State Owed $27 Million in Taxes, Penalty & Interest So Far

ANNAPOLIS, MD (June 17, 2005)-Maryland Comptroller William Donald Schaefer this week said his agency will continue to expand throughout the state a focused audit project that so far has uncovered more than $10.8 million in unpaid taxes by alcohol retailers in just four state jurisdictions. With interest and penalty added, the state is owed more than $27 million. Begun three years ago in Baltimore City, the Comptroller's office has since broadened its alcohol audit project to Worcester and Washington Counties and is now wrapping up assessments in Prince George's County.

"Thanks to cooperation from the alcoholic beverage industry, we can compare product deliveries to liquor stores and what they in turn report as sales," said Comptroller Schaefer. "As a result, we have found outright fraud in nearly half the cases we've audited with some businesses grossly underreporting sales taxes. We're constantly on the lookout, so we may be coming to a bar or liquor store near you."

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

In the last three years, the Comptroller's office has conducted 97 audits under this program, resulting in 51 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.