More Companies Hit with Criminal Penalties for Failing to Pay New York Sales Tax

The New York State Department of Taxation and Finance (NYSDTF) recently announced that two New Jersey-based corporations have pleaded guilty to failing to pay New York State sales tax. The businesses will pay more than $1.4 million, including about $560,000 in sales tax owed plus penalties and interest. This is just the latest press release from the State letting taxpayers know they are aggressively pursuing those who don’t pay sales tax. The publicity is intended to shame the business owner and make other taxpayers nervous to deter them from trying to avoid their taxes.

The reality is that sales tax violations can lead to a civil audit, significant penalties, personal liability, seizure of the business, and in the worst-case scenario a criminal investigation or conviction. However, if you haven’t collected or paid sales tax, New York State does offer relief in the form of its Voluntary Disclosure and Compliance Program.

The program is open to any eligible taxpayer, including individuals and businesses, for all types of tax administered by the NYSDTF. The main catch is that you must beat the state to the punch and come forward before the State comes after you. If you are already under audit or investigation, you cannot participate.

In addition, the following situations are not eligible for the Voluntary Disclosure Program:

• Tax liabilities less than 2 years old and less than $500;
• Partnership non-filed returns;
• Changes to a federal return unless the taxpayer completed the Federal Offshore Voluntary Disclosure with the IRS; and
• Taxpayers who are currently seeking advisory opinions.

If taxpayers meet the eligibility criteria, they can participate even if their non-filing and non-payment were the result of fraudulent or criminal conduct.

To take advantage of the program, taxpayers need to disclose the taxes they owe, enter an agreement to pay those taxes, and continue to pay their taxes in the future.

The application for the Voluntary Disclosure program is on the NYSDTF website.

Note there are limitations on the Program. If you failed to file returns and owe back taxes to New York State, contact us about whether the New York Voluntary Disclosure and Compliance Program is the right option for you.