Felony Watch: Links to Stories About People Doing Bad Things

Some relatively recent news items about sales tax evil-doers

Gadsden AL businessman charged with sales tax evasion  myfoxal.com

Bronx County Restaurateur Faces Felony Tax Charges Failed to Remit over $500,000 in Sales Tax to State and City readme.readmedia.com


3 North Georgia Business Owners Indicted for Tax Theft newschannel9.com

Former Loris SC councilman, wife face sales tax charges thesunnews.com

Liquor store owner charged with $380k sales tax evasion NY midhudsonnews.com

Rye Man Accused Of Stealing $380K In Sales Tax NY northcountrygazette.org

Brooklyn Park business loses sales tax permit MN hometownsource.com

Ex-Anderson Mayor Rex Lynch arraigned on felony charges TN knoxnews.com

Miller’s Essenplatz’s owner convicted of not paying sales tax NewarkAdvocate.com

Former North Naples restaurant owner accused of stealing $67,000 in sales taxes naplesnews.com

Aurora IL gas station owner charged with sales tax fraud couriernews.suntimes.com

Bronx Businessman (Truck Rental) Failed To Pay $400K In Sales Tax northcountrygazette.org

Lake Elmo man faces 9 counts of tax evasion MN startribune.com

Pasco café owner accused of failing to pay sales tax (WA) tbo.com

Coraopolis car dealer faces charges (PA) timesonline.com

Guilty plea entered in theft of sales taxes (used car dealer) buffalonews.com

Norwalk CT Businessman Accused Of Stealing More Than $15,000 In State Sales Tax (liquor/convenience store) Courant.com

Ocala car dealer arrested on tax charges ocala.com

Tax Lien Forces Kushi (restaurant) To Shutter With Hopes To Reopen Wednesday DC
dc.eater.com

Local Auctioneer Serving 90-Day Jail Sentence (SD) yankton.net

Tri-Cities WA Home Builder Charged With Tax Fraud keprtv.com

Omaha guy mulls moving company but may owe a LOT of taxes to Nebraska due to playing games with vehicles - allegedly omaha.com

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different. Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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Felony Watch: Links

Putnam businessman arrested for failing to pay over $1 million in sales taxes
This may be the biggest I've seen yet - the tab is over a million on a couple of masonry supply yards. Don't all of these assessments make you wonder, when the vendor charges you sales tax, if the money is going to the state, or going into the vendor's pocket? midhudsonnews.com

St. George restaurant owner faces sales tax evasion charges
It's a pizza place and the tab is $90,000 (pure amateur compared to the item above). standard.net

Ex-Anderson Mayor Rex Lynch arraigned on felony charges
This time they get an ex-mayor. The article talks mostly politics, but the gist is that he allegedly evaded sales tax on some vehicle sales. knoxnews.com

Albany bar owner, Rankins, gets six months in jail for not paying sales tax
Yeah, some orange jumpsuit time! Nice to see. The tab is $132,000. What a surprise, a bar owner. troyrecord.com

Brooklyn Park business loses sales tax permit
The tab is $92,000. And this is different - a landscaping business. hometownsource.com

Missouri moves to close Comfort Inn Kansas City Airport in sales tax dispute
Supposedly, they didn't have a sales tax license before they opened. You'd think that would be one thing on the "franchise opening a business checklist." bizjournals.com

Ontario County Man Charged In Theft Of Sales Tax
Former cop, allegedly didn't file returns, then was contacted, under reported collections, quit filing again, and now is in court - maybe jail. The tab? $240,000 What kind of business? Pizza place. oneidadispatch.com

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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FAQ: What if I underpay my taxes?

This question came in over the weekend and I just answered it. I've sanitized it, because it's worth mentioning to those of you who are relatively uninformed about this:

Found your Sales Tax Guy blog while doing some research. I'm hoping you can answer a question for me.

I own a small retail store in New Jersey. I recently discovered that my now former accountant was underpaying the amount of sales tax I owe. We collect the correct amount (8.75%) but it looks like we have been sending about 7.75% to the state every month for the last three years!

Should I just forget about the past shortages (we're paying the correct amount now) and hope that the state doesn't discover the error? How could the state discover the error anyway unless I brought it to their attention?

Doreen, of all of the possible mistakes that you can make, this is dang near the top of the "really bad" list. Have a look these articles.

You need to get professional help from someone who knows their way around sales and use tax. It'll be expensive but not as expensive as the price you'll pay if you ignore this. And New Jersey is broke, so they're even more aggressive about finding unpaid taxes.

They'll find you. It's called a "sales tax audit." And this particularly problem is one they'll probably find in the first hour or so of the audit. Snap.

Find some help.

Jim

This also brings up an issue I've talked about before. While your accountant may be highly knowledgeable at income taxes, there's a good chance that he or she knows virtually nothing about sales and use taxes. But the eventual responsibility will rest with you. So make sure that whoever you take advice from on this topic actually knows something about it. And make sure they're doing it right.

