“Subway” Restaurant Owner Sentenced in $3 Million Tax Evasion Case

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The California State Board of Equalization issued a press release recently about the sentencing, after a guilty plea, of a Buena Park man whose Subway restaurants (franchises that are owned and run by individuals, not Subway corporation) were collecting sales tax from customers but not paying it over to the BOE.  While the government takes failure to report and pay taxes seriously in all cases, the government can be even more serious when the taxes to be paid belonged to someone else – this can be seen in the civil and criminal employment tax cases, where the trust fund holding the employees’ withholdings or other benefits are at stake.

The relevant text of the press release is below and can be found at the link here:

The California State Board of Equalization (BOE) announced this week that Ajay Beri, restauranteur, was sentenced in Orange County Superior Court on November 1, 2016, to nine months confinement and three years formal probation.

Beri pled guilty to felony sales tax evasion and agreed to pay $3,021,059 in restitution to the state. Beri paid $1,250,000 on the day of the sentencing and agreed to pay the remaining balance of $1,771,059 within 18 months.

Beri, 45, of Buena Park, was the owner and operator of co-defendants Ajay Beri Corporation and Beri Restaurants Group, Incorporated. Beri and his wife operated Subway restaurants located throughout Orange and Los Angeles counties since 1998.

The BOE’s investigation revealed that Beri collected sales tax from customers on the sale of food at Subway restaurants and knowingly filed fraudulent sales tax returns to the BOE to reduce his sales tax liability. As a result of the evasion scheme, Beri failed to report to the BOE more than $3 million in sales taxes collected.

The California Attorney General’s Office prosecuted this case.

Daniel Layton, the author of this post, is the principal of Tax Attorney OC.