The Washington State Attorney General has filed tax fraud charges this week against the couple who ran First Hill’s shuttered Mexican eatery El Mestizo.
The state alleges that Jose Carrillo and Sarah Groome failed “to remit all the sales tax it collected from customers.”
El Mestizo shut suddenly in fall 2011 as owners said they were on the hunt for a new location. The building the restaurant called home at 550 Broadway was slated to make way for this seven-story development.
According to documents, the couple’s corporation has paid $23,509 to cover the unpaid sales tax, interest and penalties. The maximum additional penalty a corporate defendant can face for filing a false return is $10,000 per instance. A 2011 ruling shows a $42,063 judgment against the company that operated the restaurant.
The money problems also caused issues with El Mestizo’s landlords. In 2012, a court ruled Groome and Carrillo owed more than $33,000 due to unpaid rent.
According to the charging documents, the tax issue was found during a state audit of the business. The state AG says that Carrillo “admitted to using the tax to pay the Internal Revenue Service and restaurant employees.”
Carrillo and Groome are scheduled to be arraigned later this month.
I think there is a misleading statement above. The maximum penalty a corporate defendant can face in a case like this is jail time. Whenever there is collected and unremitted sales tax you have big issues. First the audit will be extended to the opening of the business, then all sales tax collected will be due, there will be interest, and the possible penalties that can be assessed are upwards of 130% of the tax due. Also, any person deemed to be in charge of the collected sales tax can face jail time. Coming from a former state auditor this is something that businesses need to know.