Jim

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different. Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

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A quick note to state tax departments

Here's a small suggestion to you folks at the revenue department.  Every time I read about some business charging their customers tax and not remitting it to the state, it's almost always one of the following businesses:

• Used car dealers
• Mechanics
• Restaurants
• Convenience stores

And they're always independently owned.  Seems like doing nothing but auditing these guys would clear out your deficits like that (snapping my fingers).  

Just a thought.

By the way, if you're one of the aforementioned businesses, and you're feeling all offended now, here's the problem.  While I'm miffed about your not paying the taxes the law requires, what really fries my shorts is that you are collecting the taxes from your customers, but not bothering to pay the taxes to the state.  You're defrauding not only the state, but your innocent customers.  That stinks.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

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Felony Watch

Articles I've twittered recently about people who are probably going to get fitted for orange jump suits:

Florist faces prison time for stealing sales tax money - http://bit.ly/cotfWy

Women sentenced in dog, tax evasion- http://bit.ly/b9wd4o

Acct. sentenced 2 prison 4 sales tax fraud with New City eatery owner - http://bit.ly/dffs6G

Man convicted for not paying $250,000 in sales tax- http://bit.ly/dC9OwC - Oops - probation

Owner of Wing City Grille, other restaurants, pleads glty to sls tx thft - http://bit.ly/bPsXfS

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different.

Here's information on our upcoming seminars and webinars.
http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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Watch what you report

This is part of an occasional series illustrating the ways that the states manage to find out about you not paying your taxes. Not that you would do anything like that.

The first method we'll talk about is by comparing numbers. This article caught my eye because it describes how a convenience store got busted for collecting sales taxes on tobacco and liquor, but not bothering to pay that money to the state. The amount of the taxes, depending on how you read the article, was probably over $300,000. Seems like this guy might be getting fitted for the orange jumpsuit. I mean, they mention "felony" several times in the article. Here's the press release if the above link doesn't work. And there's a picture!

The state figured it out because Texas now requires alcohol and liquor distributors to report their sales to individual stores to the state. By comparing what the distributors said they sold, to what the retailer reported as taxable sales, they can start focusing their auditors on the real problems.

You actually don't hear that much about this kind of comparison and data mining. It seems like comparing state income tax and/or franchise tax returns would also be on the agenda as well. But hey, it's just me. Still, it's nice to see Texas is thinkin'

So watch out. If your numbers don't jibe with the numbers someone else is reporting, it could be orange casual wear for you too.

No posting tomorrow on 12/31/09. See you on Monday. Happy New Year.



The Sales Tax Guy
http://salestaxguy.blogspot.com

See disclaimer and research the issues thoroughly before making decisions

Here's information on our upcoming seminars and webinars

News Links

It's "felony watch" day. Two stories about businesses accused of not paying taxes they collected from their customers. Tsk tsk

Seattle contract gets nailed for not remitting his sales tax

Hat store in NY seized by revenuers

Pet Store Shut Down (PAY YOUR TAXES!)

Part of a series on essential actions you need to take

This article would have just gone out on my new Twitter feed, but as I read this news article I got more and more ticked off and decided it required the full Sales Tax Guy treatment.

In case the article disappears, the essential facts are below.

There have been several stories recently about Rhode Island suddenly closing over 1000 businesses because they haven't paid their sales and use taxes.

That's the first thing to be ticked off about. Why do they pick the depths of the recession to close businesses and increase unemployment? Sounds like the RI revenuers need a reality check. Maybe some targeted state layoffs would do the trick.

But, it's not all entirely the state's fault either. As I read the article about this pet shop owner, I really can't feel sorry for him either. Now, I am assuming the article is correct which is a big assumption. So if I'm wrong here, I've seen other situations where the facts were pretty close to as described. So, at least we'll considered it a teaching opportunity.

1. Business hasn't been good for the pet shop for a while.
2. The owner quit remitting his sales taxes and started keeping the money to run his business, figuring he'd pay it back someday when business got better. The quote in the article is “I used that money to stay in business." [my emphasis]
3. He apparently hasn't been filing returns on schedule either.
4. He has had problems with the IRS too.
5. While not mentioned in the article, I'm betting he got more than a few letters from the state inquiring about when he was going to pay up.
5. He has virtually no assets.

And he wonders why the state won't give him a break and lenders won't give him money. Talk about a bad credit risk. The amazing thing is that he still has employees coming to work to take care of the critters. Hey, I'm in favor of taking care of the critters, but how is this guy paying his employees? Is he going to have to deal with unpaid wage claims at some point too?

