Tax Enforcement

Tax Enforcement

To ensure that the State of New York's tax laws are enforced the Department fields a team of dedicated law enforcement officers through the Office of Tax Enforcement (OTE). OTE is divided into two bureaus, the Petroleum, Alcohol and Tobacco Bureau (PATB) and the Revenue Crimes Bureau (RCB).

PATB is primarily concerned with excise taxes levied on the controlled commodities referenced in its name. PATB also investigates other related taxes subject to evasion by regulated industries. These taxes include the petroleum business tax, highway use tax, and the sales and use tax on sales of regulated commodities. In addition, PATB is responsible for enforcement of the Cigarette Marketing Standards Act.

RCB focuses its efforts on non-compliance with the personal income tax, sales tax, withholding tax and corporate tax.

PATB
As a result of the 2001 increase in the cigarette excise tax, there has been increased potential for criminal profitability in cigarette tax evasion. Accordingly, the Cigarette Investigation Tax Enforcement (CITE) Program pro-actively monitors the entire industry through formal premise inspections of cigarette agents, tobacco products distributors, tobacco product and cigarette wholesale dealers, and retail dealers in cigarettes and tobacco products for compliance with the tax laws and regulations. Follow-up investigations are performed of all non-compliance violations uncovered by the pro-active compliance segment of the program. From the program's inception in March 2000, through a period ending March 2001, 46,612 CITE inspections were conducted. Department studies indicate an approximately 7.5 percent non-compliance with the tax laws. As a result of these inspections, seized contraband included over 3,500 cartons of untaxed cigarettes, over 17,000 cigars, more than 70 pounds of tobacco, and approximately 245 liters of alcohol. In addition, over 145 Certificates of Registration were suspended. Approximately 2,900 civil violations resulted as well as 475 misdemeanor and felony criminal counts.

In calendar year 2002, OTE agents seized nearly 215,000 cartons of cigarettes, including a hijacked RJ Reynold’s truck. The majority of product seized came as a result of joint Tax Department and federal ATF investigations. More than 100,000 counterfeit tax stamps were seized, as well as 544,700 untaxed cigars and 4,178 pounds of untaxed tobacco.

Some noteworthy PATB cases during calendar years 2001 and 2002 include:

A New York City man who was arrested on felony and misdemeanor charges after he illegally transported nearly 9,000 gallons of gasoline from New Jersey to Long Island in an attempt to evade and defeat the state's motor fuel tax. The truck and gasoline were seized by Department investigators.

Two Buffalo men were arrested and charged in an illegal bootlegging scheme in which they sold untaxed cigarettes for federal food stamps. When arrested, the men were in possession of more than 30,000 untaxed cigarettes. In addition to the misdemeanor and felony state tax charges, the two were charged with misuse of government food stamps, a federal felony.
Two Capital Region men were arrested on charges of selling bootleg cigarettes at their place of employment. In addition to the 94 cartons of untaxed cigarettes seized, Department investigators seized client lists and two vehicles, a 1995 Oldsmobile and a 1991 Mercury.

Noteworthy RCB cases include:

A well known Manhattan restauranteur pleaded guilty to a Class C felony for failing to remit nearly $550,000 in sales, withholding, and franchise taxes. In addition to agreeing to pay the back taxes, the defendant agreed to pay an additional $550,000 in interest and penalties.
A Garden City retailer pleaded guilty to a Class E felony of falsifying business records relating to $1.5 million in back taxes, penalties and interest. The retailer collected more than $537,000 in sales taxes which he failed to remit. In addition to the $537,000 in unremmitted taxes, the retailer owes civil penalties and interest totaling nearly $1 million.
An Albany man was arrested on a felony count of grand larceny for the theft of a New York State income tax refund check in the amount of $1,346.
Seven New York State residents were charged with Class E felonies for failing to file New York State personal income tax returns for a period of three consecutive years or longer. The seven included two attorneys, an investor, a business owner and a computer programmer. The total combined state personal income tax liability for the seven exceeded $113,000.
A Long Island businessman was charged with a Class C felony for allegedly pocketing more than $325,000 in New York State payroll taxes. The defendant issued W-2 forms to his 18 employees indicating taxes had been withheld but he did not report or remit withholding taxes to the state.

Last Modified: November 14, 2003