Omaha eateries that owe the city thousands in back restaurant taxes might soon have a new reason to fork over the money.

A proposal on the City Council agenda could put restaurants’ liquor licenses at risk if they don’t pay the 2.5% tax.

The ordinance would allow the city to weigh late payment of the restaurant tax in its recommendations to the state on liquor license renewals.

A provision of the city’s restaurant tax law currently prohibits the city from considering nonpayment of the restaurant tax as a factor in any licensing decisions.

Councilman Rich Pahls, who chairs the council’s Law Committee that recommended the change, said the city needs new tools to encourage payment of the tax.

Under current law, the city has few options to compel restaurants to pay, short of shutting down the businesses.

As of the end of June, 107 restaurants owed about $350,000 in unpaid restaurant taxes, according to the city’s Finance Department.

“This holds people accountable,” Pahls said. “If somebody runs a business and doesn’t pay it, it’s not fair to the ones following the law.”

Several restaurants owe tens of thousands of dollars, based on information compiled Friday by the Finance Department. Some restaurant companies have changed names in what the city believes is an attempt to avoid paying the tax.

The city doesn’t know without auditing individual restaurants whether they are collecting the tax and keeping the money, calculating it incorrectly or ignoring the law.

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City Finance officials pointed to the example of the recently closed Candlelight Lounge at 50th and Grover Streets.

That restaurant, before it closed, owed about $30,000 in restaurant taxes, the most on the list, based on estimates compiled by the department. The business’ phone number was no longer in service Friday.

The city turns to collection agencies as a last resort to collect the restaurant tax, because the firms often keep 30% or more of what they collect.

Council President Chris Jerram said tying nonpayment of restaurant taxes to liquor license renewal applications makes sense.

“If you’re skirting the law on this (the restaurant tax), it raises questions whether you’re following the law on other things,” he said.

Several restaurant owners contacted Friday said that they had no problem with the city exploring another way to encourage payment of restaurant taxes.

Matt Carper, who operates Blackstone-area restaurants Stirnella, Butterfish and Red Lion Lounge, said he makes sure his businesses follow the law.

The restaurants collect the restaurant tax on behalf of the city, he said, so they don’t consider it to be the restaurants’ money. It’s the city’s, he said.

He speculated that some restaurants might be keeping the money to pad the books, and others might not be collecting the tax in protest.

He said the council proposal would be effective in encouraging restaurants to pay up, because alcohol sales are vital to the bottom line.

“Your revenue stream off of alcohol is much greater than off of food,” he said.

David Utterback, who owns the Yoshitomo restaurant in Benson, said people shouldn’t jump to conclusions about restaurants that owe back taxes.

He pays his restaurant taxes monthly, but he said it’s easy in a business with tight margins for an accountant or an owner to make a mistake that grows large quickly.

He gave the example of his business incorrectly calculating the restaurant tax on deliveries made by delivery services. His business now owes the city about $2,000, he said.

Utterback said he doesn’t mind the city’s new plan so long as it’s used as a last resort, and that the city works with businesses on payment plans.

“If a restaurant closes, you’re not going to get the money,” he said.

The city says it’s working with restaurants and trying to find ways to make sure the tax is paid in a reasonable amount of time.

Kristi Todorovich, who owns Starsky’s Bar & Grill in south-central Omaha, said she’s still working with the city to pay off about a $29,000 restaurant tax bill.

“We’re talking to them, and they’re working with us,” she said.

However, the city says it has yet to receive payment from the restaurant.

The public hearing on the proposal is scheduled for Sept. 17.

World-Herald chief librarian Sheritha Jones and food critic Sarah Baker Hansen contributed to this report.

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