State shuts down business after I-Team 8 investigation

KOKOMO, Ind. (WISH) — A tire repair shop accused of stealing more than half a million dollars in tax money since 1995 must remain closed until a repayment deal can be reached with the state, a Howard County judge ruled Tuesday.

The ruling follows an I-Team 8 investigation that found thousands of businesses across the state profiting by pocketing millions in sales tax money they’re not entitled to.

The ruling, issued by Howard Superior Court Judge George Hopkins, grants the Indiana Attorney General a permanent injunction against Dave Evans Tire, Inc. It was entered without objection from Evans, according to an Attorney General’s office spokesperson.

The ruling could even allow the state to begin the process of seizing Evans’ assets.

But, I-Team 8 discovered that’s a rare step that’s almost never taken in Indiana, despite a growing list of businesses who continue to rip off taxpayers.

THE LONG LIST

Earlier this month, I-Team 8 discovered thousands of Hoosier business owners lining their pockets by stealing sales tax.  The investigation uncovered critical questions about what the state was doing to recover the money.

State records show more than 36,000 Indiana businesses have had their business licenses — known as Registered Retail Merchant Certificates, or RRMCs — revoked due to outstanding tax debt. But, I-Team 8 discovered the state rarely takes action to shut them down.

There may be no better example of that than Dave Evans Tire, Inc.

Evans describes his shop as a staple in the Kokomo community. He’s been serving customers there for more than 30 years. But, for much of that time, Indiana’s Department of Revenue (DOR) alleges he’s also been stealing from them, by keeping sales tax, withholding tax and tire fees he’s not entitled to.

Last week, DOR alleged Evans owes $550,932.92 in delinquent taxes.

“That’s not their money,” said DOR spokesperson Bob Dittmer. “That’s the state’s money. The customer trusts that business owner to take the 7 percent [tax], and then send it to the state. That’s the implicit handshake. And, when that doesn’t happen, how can you trust those businesses? These are the monies the state uses on a recurring basis to build bridges, and repair roads, and fund schools and all of the things we’re supposed to do to support our citizenry. And, when someone doesn’t pay those to the state, everyone in the state is shorted.”

DOR says the tire shop began keeping portions of its sales tax and withholding tax in 1995. That’s an average of nearly $29,000 in additional revenue pocketed per year. The shop began keeping tire fees it wasn’t entitled to in 2005, the lawsuit alleges.

But, Evans says the numbers don’t tell the whole story.

‘FIGHTING THIS FOR 20 YEARS’

Two business days after his shop had been shut down by the state, I-Team 8 tracked Evans down. He quickly admitted that he does owe the state money.

“I’ve been fighting this for 18-20 years,” he said. “I have paid a lot of sales tax over the years, too in the last 30 years. [But,] not everything I was supposed to. When you get behind, with penalties and interest and different things, it becomes almost impossible to get caught up. But, the state has a right to get their money, no question about it.”

Still, asked if he intended to pay the state back in full, Evans shook his head.

“It would be almost impossible on the new figure they’ve come up with,” he said.

Evans claims the state’s number is far too large.

“I think their figure is based on a lot of penalties and different things that come through, estimates on the returns and so forth, which are inflated. I figured the figure was somewhere a lot less than that, maybe a third lower,” he said.

Still, Evans said he intends to work with the state to reach a settlement.

“I want to work something out so I can take care of my customers, take care of the state of Indiana, and take care of my family,” he said.

LICENSE REVOKED

On Thursday, DOR’s Special Investigations Unit placed a large orange sign on the tire shop’s door, warning that any business conducted there would be considered a Class A misdemeanor. It’s a step that’s supposed to be taken anytime a businesses’ operating license, known as an RRMC, is revoked. According to state law, any business with delinquent sales tax remittance is subject to revocation of their RRMC.

But, despite the fact that the state alleges Dave Evans Tire, Inc. had delinquent sales tax for the last 19 years, records show the businesses’ RRMC wasn’t revoked until September 2011.

