Sales Tax Evasion
A DuPage County man was recently indicted on theft and tax fraud charges for allegedly stealing over $391,000. The man, who managed a tobacco shop in Glendale Heights, is alleged to have understated his sales tax liability by filing fraudulent sales tax returns between August 2011 and July 2014. He has been charged with theft of government property, sales tax evasion, filing a fraudulent sales tax return, and wire fraud.
When consumers buy products or services in Illinois, they owe sales tax to the state government. Instead of requiring consumers to track their purchases and pay sales tax directly to the Illinois Department of Revenue, sellers generally collect the tax and hold it in trust for the state. The seller must then pay the money to the state, generally on a monthly basis. If the seller does not pay the sales tax to the state, it is a criminal offense.
Evading Sales Tax
In Illinois, business owners or retailers commit the offense of sales tax evasion if they:
- Knowingly attempt to defeat or evade a sales tax imposed on them or on any other person; and
- Commit an affirmative act in furtherance of the evasion.
An affirmative act is an action designed to conceal or misrepresent any material fact, or to destroy or tamper with documents relating to the tax liability. This may include using an automated sales suppression device or phantom-ware.
Sales Suppression Devices
Automated sales suppression devices are software designed to falsify electronic sales records, while phantom-ware is a programming option in an electronic cash register that can be used to create a second set of records, or to manipulate the register’s records. The sale, purchase, installation, possession, or use of these devices is also a criminal offense in Illinois.
The penalty for sales tax evasion depends on the amount of tax that has been evaded. If the amount is less than $500, the offense is a Class 4 felony. If a business owner evades or attempts to evade $500 to $10,000 of tax liability, he or she commits a Class 3 felony. Evasion of $10,000 to $100,000 in taxes is a Class 2 felony, while evading $100,000 or more of tax liability is a Class 1 felony.
If a business owner evades sales tax multiple times, the prosecution can aggregate the amounts, then charge the business owner with the felony class appropriate for the aggregated amount. For example, if a business owner evades sales tax in the amount of $400 one month, then $9,700 the next, she may be prosecuted for one count of a Class 2 felony, rather than two counts, one a Class 3 and one a Class 4. This makes the offense less cumbersome and easier to prosecute, since most retailers pay sales tax monthly.
The possession of an automated sales suppression device or phantom-ware is a Class 3 felony in Illinois.
Tax laws are complex, so it is important to retain the services of an experienced attorney. If you have been charged with tax evasion, please contact the passionate Naperville criminal defense attorneys at Donahue & Sowa to schedule an initial consultation.