There is an inherent audit risk with an all cash based business. However, it is by no means a crime to operate a cash business. That said, if you structure cash transactions to avoid having to file certain required reports it may constitute tax evasion. For example, in United States v. Mounkes, 204 F.3d 1024, 1030 (10th Cir.), cert. denied, 530 U.S. 1230 (2000) the taxpayer attempted to evade personal and corporate income taxes by “structuring . . . payments to avoid IRS reporting requirements.” The court said that such actions rose to the level of “affirmative act[s] [of] evasion or attempted evasion” of income taxes.