The state Attorney General’s office announced this afternoon that the owner of West Seattle’s Tacos Guaymas restaurant and others is charged with theft for allegedly not paying $5.6 million in sales tax. 57-year-old Salvador Sahagun of Bothell is accused of doing this by illegally using “sales-suppression software” for cash transactions. We looked up the court documents to get West Seattle specifics, but first, here’s the AG’s news release:
Attorney General Bob Ferguson filed charges against the owner of Tacos Guaymas restaurants for allegedly using “sales suppression software” for cash transactions, pocketing more than $5.6 million in sales tax.
This is the largest “sales suppression software” in Washington state history –– and potentially the largest in the country.
Salvador Sahagun, owner of several Tacos Guaymas restaurants in King and Snohomish counties, is charged in King and Snohomish County Superior Courts with a total of six counts of first-degree theft and three counts of possessing and using sales suppression software, which is illegal in Washington state. In addition to a potential prison sentence, the defendant faces up to $150,000 in penalties and could be liable for up to $5 million in restitution to the state.
“When businesses pocket sales tax, they are stealing from Washington taxpayers,” said Ferguson. “That money should be funding our schools and parks, not deceptive businesses.”
Salvador Sahagun operated six Tacos Guaymas locations in West Seattle, Broadway, Greenlake, Fremont, Lynnwood and Marysville. During an audit, an auditor with the Washington State Department of Revenue found that point-of-sale records from these restaurants did not match with tax returns submitted by Sahagun. Additionally, the auditor found that the majority of sales receipts were missing from Sahagun’s point-of-sale system.
Run on a point-of-sale computer or cash register, sales suppression software surreptitiously deletes or underreports cash transactions. The software then re-balances the company financial records to show a lower sales figure, reducing the business’ sales tax obligation. The retailer pockets the difference between what the patron paid, including the full sales tax, and what the software reports. These unscrupulous retailers often keep “two sets of books.”
Suspecting that Sahagun was using sales suppression software, Department of Revenue employees visited the seven restaurants on several occasions and paid cash for their meals. The auditor then compared the employees’ receipts with the receipts on the point-of-sale system to determine whether the transactions existed and the amounts matched. The auditor found that three of the restaurants were using sales suppression software to delete or underreport cash transactions.
The auditor determined that Sahagun owed thousands of dollars in sales tax at each location, ranging from $43,339 to $2,197,460. In total, the auditor determined that the owner owed $5,615,497 to the state.
The charges contained in the complaint are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
An arraignment in the case is expected March 21 in both King and Snohomish County Superior Courts.
In 2013, Washington passed a law making it a class C felony for anyone to “sell, purchase, install, transfer, manufacture, create, design, update, repair, use, possess, or otherwise make available” software or hardware that deletes transactions.
In February 2016, the Washington State Attorney General’s Office filed the first “sales suppression software” case in the country. In that case, the owner of Bellevue restaurant Facing East used sales suppression software to pocket nearly $395,000 in sales tax. The owner pleaded guilty, paying $300,000 in restitution to the state and $600 in penalties and fees.
After receiving the news release, we looked up the documents on file in the King County Superior Court online system.
Sahagun is accused of breaking the law between the start of 2012 and the end of 2016. One count of first-degree theft specifically names the West Seattle restaurant; the second count names the restaurants on Capitol Hill and in Green Lake and Fremont. (We don’t have the Snohomish County filings.) Two counts of use of “sales-suppression software” are filed in KC Superior Court, one specifically naming the West Seattle restaurant, the other naming Fremont.
The probable-cause document explains that “sales-suppression software” runs on cash transactions, not credit. It says the undercover visits by state Department of Revenue employees included five at the West Seattle restaurant between December 16, 2015, and December 29, 2015, and 30 visits to other locations. Of the $5,615,497 that Sahagun allegedly owes to the state as unpaid taxes, the court documents say $178,575 is from West Seattle. The auditor also reported determining that Sahagun “personally runs each of these restaurants,” and each day “gathers the cash and reviews the prior day’s sales.” No one else is named in the court document and there is no allegation that anyone else in the company was complicit. Since the AG’s news release used past tense, we checked city and state records to verify that Sahagun is still the restaurants’ owner.