agrees in its response to the amended complaint that if the restaurants in the corridor were located within town limits, that the restaurants would collect the meals tax from its customers and "remit or pay the taxes to the Town."

As to whether state law does not allow the restaurants to pass on the town's meals tax or user fees to their customers, the town says that assertion is a legal conclusion reached by the plaintiffs, to which the town does not have to respond.

Court documents also indicate that based on mutual agreement between the town and the plaintiffs, beginning with the June payments, the restaurants will pay to the court the fees that are in dispute while the case and appeals are pending.

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