The front of XS Lounge in the Northeast Plaza in Brookhaven, Georgia, on Monday, April 23, 2018. (REANN HUBER/REANN.HUBER@AJC.COM)
Photo: Reann Huber
Photo: Reann Huber

Brookhaven nightclubs may lose liquor licenses over tax dispute

Three Brookhaven nightclubs that have accused the city of trying to shut them down now face the loss of their liquor licenses.

Brookhaven leaders say XS Restaurant and Lounge, Medusa Restaurant and Lounge and Josephine Lounge have until April 26 to pay tens of thousands of dollars in unpaid taxes or lose their ability to sell alcohol. Brookhaven Chief Financial Officer Steven Chapman said that the nightclubs never challenged the amount the city says they owe: $48,334.92 for Josephine, $32,240.29 at Medusa, and $18,443.88 for XS.

But the money was never paid, and now the city in northern DeKalb County says liquor licenses will be suspended until the clubs settle up.

“The suspension will continue indefinitely until such time as all fees are paid to the city,” the letters state.

All three nightclubs are located in Northeast Plaza off Buford Highway and have accused the city in the past of implementing laws they know would make it nearly impossible for nightspots to keep their doors open.

In late 2017, Brookhaven passed a law that would have raised the fees for alcohol permits from $6,000 to $100,000 for nightspots and prohibited them from serving liquor on Sundays, a usually busy night. The three nightclubs that cater to a primarily black clientele sued in federal court, accusing the city of racial discrimination and infringing on their civil rights.

A judge issued an initial ruling in the clubs’ favor in July, saying that the city was not treating all nightspots the same and therefore the law was likely unconstitutional. Brookhaven eventually rolled back those rules, and  both parties recently agreed to dismiss that lawsuit.

Related | Pink Pony strip club, other businesses owe liquor taxes

Related | With new liquor laws in Brookhaven, nightclubs drop lawsuit

Around that same time, this new controversy had taken hold. The city says that it ordered an audit of every club and restaurant serving alcohol to determine if the proper amount of taxes on liquor sales had been paid over a roughly two-year period.

Out of 77 businesses, the city initially said in December there were issues with 13. After some discussions, a few of the restaurants proved they had paid the correct amount in taxes and others paid up after agreeing on what is owed.

The owners of Hudson Grille, for example, requested a hearing to challenge the city’s conclusion that they have about $10,000 in back taxes. A hearing officer has yet to rule on that case.

Brookhaven also said the Pink Pony strip club owed $80,237.72 and tried to put the venue on a payment plan. Because the club’s owners have filed for Chapter 11 bankruptcy, the city must go through the courts to see if they can recover unpaid taxes.

Related | Pink Pony strip club files for bankruptcy

XS, Medusa and Josephine did not dispute the amount Brookhaven says they owe, and Chapman said they can no longer file an appeal about the tax bills. But the clubs can appeal the city’s decision to suspend their liquor licenses.

Attorney Cary Wiggins, who represented the clubs in the previous lawsuit against the city, said Tuesday that he cannot comment on whether the clubs will appeal the suspension, pay up by the April 26 deadline or file a lawsuit if the city revokes their liquor licenses.

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