While I'm a big appreciator of persistence, there is a signal that any business should heed when considering its viability. If the management can't (or won't) remit their sales taxes (which have been collected in trust for the state), and choose to use those funds to keep the business going, then it's probably time to rethink the business plan. This situation is not the beginning of the end. It's pretty much the last ledge before the business falls into the abyss.

And if I was working for a company where this was going on, I'd be asking for daily paychecks and hitting the bank on the way home to cash them.

Is it right to steal from the state, and defraud customers to keep the business going?

Stealing from the state? Yeah. The taxes weren't collected for the business's benefit. The seller, in most states, in merely the collector and is holding the taxes in trust. If the seller doesn't send the funds in, it's theft as far as I'm concerned.

Defrauding the customer? The customer didn't pay the business an extra few percentage points for the business's profit. They paid it under the assumption that the state would get that money. If the business isn't going to send the money in, then the business defrauded the customer.

The same thing applies to taxes you withhold from your employees' paychecks. If that money doesn't get deposited quickly... Well, let me just say this. I've heard that the IRS agents who audit companies for this particular problem - not making tax deposits - carry guns. Because people who violate this particular law, tend to find themselves wearing orange jumpsuits.

Bottom line folks. If you're small business, don't think that sales tax money sitting there waiting to be sent to the state is available for interest free loans you can take care of later. It isn't. And you won't. You'll probably wind up just like this poor pet store owner.

So if you've collected taxes, PAY THEM!

See, way more than what I could have squeezed into a Twitter post.

Sales Tax Guy

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Picture note: The cat is Pewee. She wants YOU to pay your taxes. More on Flickr here.

Charging Taxes Instead of Raising Prices

Here's a new scam that, frankly, makes sense - if you're a felon.

There was a case recently where a seller charged tax on a non-taxable service. He didn't call it "sales tax" - he just called it "tax." But he put it on the invoice where you'd typically see sales tax. And his employees used a sales tax rate card in the presence of the customer to calculate the "tax." He knew the service wasn't taxable, he was just trying to make more money. He wanted to raise his price but he couldn't because he had competition. So he decided to just start charging "tax."

The problem is that the state asked him where the money was. If you're going to charge your customers tax, even if incorrectly, then you're expected to pay the money to the state. Which, of course, kind of defeats the purpose.

The article I read did not indicate the penalties assessed by the state. I hope they were high. I wonder though, if the state took any action to get the customers, who had been illegally charged tax, their money back.

Probably not.

The moral of the story is that you need to be aware of the taxability of what you're buying. And if the seller is charging tax on something you don't think is taxable, then yell. And threaten to call the revenuers.

Felony Watch

Propane dealer pleads guilty to felony tax charges

In brief: Antiques dealer admits to fraud

Riverboat owner pleads guilty in tax case

Stillwater man faces 20 felony tax charges

Car dealer sent to prison (they threw the book at this guy!)

Felony Watch

More people gettin' thrown in jail (or at least getting in BIG trouble):

Contractors who didn't remit their collected sales tax to Washington state

Shenagins in Minnesota with a couple who had multiple businesses, allegedly filed false information and used fake numbers, didn't remit the taxes they collected, etc. All allegedly, of course.

This one made the news all over Ohio. A couple allegedly bought 62 vehicles from an Ohio dealer and told him they they would register them in Kentucky, therefore the dealer didn't charge Ohio tax. But the couple apparently never registered them in KY, but instead shipped them to Australia (these particular models aren't sold down under). Apparently someone at the dealer tipped off the state of Ohio that this was going on. Although you have to wonder...only after 62 cars???

And this article wouldn't be complete without at least one used car dealer who didn't remit the taxes...in this case, $734,000 in taxes.

Another bad guy!

He collected money but didn't pay it. Allegedly. But he didn't go to jail - probation. Man, doesn't anyone go to jail on this stuff?!?

Bristol businessman pleads guilty to tax fraud

Sentenced to Seven Years in Jail!

But the sentenced was suspended. What a gyp! Here's the article.

And in this case, a restaurant owner was indicted for allegedly not paying over $100,000 in taxes collected. What's interesting is that one of his staff now owns the business - she knew what was going on and waited until he got in over his head, then managed to snag the business from him. Sneaky. Here's the article.

Searching Google for Sales Tax Bad Guys

As I've mentioned in my seminars, it's fun to occasionally to a Google search on "sales tax" felony to see who's getting in serious trouble for sales tax violations.

Here's a video store owner who allegedly "misapplied" his sales tax collections.

Here's one about a guy who allegedly reported a boat purchase (and paid taxes when he registered it) with a value of $4000 vs. the real price of $40,000. And there is other stuff going on here that makes this a real soap opera. The taxes are just the beginning.

A restaurant in Michigan REALLY got in trouble for allegedly hiring illegal workers, and not remitting sales tax and employment taxes.

I'll be reporting on some of the more interesting cases every week or so from now on.

Sales Tax Guy