“It expired, and, he didn’t renew it,” said Andrew Swain, chief counsel of the Indiana Attorney General’s Revenue Division. “And, then he was sent a revocation letter, called a five-day letter, and he didn’t respond to that.”

Operating without a valid RRMC is illegal in Indiana. But, despite that revocation in 2011, Dave Evans Tire didn’t shut its doors until last week.

Asked if he knew the RRMC had been revoked, Evans nodded.

“Yes,” he said.

Asked if he was aware that was illegal, he nodded again.

“Well, yes,” he said. “But, only because … the reason I thought I was OK to operate was because I had been getting a lot of correspondence from them.”

Evans says a DOR “special investigator” — one of only six in the state at the time — visited his shop in person last summer. But, he claims no steps were ever taken to attempt to shut the shop down.

“No, not at all,” he said. “They didn’t do anything [to shut us down] until last week.”

WHY SO LONG?

Just two weeks after I-Team 8 first exposed how thousands of businesses were cheating the sales tax system and getting away with it, the DOR sent a letter to Evans, warning him that his business would be shut down in seven days, unless he paid the state back all $550,932.92 he owes. The DOR also says it has now more than doubled the size of its special investigations unit to 15 people.

But, despite those quick actions 19 years after delinquent taxes began piling up on the business, Swain, the Deputy Attorney General, says none of this should have been a surprise to Evans.

“It’s going to be very difficult for him to tell me he’s been trying to work things out with the state when, if he’s a business, he knows he has to have a retail merchant’s license. And, you’ve got to know you haven’t been remitting sales taxes and withholding your employees’ taxes for the last couple of years,” Swain said.

Still, Swain shrugged when asked why it took 19 years to get to this step.

“You’d have to ask the Department of Revenue that,” he said. “They refer the cases to us. We’re just their attorney.”

Pressed on the time frame, Dittmer, with the DOR, divulged very few details.

“You’re presuming that just now action is being taken. I cannot talk to you about the details, but I can assure you that this is not the first time we have worked with this particular taxpayer. This is not the first time we’ve been in contact with this particular taxpayer. There have been efforts before,” he said.

Court records show the State of Indiana has filed no less than 204 separate tax warrants against Dave Evans Tire since 1995. 67 of the warrants were for unpaid sales tax, 68 for unpaid withholding tax, and 69 for unpaid tire fees.

Dittmer wouldn’t comment on how many of those warrants were being settled, but Evans says he agreed on a plan to pay them — at around $1,700 per month.

“I was paying them,” he said. “But, money [got tight]. The last few months, I didn’t know what to do.”

Asked when he last made a payment to the state, Evans shrugged and said late last year.

“Well, maybe it’s been longer,” he said. “It might have been last April or May.”

LACK OF PROSECUTION

Despite the lack of a valid RRMC and despite the admitted lack of any payments in nearly a year, Dave Evans Tire remained open in 2013 and into 2014, continuing to collect sales tax.

Now, the doors are closed until taxpayers get their money back — or at least a substantial amount of it. But, records obtained by I-Team 8 show that approach is extremely rare.

According to the Attorney General’s office, the Department of Revenue has turned over just 11 cases of business tax fraud for civil injunction or criminal prosecution during the last 5 years:

  • 2010 – 4 cases
  • 2011 – 4 cases
  • 2012 – 1 case
  • 2013 – 1 case
  • 2014 – 1 case

That’s despite the fact that the list of revoked RRMC’s is now approaching 37,000 — an addition of nearly 1,000 businesses in the last three months alone.

While Evans’ case has not been referred on for criminal prosecution, both agencies say the civil actions taken should serve as a warning that those numbers are about to rise.

“Special investigations unit now has 15 people dedicated to researching our data, building these cases, and presenting these cases to the Attorney General’s office. They’re tasked specifically with discovering these outlier taxpayers and putting cases together. You will see more,” Dittmer said.

“I hope this sends a message,” Swain agreed. “That’s one of the purposes of doing something like this. We are hoping to send out a deterrent message to other businesses and taxpayers that we are looking into this. And, the Department of Revenue is also looking into this. You need to come forward and pay your fair share.”

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