Maaria Nyazee, the former owner of Joplin, Missouri pizza restaurant Redbrick Pizza, which closed in 2017, was recently charged with sales tax fraud (tax evasion). Nyazee, 31, was booked in February 2018 – a process that involves photographing, fingerprinting, and searching inbound inmates – on charges of intent to defraud Missouri sales tax. At first glance, a criminal tax case in Missouri might seem irrelevant to California business owners, but take heed: like many other states, California requires both physical and online retailers to collect and remit sales tax to the appropriate state agency – that being, in California, the CDTFA, or California Department of Tax and Fee Administration. Depending on factors like what types of products you sell and how many transactions you make, you may have California sales tax obligations if you operate a brick-and-mortar or internet business that sells products to customers in California. This even extends to out-of-state Amazon third party sellers, such as independent sellers of used appliances or refurbished electronics. Our online business tax attorneys can help you avoid making compliance or filing errors that could lead to a California sales tax audit – or to a criminal tax investigation.
Failure to Collect and Remit Sales Tax Leads to Criminal Charges for Missouri Business Owner
Court records indicate that Nyazee registered the business during 2015. For an approximately yearlong period spanning November of that year through December 2016, Nyazee allegedly failed to collect and pay sales tax to Missouri tax agencies – despite, according to Missouri Department of Revenue Special Agent Daniel Smithson, admitting to having knowledge of the state’s sales tax laws. Nyazee admitted, when speaking with Special Agent Smithson, to avoiding her sales tax duties on purpose because her business was struggling financially.
Because she acted intentionally, or “willfully,” to evade sales tax, Nyazee was criminally investigated and charged, rather than solely receiving civil tax penalties (which – to be clear – can be financially devastating in their own right). To filter out sincere tax mistakes from deliberate attempts at fraud, auditors carefully examine taxpayers’ records for specific indicators of tax evasion (“badges of tax fraud”), such as understatements of income, unfiled returns, and inconsistent books and records. If such indicators are observed, the auditor (also known as a “revenue agent”) may deem it appropriate to refer the case to a criminal investigator (also known as a “special agent”) – at which point the civil audit has become a criminal tax issue. (Note: for taxpayers concerned about criminal tax exposure, it is imperative to consult with an experienced tax attorney, as opposed to a tax preparer or accountant, due to the attorney-client privilege, which does not exist with CPAs and other tax professionals.)
State tax agencies frequently collaborate and share information with federal tax and law enforcement agencies, like the IRS or FBI, to investigate and prosecute taxpayers who are suspected of committing fraud. In recent years, there has been a trend of federal prosecutors pursuing small businesses for state tax violations – and in light of the U.S. Supreme Court’s Wayfair decision (which our online sales tax lawyers discussed in detail here), which only complexified existing sales tax regulations, that pattern is likely to continue. Driven by Wayfair, California tax audits of internet businesses are on the rise. This makes it essential for both in-state and out-of-state business owners to understand the common issues encountered during sales tax audits – and to protect themselves by working with an experienced business tax attorney in California.
California Sales Tax Audit and Criminal Tax Defense Attorneys for Small Businesses and Online Retailers
According to court records, Nyazee was originally charged on 14 criminal counts, which were later reduced to three misdemeanor counts in March 2019. Strategic legal representation can dramatically impact the course of your case, making it vital to work with a skilled and experienced tax evasion lawyer if you have been charged with a tax-related felony or misdemeanor.
Whether you are in need of criminal tax defense, sales tax audit representation, audit appeals representation, or general guidance on business tax planning, rely on the Tax Law Office of David W. Klasing to deliver the sophisticated level of service you are searching for. With more than 20 years of combined tax, accounting, and legal experience, our versatile, award-winning team of tax attorneys and CPAs are here to support you and your business 24/7. Contact us online right away to arrange a reduced-rate consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295 to discuss your sales tax questions with an attorney.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.
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Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here:
Sales Tax Questions and Answers
- Common issues encountered during sales tax audit
- What is a sales tax audit?
- Disagreeing with business audit conclusions
- Timeline to file Petition for Redetermination?
- What should Petition for Redetermination contain?
- Is the appeals conference formal or informal?
- Appeals Division’s Decision and Recommendation
- Are a mark-up percentage and a profit margin the same?
- Problems with the mark up audit
- Can State Board of Equalization ignore my business records
- What is a sales tax deficiency determination?
- Business being audited for sales tax. Should I be worried?
- Audit determined fraud to avoid sales and use tax
- Definition of “sale” for California Sales Tax
- What do California sellers need to know about sales tax?
- How do I apply for a sellers permit?
- What are my obligations as a permit holder?
- What is sales tax?
- What is tangible personal property?
- What is a sale?
- What are total gross receipts?
- What is use tax?
- Who is responsible for paying the use tax?
- Who is a retailer engaged in business in California?
- Who is a qualified purchaser?
- Do I need a Certificate of Registration Use tax?
- Do I need a Use Tax Direct Payment Permit?
- What types of sales are exempt from sales tax?
- How are Internet Transactions Taxed?
- How is California sales or use tax determined?
- What is the statewide sales and use tax rate?
- Are there other local and district sales and use taxes?
- Total sales and use tax rate calculation
- How to protect against successor liability in California
- Recourse when issued California sales tax liability notice
- CA Sales Tax liability extend to purchasers/successors?
- Waiting Until Audited to Take Action on Tax Matters
- Sales tax records needed in California
- What are California’s sales and use taxes?
- Why does the State of California audit businesses to ensure compliance with sales and use taxes? How does the State determine whether to audit my business?
- The BOE reviews the purchase invoices of my business
