Sales tax violations are heavily enforced by the New York State Department of Taxation and Finance and a simple tax failure can result in the filing of civil liens and even criminal charges if a company intentionally fails to report their accurate total gross sales on their sales tax returns in an effort to reduce their sales tax obligation. Depending on the circumstances, restaurant owners have been charged with Grand Larceny, Criminal Tax Fraud, Forgery and Offering a False Instrument for Filing. The penalties for these offenses can include several years of incarceration, orders of restitution for all sales tax owed, and fines imposed by the Court.
Ignorance of the law is not a defense and owners who take deductions from their gross sales much the way you would when filing your income taxes, often find that their misunderstanding of the tax law will not help them in Court. With that said, most every tax crime requires the State to prove that the defendant owner intentionally or willfully failed to remit the proper amount of sales tax due the state.
Sales tax fraud is more commonplace in the restaurant industry than we like to believe. A common practice (of those who commit sales tax violations) is to place cash into the register drawer without ringing in the sale. To catch violators, Tax Investigators routinely go undercover and pose as ‘would-be buyers’ of the establishment. As they build a relationship with the owner(s), they ask to see the sales records and receipts for the bar and they ask whether sales were underreported for tax purposes. Owners looking to increase the restaurant’s purchase price readily admit the sales tax deviations and quickly find themselves named as defendants in a criminal indictment. Other common stings involve undercover agents attempting to sell illegal alcohol and/or cigarettes to bar and restaurant owners.
The best practice is to avoid sales tax violations all together and hire a bookkeeper and/or accountant that you trust to accurately record all sales and pay the appropriate sales tax owed.
If a lien has been filed against you or your business, or if you have been criminally charged for failing to pay the sales tax allegedly owed by your restaurant, bar, lounge or nightclub, call Attorney James DiPasquale at (646) 343-4607, for a free consultation. |