Background
Justin Douglas Peery owned and operated Good Place Farms, LLC, a short-term lodging and catering business in Rockbridge County, Virginia. Under Virginia law, businesses offering prepared food and beverages or short-term lodging must file monthly tax reports with the Commissioner of Revenue and remit taxes to the Treasurer. The collected taxes are held in statutory trust for the county, not as the business owner’s property.
From April 2022 to May 2023, Peery failed to timely file and remit meals and lodging taxes. The Commissioner sent multiple delinquency notices and summonses, and even issued a statutory assessment and referred the matter to the Commonwealth’s Attorney’s Office. Peery eventually filed late reports in March and June 2023, and paid $17,125 in June 2023. When he amended his lodging reports in February 2024, claiming he had been “double paying” remittances that Airbnb and VRBO had already remitted, the Treasurer issued him a refund. A grand jury indicted Peery on two counts of embezzlement under Virginia Code § 18.2-111.
Peery argued on appeal that there was insufficient evidence of conversion and fraudulent intent, claiming his conduct amounted only to bookkeeping mistakes and bad business practices. He also challenged the trial court’s denial of his motion for a bill of particulars and its quashing of three subpoenas directed to county revenue and treasury offices.
The Court’s Holding
The Court of Appeals affirmed the conviction, holding that the Commonwealth presented sufficient evidence of both conversion and fraudulent intent. On the conversion element, the court found that Peery’s own tax reports and statements established that Good Place Farms collected meals and lodging taxes from customers, that Peery withheld over $1,000 in unremitted trust taxes during each indictment period, and that as the business owner, Peery had control of those funds. The fact that Airbnb and VRBO also remitted taxes on his behalf did not eliminate his liability for the amounts he failed to remit.
On fraudulent intent, the court held that circumstantial evidence sufficed. The evidence showed Peery knew the taxes were not his property—the Treasurer explicitly told him they were held in trust—yet he failed to make timely payments despite multiple delinquency notices, summonses, and offers of alternatives (mailing reports or having a representative file on his behalf). The Treasurer testified that Peery indicated he had not set aside funds for the county and had possibly used them for personal financial issues. Peery only remitted the taxes after a sheriff’s investigator informed him of potential criminal liability. The court rejected Peery’s explanation of mere bad bookkeeping as unreasonable, holding that his knowing failure to perform an absolute duty to remit trust taxes demonstrated fraudulent intent.
The court also affirmed the trial court’s denial of the bill of particulars, finding the indictments sufficiently identified the offense, the statute violated, and the date ranges involved. Additionally, the court held that the Commissioner of Revenue and Treasurer were agents of the Commonwealth in Peery’s prosecution and thus not subject to subpoenas duces tecum under Virginia Rule 3A:12(i); discovery of their materials must proceed instead under Rule 3A:11.
Key Takeaways
- Meals and lodging tax collections are statutory trust funds held by a business for the county, not the business owner’s personal property, making unauthorized withholding subject to embezzlement charges.
- Embezzlement does not require direct proof of conversion (bank records, financial ledgers, or documentation of how funds were spent); circumstantial evidence of control and knowing failure to remit suffices.
- Fraudulent intent can be inferred from the defendant’s knowledge of the trust obligation, repeated failure to perform despite notice and offered alternatives, and statements suggesting the funds were diverted to personal use.
- Later repayment of embezzled funds does not absolve criminal liability or erase the defendant’s guilt.
Why It Matters
This decision clarifies that business owners face serious criminal jeopardy for failing to remit trust taxes, not merely civil tax penalties. The case establishes a relatively low criminal threshold—unremitted taxes exceeding $1,000 over several months—and shows that prosecutors need not prove sophisticated fraud schemes or trace where the money went. Knowledge of the legal obligation, combined with deliberate or reckless non-performance, supports a fraud inference even when the owner claims financial hardship or bookkeeping incompetence.
Procedurally, the ruling reinforces that government agencies participating in a criminal investigation become Commonwealth agents and cannot be subjected to defense subpoenas; instead, defendants must pursue discovery through formal motions. This can significantly limit a defendant’s ability to obtain agency communications, policies, or internal notes that might support an innocent explanation or reveal prosecutorial inconsistency.