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Sunday, December 22, 2024 at 9:02 PM

County Tax Non-filings Lead To Conviction

Justin Peery was found guilty of two counts of felony embezzlement in Rockbridge County Circuit Court on Nov. 22 for failing to remit meals and lodging tax revenue owed to the county between April of 2022 and May of 2023.

Meals and lodging taxes are what are known as trust taxes. The tax is paid by the person renting the room or paying for the meal, but instead of being paid directly to Rockbridge County, it is collected by the owner of the hotel, short-term rental or restaurant and then turned over to the county every month. The lodging tax is 10 percent of the gross receipts and the meals tax is 6 percent.

, page A14 Each month, the business owner is supposed to fill out a report showing how much was collected for meals and lodging, and how much is owed to the county in taxes. Those forms are filed with the commissioner of revenue’s office and the taxes are collected by the treasurer’s office. Even if no money is collected in a given month, a form still needs to be filed indicating that no taxes are due.

For the period of time listed in the indictment, Peery didn’t file any forms with the Rockbridge County commissioner of revenue for meals and lodging taxes collected by Good Place Farm Bed and Breakfast, which he owns.

David Whitesell, who was the county’s commissioner of revenue at the time, testified that he had followed standard protocol for late or unfiled forms, which was to send letters to the business owner reminding them to submit the forms. Peery was sent several letters for missing filings, though Whitesell couldn’t recall the exact number that were sent.

The next step, Whitesell testified, was to send a summons to Peery regarding the missing tax filings. Three summonses were issued, the first in September 2022, the second in November 2022 and the third in January 2023.

Whitesell testified that after one of the summonses, he had spoken to Peery on the phone regarding his missing filings. Peery had explained that he was on house arrest at the time (for charges that were later dismissed) and couldn’t come in to file the forms and pay the taxes. Whitesell said he told Peery that he didn’t have to come in himself, that he could mail the forms or have someone else bring them in. He said that Peery said at one point that his father would be bringing in the filings, but Whitesell couldn’t recall that his father ever brought them in.

The last step in the process is to create a statutory assessment for the missing months. For a statutory assessment, Whitesell said that he would look at the most recent filings for the same period of time and see what was collected during that time frame. He said that he would take that amount and double it and submit that to the business owner, over-estimating the amount owed in hopes of spurring the owner to come in with records to argue that they owe less than that amount. That method was successful about 10 percent of the time by his estimate.

On June 13, 2023, Peery brought in the assessments for the period from April 2022 through May of 2023 for the meals and lodging taxes. He filed that he owed $9,766.44 in lodging taxes and $2,363.14 in meals taxes, which he paid to the treasurer’s office that day.

Amended assessments for the lodging taxes, filed Feb. 22, 2024, showed that Peery had overestimated his payments by almost a thousand dollars and he actually owed $8,856 for that time period, meaning he had overpaid in June. Part of the reason for the overestimation was that his forms in the latter half of the time frame included taxes for stays at the bed and breakfast booked through short-term rental companies AirBnB and VRBO, which began remitting lodging taxes on bookings directly to the county in October of 2022.

Former Rockbridge County Treasurer Becky Trovato testified that her office had received payments for delinquent taxes from Peery in two different payments, the first, in April of 2022 for $10,487.30 for the meals and lodging taxes for 2021 (including late fees), and a second payment for $18,124.56 in June of 2023 for the time period listed in the indictment. She also testified that, in a conversation about his responsibility to collect the taxes and remit them to the county, Peery had commented to her that he might have used some of the funds for personal matters relating to a divorce he was going through at the time.

After the prosecution rested its case, Neill Wente, Peery’s attorney, made a motion to strike the case based on the prosecution’s failure to meet the burden of proof for embezzlement. The commonwealth, he argued, offered no evidence of “wrongful or fraudulent” use of the money on Peery’s part, and had only submitted evidence that Peery had been late in paying his taxes.

“There’s evidence of bad bookkeeping, but no evidence that Mr. Peery intended to defraud the county of money,” he argued.

Kari Munro, one of the attorneys prosecuting the case, argued that the money in question belonged to Rockbridge County, not Peery, and that his failure to file the necessary reports and turn the money over to the county for more than a year met the statutory requirements for embezzlement, as did the fact that he filed the reports and made the payments after he was made aware that criminal charges might be coming due to his failure to pay the taxes.

Judge Christopher Russell overruled Wente’s motion before convicting Peery of both counts of embezzlement. A sentencing hearing is scheduled for March 10.


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Lexington-News-Gazette

Dr. Ronald Laub DDS