Lakewood Merchant Admits To Cheating More Than 92k in Sales Tax

State documents released this past week show that a merchant in Lakewood admitted to cheating the state out of at least $92,543 in sales taxes at his convenient store Smoke and Beer and More located at 10506 Bridgeport Way.

Seeking leniency after being caught, he claimed in writing to officials that “ït was necessary to cheat on the taxes” to keep his business in operation. He later paid $146,768 to the state to cover the back taxes, penalties and interest.

Nonetheless, last week in Pierce County Superior Court, the state charged Jong S. Cheon with filing a false or fraudulent tax return, which upon conviction would carry a maximum penalty of up to five years imprisonment or a $10,000 fine, or both. According to state documents, Cheon used two cash registers in his store, one for credit and debit cards, and one for cash. Taxes on many of the cash sales, especially for cigarettes, were not reported or conveyed to the state, authorities say.

Retailers and service providers in Washington state collect sales taxes, and are required to accurately report their sales totals and turn over their sales tax revenues to the state, which then keeps some and distributes the rest to counties, cities and other local taxing bodies, based on established rates.

The Washington state sales tax rate is 6.5 percent and county and local sales taxes typically add another 2 to 2.5 percent. A state Revenue Department compendium lists the total sales tax rate for each city, by county.

Key findings

• The Washington Department of Revenue audited a convenience store in Lakewood named Smoke and Beer and More, covering 2006 through first quarter 2009, and found two cash registers were used. One was for credit and debit card purchases, for which sales tax were collected on-site and conveyed to the state as required; the other register was for cash purchases, for which sales tax were collected on-site and often not conveyed to the state. Many of those purchases were of cigarettes.
• The audit found the store owed at least $92,543 to the state for sales taxes it had collected but not delivered, plus penalties and interest which brought the total amount owed to $146,768.
• The store’s owner, Jong S. Cheon, appealed the assessment. His written appeal included his statement that, “tobacco shops only make a profit of $0.40 per pack of cigarettes sold. Due to the tough economic times we did what they had to stay open. We needed to pay bills to remain open, and in order to do that, it was necessary to cheat on the taxes."
• Cheon later paid the full amount after learning criminal charges might be filed against him.
• Last week, the Washington State Attorney General Office filed a complaint against Cheon in Pierce County Superior Court for filing a false or fraudulent tax return. The maximum penalty is five years in a corrections facility or a $10,000 fine, or both.
• In a statement, Washington Department of Revenue Director Suzanne Delbene said, “These taxes are not the property of the business to be used to pay bills or make a profit. These are trust funds the business collects on behalf of state and local government.”

Key Links

• Affidavit For Determination of Probable Cause, State of Washington v. Smoke & Beer & More, Washington State Attorney General in Pierce County Superior Court, April 15, 2011;
• Complaint, State of Washington v. Smoke & Beer & More, Washington State Attorney General in Pierce County Superior Court, April 15, 2011;
• State of Washington Department of Revenue News Release, April 15, 2011.

Matt Rosenberg is founder and editor of Public Data Ferret and is the founder and executive director of the non-profit Public Eye Northwest.