AG's office files $5.6M criminal tax theft case against owner of Tacos Guaymas
March 10, 2018
Largest sales suppression software case ever in Washington state
(OLYMPIA, WA.) — Attorney General Bob Ferguson has filed charges against the owner of Tacos Guaymas restaurants for allegedly using “sales suppression software” for cash transactions and thus "pocketing more than $5.6 million in sales tax," said a statement reeased by the AG's office.
"This is the largest “sales suppression software” case in Washington state history –– and potentially the largest in the country," said the statement. Ferguson's office filed the suit March 7 in king County Superior Court.
Salvador Sahagun, owner of several Tacos Guaymas restaurants in King and Snohomish counties, is charged in both King and Snohomish County Superior Courts with a total of six counts of first-degree theft and three counts of possessing and using sales suppression software, which is illegal in Washington state.
Ferguson's office says in addition to a potential prison sentence, the defendant faces up to $150,000 in penalties and could be liable for up to $5 million in restitution to the state.
“When businesses pocket sales tax, they are stealing from Washington taxpayers,” said Ferguson. “That money should be funding our schools and parks, not deceptive businesses.”
Salvador Sahagun operated six Tacos Guaymas locations in West Seattle, Broadway, Greenlake, Fremont, Lynnwood and Marysville.
The AG's statement says that during an audit, an auditor with the Washington State Department of Revenue found that point-of-sale records from these restaurants did not match with tax returns submitted by Sahagun. Additionally, the auditor found that the majority of sales receipts were missing from Sahagun’s point-of-sale system.
Run on a point-of-sale computer or cash register, sales suppression software surreptitiously deletes or underreports cash transactions. The software then re-balances the company financial records to show a lower sales figure, reducing the business’ sales tax obligation. The retailer pockets the difference between what the patron paid, including the full sales tax, and what the software reports.
The software in essence allows an operator to keep “two sets of books.”
Suspecting that Sahagun was using sales suppression software, Department of Revenue employees visited the seven restaurants on several occasions and paid cash for their meals. The auditor then compared the employees’ receipts with the receipts on the point-of-sale system to determine whether the transactions existed and the amounts matched.
The auditor found that three of the restaurants were using sales suppression software to delete or underreport cash transactions.
The auditor determined that the other three locations also owed sales tax. The amount of taxes owed from each of the six locations ranged from $43,339 to $2,197,460. In total, the auditor determined that the owner owed $5,615,497 to the state.
The charges contained in the complaint are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
An arraignment in the case is expected March 21 in both King and Snohomish County Superior Courts.
In 2013, Washington passed a law making it a class C felony for anyone to “sell, purchase, install, transfer, manufacture, create, design, update, repair, use, possess, or otherwise make available” software or hardware that deletes transactions.
In February 2016, the Washington State Attorney General’s Office filed the first “sales suppression software” case in the country. In that case, the owner of Bellevue restaurant called Facing East used sales suppression software to pocket nearly $395,000 in sales tax.
The owner pleaded guilty, paying $300,000 in restitution to the state and $600 in penalties and fees.