The State of New York dedicates substantial efforts and resources to ensure that business enterprises pay the sales tax they collect from patrons. Those New York businesses that fail to comply face a myriad of enforcement mechanisms by the New York State Department of Taxation and Finance. The following is a summary of these tools.
- Revocation of a business entity’s sales tax license
- Closure of the business
- Liens, levies, and income execution on real or personal property, bank accounts, wages, and other assets
- Personal liability of “responsible persons”
- Criminal liability
- Penalties and interest up to as much as 14.5%
- Driver’s license suspension if the driver owes $10,000 or more in tax, penalties, and interest and no collection mechanism is in place
- Issuance of press releases (bad publicity)
As an example of the last consequence, the State of New York announced at the end of September that the owner of a restaurant business in Hamburg pleaded guilty to attempted grand larceny of sales taxes that his business collected from customers. The owner must pay more than $40,000 in restitution.
James Rath, 60, of Lake View, New York, owner of the Wanakah Grill in Hamburg, admitted to the theft of $40,661 in sales tax receipts collected from customers between March 1, 2014, and February 28, 2018.
“Those who disregard their obligation to remit the sales tax they collect violate the trust of their customers, deprive the communities where they operate of revenue needed for vital services, and put similar businesses at a competitive disadvantage,” said New York State Commissioner of Taxation and Finance Michael Schmidt.
Under Rath’s plea agreement, he must pay the State of New York restitution of $40,661. Of a more serious nature, his sentencing is scheduled for December of 2019, and he could receive prison time of up to a year. A substantial prison sentence for a business owner could very well result in the end of the underlying business.
The State of New York offers the Voluntary Disclosure and Compliance Program. The State will often impose penalties or file criminal charges only in certain circumstances provided that a business owner pays outstanding tax liabilities. Qualified taxpayers are also eligible for a limited look-back period to comply with state tax requirements.
Sales tax regulations are complicated and leave no room for misinterpretation. Business owners must accurately track, collect, and pay sales tax. Any business owner with questions or concerns should contact a qualified tax professional to discuss compliance with sales tax regulations. If a business owner is currently not in compliance with New York State sales tax regulations, he or she should contact a tax professional as soon as possible if not immediately. Call THE TAX EXPERTS at the Thorgood Law Firm at 212-490-0704. The consultation is FREE. Check our website at www.thorgoodlaw.com for more useful tax-related information.
