One of Omaha's favorite steak restaurants, The Drover, has a beef with City Hall related to the city's controversial restaurant tax.
The Drover managers' issue isn't with the 2.5 percent tax itself, which the restaurant, home of the whiskey steak, has diligently paid since the City of Omaha began imposing it in 2010.
The problem is that the restaurant mistakenly overpaid about $11,000 in restaurant taxes — and the city will only refund about $7,000 of that.
The City Council on Tuesday voted 7-0 to deny The Drover's request for a refund of the remaining $4,035 that the restaurant overpaid.
That's because a state law places a limit on the city's ability to voluntarily repay taxpayers who have overpaid, city attorneys told the council.
The city can only voluntarily refund tax overpayments for the 18 months prior to when the city received notice of the error.
The Drover had paid too much for about 2 1/2 years, from the time the restaurant tax took effect in October 2010, until the summer of 2013, when the city caught the mistake.
That's right, the city caught the mistake, in a routine audit.
The Drover had been miscalculating the restaurant tax. It was adding the regular 7 percent state and city sales tax to a bill, and then calculating the restaurant tax based on that amount.
But that's the reverse of how it's supposed to work. The restaurant tax is supposed to be calculated before the sales tax is added. Consequently, that meant The Drover underpaid the state, which now wants its money, plus penalties and interest.
“We collected the right amount; we just apportioned it wrong,” said Joni Piper, the restaurant's bookkeeper.
The city and The Drover agree it was a mistake made in good faith.
“We've always paid all our taxes and we always will,” Piper said. “We just happened to pay the city way too much.”
She said nobody at the restaurant is mad at the city. She thanked the city's auditor who found the error.
But Piper called it “an injustice for the city to keep the funds that were overpaid inadvertently through an honest mistake.”
Council members Aimee Melton and Franklin Thompson said they thought the law was unfair.
Deputy City Attorney Tom Mumgaard said the law is written in favor of general taxpayers, “not the taxpayer who made the error.”
If someone mistakenly overpaid taxes, and waits beyond 18 months to ask for a refund, the city would have to go to all other taxpayers for money for a refund, Mumgaard said. It could be a large amount, he said, noting that a telephone company had overpaid about $100,000.
The Drover has been refunded the $7,000 that the city agreed to pay. It would have to sue to try to obtain the rest, the council was told.
Piper plans to ask the council to reconsider its vote.
Meanwhile, Mumgaard offered this takeaway from the situation: “If you think the city owes you money, you better speak up within that 18 months.”