Home Courts Yonkers Wholesale Beer loses appeal on $9.5M state tax assessment

Yonkers Wholesale Beer loses appeal on $9.5M state tax assessment


An administrative law judge has reaffirmed a $9.5 million sales tax assessment against Yonkers Wholesale Beer Distributors Inc. and owner Richard McDine.

Judge Dennis M. Galliher ruled in October that the beer business had willfully failed to file several sales tax returns and had not proved that most of its sales were tax exempt.

Yonkers Wholesale claimed that 80 percent of its sales were exempt from taxes as wholesale transactions to retail vendors and 20 percent were taxable as retail sales.

That ratio, the state argued, is unusually low.

Yonkers Wholesale Beer
Image via Google Maps.

The state Division of Taxation calculated that Yonkers Wholesale failed to properly account for $92.9 million in sales from 2009 to 2016.

McDine did not immediately respond to a message requesting his side of the story.

Yonkers Wholesale operates a store at 424 Riverdale Ave. as Yonkers Discount Beverage Center.

The dispute traces back to 2009, when a new law required alcoholic beverage wholesalers to file annual returns that enumerate transactions with tax-exempt vendors. Yonkers Wholesale filed the returns for 2009 and 2010, according to the judge’s ruling, then stopped filing.

The state issued an audit letter in 2013, demanding proof of exempt sales: invoices, cash journals, cash register tapes and tax-exempt documents. The business responded with bank statements, federal tax returns and a list of fixed assets.

The state made more requests for sales records but Yonkers Wholesale, the state maintained, provided neither the detailed sales information nor the required tax returns.

“We have found that you owe additional tax,” state auditors said in a 2015 letter, “as a result of errors you made in recordkeeping and reporting sales.”

The tax agency used information from third-party vendors to calculate $92.9 million in “unaccounted for sales.” The state accepted Yonkers Wholesale’s reported gross sales but was unwilling to accept, without proof, the business’ estimate of how much was tax-exempt.

The state assessed $9.5 million in taxes, penalties and interest, and proposed a revocation of the beer business’ sales tax certificate of authority.

Yonkers Wholesale petitioned the Division of Tax Appeals, arguing that the assessments “are arbitrary and do not reflect the correct amount of tax due.”

Galliher found that Yonkers Wholesale did not dispute that it had failed to file required tax returns, despite numerous requests by the state, and it had presented no additional documents or witnesses to verify that 80 percent of sales were nontaxable.

“In the absence of any such records,” he ruled, the state “is under no obligation to guess as the portion of a vendor’s sales, if any, that are, or might possibly be, non-taxable.”

Accordingly, he concluded, the penalties are sustained.

Yonkers Wholesale was represented by accountant Michael Buxbaum of Buxbaum Sales Tax Consulting LLC of New City.

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