New York Attorney General Letitia James this morning announced a settlement under which the state will be able to collect taxes on air that have gone unpaid.
The company Service Station Vending Equipment Inc., (SSVE) based in Floral Park, which operates in six states, agreed to a settlement with James”™ office for sales taxes it was supposed to pay to New York but didn”™t. The settlement, including back taxes and penalties, totals $4.25 million.
The company places vending machines at gas stations and similar facilities that dispense air that can be used by motorists to inflate their vehicle”™s tires. In addition, SSVE places coin-operated vacuums at those locations.
The company advertises that it manufactures the equipment, maintains the machines and handles money that is collected so that gas station owners and others placing the company”™s machines on their premises don”™t have to do anything while receiving a share of the money that”™s collected.
According to James, company owner William McCabe knowingly failed to pay tax due on sales of air inflation services, as well as engaged in fraudulent tax avoidance schemes by underreporting sales and paying workers off the books.
According to documents from James, the company”™s workers would go from location to location and empty the machines of quarters that had been collected, then weigh the quarters to determine how much money had been taken in.
In some instances, according to the documents, some money was set aside ostensibly to pay sales taxes, but the money never actually made it to New York state.
James reported that in 1997, SSVE requested an advisory opinion from the New York state Department of Taxation and Finance on whether sales from its coin-operated air machines were exempt from sales tax.
In response, the agency issued an advisory opinion that explicitly stated that receipts from sales of services rendered by air inflation machines are subject to sales tax. James also reported that the company”™s accounting firm advised that sales taxes needed to be paid.
An investigation by the Attorney General”™s Office found that SSVE and McCabe evaded more than $2.4 million in sales taxes for services for the period from 2010 through 2018. SSVE and McCabe also evaded income taxes, employee withholding taxes, and workers”™ compensation payments to the New York state Insurance Fund by underreporting sales and paying workers off the books.
“As New York continues to suffer budget shortfalls, we won”™t allow any company to further deflate our state”™s finances and avoid millions in tax payments,” James said.
“If New Yorkers need to pay for their air, we”™re going to ensure those selling it pay their taxes. Those who aim to cheat the system should know that their fraud will blow up in their faces because my office will continue to aggressively pursue those who defraud taxpayers and the state.”
