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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.
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.
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.
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