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Tax Evasion Charges for California Tobacco Wholesaler

The owner of Wholesale Palace, a Burbank-based tobacco wholesaler, was indicted for tax evasion after failing to pay $554,000 in taxes.

The indictment claims that Wholesale Palace defrauded the state of California of tax revenue in its purchase of tobacco products, including leaf and chewing tobacco and cigars, between May 2006 and August 2008. 

According to California law, when a distributor sells untaxed tobacco products, it is required to collect the excise tax from the purchaser. Additionally, the distributor is required to submit monthly reports detailing the amount of tobacco products purchased, the amount of excise tax owed and the amount of payment to the California State Board of Equalization.

Wholesale Palace is accused of purchasing tobacco products under its own name and "Kim's Supplies" from an unidentified out-of-state distributor. The company Chief Executive Jack Haroun paid by check for purchases made in Wholesale Palace's name, but used cash or a money order when purchasing under the name Kim's Supplies.

Haroun made large purchases from out-of-state distributors and manufacturers and substantially under-reported these purchases and tax to the California State Board of Equalization.

Throughout this scheme, Wholesale Palace only paid taxes on $547,000 in untaxed tobacco products, even though it sold approximately $1.8 million in such products.

Authorities are seeking payment of $554,000 in unpaid excise tax.

Authorities reported that tax evasion and tobacco smuggling take away $34 million from the state of California and county health care programs. Approximately $1.3 million in tobacco products along with other assets have been deemed forfeited. Currently there are another $21.5 million in seized tobacco products and other assets that are pending.

Source: The Burbank Leader "Tobacco wholesaler faces tax evasion charges" 8/13/10

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