Most people have something they enjoy shopping for. And when it comes time to pay for the item, what’s the best part? Paying the sales tax of course! Okay okay, maybe that’s not the best part. If you’re anything like me, you pay it because you have to, not because you want to. And then you assume the company that collected the sales tax will complete their fiduciary duty by remitting the taxes to the appropriate jurisdiction so that the money can be used for its intended purposes. That last part of remitting was a sticking point for a used car dealership in Phoenix.
In the words of the Jerry Seinfeld episode when he was informed by the clerk they were out of rental cars, “You know how to make the reservation, you just don’t know how to hold the reservation. And that’s really the most important part of the reservation: the holding. Anybody can just take them.” And so goes with this dealership: anyone can take sales tax from a customer, but it’s the remitting. That’s really the most important part.
On September 26th of 2019, Attorney General Mark Brnovich in partnership with the Arizona Department of Revenue announced that the dealership pleaded guilty to $119,000 in tax fraud. The business admitted to charging its customers sales tax but failed to pay the collected taxes to the Arizona Department of Revenue.
From January 2015 to July 2016, the dealership underreported the number of cars sold in order to avoid paying taxes. Prior to entering the plea, the dealership repaid the $119,000 in taxes owed. They also paid a $34,000 fine and were placed on probation.
In hindsight, they may be realizing it’s better to timely remit tax dollars that were never really theirs in the first place and avoid the big fines. But then again, I’m not sure Jerry got through to the clerk on why she takes reservations. Hopefully, the Attorney General got through to this dealership, though.
Scott W. Clouse, CPA