What began in Seattle as potentially the largest sales tax suppression case in U.S. history against a Mexican restaurant owner ended with dismissal after a local tax attorney successfully deployed the “that’s a lot of tacos” defense.
The Washington Attorney General’s office in March accused Salvador Sahagun, owner of six Tacos Guaymas restaurants in metropolitan Seattle, of pocketing $5.6 million in sales tax using special “zapper” software that surreptitiously deletes or under-reports cash transactions run on point-of-sale computers or cash registers. A news release at the time called it potentially the largest such case in U.S. history.
Sahagun faced six counts of first degree theft and three counts of possessing and using sales suppression software. If found guilty, Sahagun faced up to $150,000 in penalties, $5 million in restitution, and prison time.
Seattle tax attorney Robert Chicoine told Bloomberg Tax Nov. 14 that he did the math. Given the sales tax rate of about 9.5 percent, his client would have needed sales of about $56 million to steal that much tax revenue. “That’s a lot of tacos,” Chicoine said, noting the small size of the restaurants.
“The Department of Revenue didn’t understand the technology” and just assumed that a few missing sales tickets meant Sahagun was stealing from the state, Chicoine said. “Our computer guys were better than their computer guys,” which resulted in the state dropping all criminal charges against his client late Nov. 9.
“The Attorney General’s Criminal Litigation Unit dismissed the personal charges against Mr. Sahagun. In exchange, his corporation pled guilty to felony theft in the second degree. The court imposed a fine of $750 and ordered the corporation to pay a $500 victim penalty assessment to the state,” the attorney general’s spokesman Dan Jackson told Bloomberg Tax in an emailed statement.
The attorney general’s office filed the first sales suppression software case in the country in 2016, which resulted in a guilty plea by a restaurant owner who stole nearly $395,000 in sales tax.
The case is Wash. v. Tacos Guaymas Greenlake, Inc., Wash. Super. Ct., 18-1-06652-9, charges dismissed 11/9/18.