Alcohol and Tobacco Taxes
The term “tax evasion” is tossed around frequently in today’s climate – from political leaders to big-box corporations, tax evasion is a massive problem.
Alcohol and tobacco corporations are two areas, in particular, that have been affected by tax evasion and general revenue issues.
Below is more information on tax law in general, how it affects alcohol and tobacco corporations, and how consumers are affected.
If you’re been accused of filing fake or fraudulent taxes relating to alcohol or tobacco, call the Zoukis Consulting Group now.
The Law
Tax law is, unsurprisingly, complex. There are several different statutes involving tax evasion, fraudulent claims, and so on.
§2T1.1 is the most relevant to alcohol and tobacco corporations and sales. Like most criminal offenses, tax evasion and fraud are at levels that represent tax loss.
Tax loss for alcohol and tobacco is the total amount of taxes due or the amount evaded. A few monetary levels represented are:
- Level 6 – $2,500 or less
- Level 8 – more than $2,500
- Level 10 – more than $6,500
- Level 12 – more than $12,000
Levels and punishment for the offense go up to 36, which is more than $550,000,000.
The IRS separates corporate tax evasion into two categories – evasion of assessment and evasion of payment. Evading assessment is filing a false income or deductions, and evasion of payment involves not submitting tax returns.
Regulations
The specific regulations of §2T1.1 for filing a false report are as follows:
- If the offense is falsified income, the tax loss is 34% of the reported income – plus 100% of all false credits.
- When the offense is a false claim or exemption, the tax loss equals 34% of the fraudulent exemption amount and 100% of the false claims.
- For a future exemption, the amount owed is the same as mentioned in 1 & 2.
- If the corporation is guilty of all three offenses, each amount gets compounded to represent the total tax loss.
The second part of the statute involves evading taxes entirely. The tax loss amount is the amount that went unpaid – for corporations, which includes 25% of gross income.
Also mentioned is a willful failure to submit tax returns and claiming improper refunds.
Additionally, tax loss cannot decrease by any payment following the offense.
Debates and Data
There is a good bit of debate on whether tobacco and alcohol tax evasion affects sales.
One argument is that corporations evading taxes means Americans purchase more tobacco because it costs less. Alcohol sales are seemingly unaffected.
The other point of view, mostly from corporations, is that high taxes equal fewer sales and ultimately lead companies to file false returns.
Health is another problem that cigarette taxes challenge. Tobacco-Free Kids demonstrates that every state that increases tobacco taxes has a substantial decrease in cigarette sales:
- California – increased taxes by $2.00, sales decreased by 27.8%
- Florida – increased taxes by $1.00, sales decreased by 27.4%
- Pennsylvania – increased taxes by $1.00, sales decreased by 18.1%
Each side has a valid point, but data shows that higher taxes equal fewer sales.
Retailers and Distributors
Retail alcohol and tobacco taxes are a much more substantial issue than consumer taxes if not paid.
Most states require every distributor of liquor to pay some amount of tax every month. You also have to have a liquor license to sell alcohol, and if you serve alcohol at your establishment, you have to have a pouring certification for distribution.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) mandates that a $1,000 tax is due by tobacco distributors before any sales. If a business operates illegally or without a license, a fine of $1,000 per offense is likely.
The TTB does not enforce laws, but they do ensure all businesses and vendors are licensed. They also:
- Issue or revoke permits
- Prevent those who are likely to not follow the regulations from entering the field
- Protect consumers
Tobacco distribution is a more challenging process than alcohol distribution. To become a tobacco seller, you have to submit a bond with the government. If it’s approved, you can apply for a permit and, if your application is approved, you can sell tobacco.
If corporations fail to submit returns or report sales, they face the penalties listed in §2T1.1.
Call Us for Help Fighting Your Alcohol and Cigarette Taxes Charges
Corporate tax evasion is a serious issue, and it doesn’t just affect businesses. When alcohol and tobacco companies fail to pay taxes or file false reports, taxes go up – leading to higher prices.
Tobacco and alcohol tax evasion doesn’t result in more money for anyone in the long run – it’s best to do it legally.
The Zoukis Consulting Group can defend you in court and see that your rights are upheld. Call now for a consultation.
Published Feb 15, 2022 by Christopher Zoukis, JD, MBA | Last Updated by Christopher Zoukis, JD, MBA on Jul 16, 2023 at 9:11 pm
