Comptroller Schaefer’s Alcohol Audit Project

Uncovers $9.65 Million in Unpaid Taxes

More Than $36 Million Uncovered Since 2002

ANNAPOLIS, MD (July 26, 2006)—Comptroller William Donald Schaefer today announced that his Alcohol Audit Project, used to uncover discrepancies between retail liquor sales and wholesale deliveries, has turned up $9.65 million in under-reported taxes this past fiscal year, ending June 30.  A total of $36.8 million has been uncovered since fiscal year 2002, the first year Comptroller Schaefer implemented the initiative.  

“This year, with the cooperation of the alcoholic beverage industry, we expanded our audits into Montgomery County,” said Comptroller Schaefer.  “We uncovered fraud in 57 percent of our audits and more than $9 ½ million in under-reported taxes.”

Since fiscal year 2002, the Comptroller’s field audit section has used sales records obtained from the state’s licensed alcohol beverage wholesalers and compared those with sales returns filed by the merchants they supply.  Wholesaler records disclose the amount of product delivered to each retailer, and from that, auditors can estimate the sales tax that should be collected.  Falling short of those estimates can trigger an audit. 

“Most alcohol retailers in Maryland run a good business, follow the law and turn in the sales taxes they collect,” said Comptroller Schaefer. “Some don’t, and are cheating their customers and the state.  We make it our business to find the money they’re hiding and bringing them into compliance.  Marylanders pay enough taxes without having to pull the weight of crooked businesses.”
 

There are 79 alcohol beverage wholesalers in Maryland that supply 7,130 licensed retailers in the state.  Over the last four years, the Comptroller's office has conducted 112 audits under this program, resulting in 64 cases of fraud and 22 cases of gross negligence.

Civil fraud can result in a penalty of up to 100 percent of the tax due and a waiver of the statute of limitations, which is normally four years. Gross negligence also involves a waiver of the statute of limitations in addition to a 10 percent penalty on assessments. In certain cases, the assessed period for back taxes has been extended to the early 1990s.