Va. Beach wants unlicensed businesses to pay up

VIRGINIA BEACH

Who doesn't pay their business license taxes in Virginia Beach?

You might be surprised.

In a sweep this past winter of the Town Center and Pembroke areas, investigators from the Commissioner of Revenue's office found attorneys, a maritime consultant, financial services and mortgages companies operating without the required business licenses or the proper registration paperwork. Some had been doing so for seven years.

Investigators discovered 80 companies that were unregistered or needed a license, Virginia Beach Commissioner of Revenue Phil Kellam said.

Thirty of those businesses applied for licenses soon after the sweep, and the city was able to recover $175,000 in license and property tax revenue, Kellam said.

Nineteen of the companies simply needed a registration. City officials have sent notices to the remaining businesses and are investigating their status, Kellam said.

"Whether they generate $150 or $1.5 million, I have a duty to ensure a level playing field," Kellam said.

Some are ignorant about the law; others are trying to circumvent it, he said.

Mike Evans, owner of Prime Mortgage Resources, said he thought he was up to date on his taxes and in compliance through the state corporation commission. Then, on Feb. 4, an investigator from Kellam's office stopped by.

"It's a bit of a shock," said Evans, whose company opened in 2005. "When you're starting a company, there's a lot to go through. I didn't realize that registering with the city was one of them."

Eagle Maritime Consultants Inc. in the Pembroke One tower was inspected the same day.

Laura Heartwell, an administrative assistant with Eagle Maritime, said the employee who initially opened the Houston-based company's Virginia Beach office in 2003 had not applied for the license.

"They'd let it fall through the cracks," she said.

Eagle Maritime now has a Virginia Beach business license, she said.

Kellam is trying to do more in-depth searches of growing business areas, such as Town Center, with investigators going through the office towers and knocking on doors asking for licenses.

It's difficult for the office's four investigators to keep track of all the new business openings, and that was especially true in the boom years.

At that time, business tax revenue was growing and tracking the companies without licenses wasn't a priority for the city, Kellam said. That revenue is now shrinking. At the end of April, the city had collected about $1.1 million less in business license taxes than it had at the same time last year.

The business license tax rate is based on what services a company provides and ranges from $1.20 to $5.80 of every $1,000 of gross receipts or purchases.

In 2008, the city collected $42 million in license taxes and $24 million in business personal property taxes, Kellam said.

Kellam expects more companies will skip their license taxes this year because the economy is forcing them to weigh which bills to pay.

Making sure businesses are in compliance is even more important, he said.

"It's kind of like cops on the street," Kellam said.

Deirdre Fernandes, (757) 222-5121, deirdre.fernandes@pilotonline.com