Owner of Tacos Guaymas restaurants charged with theft, accused of not paying $5.6 million in sales tax

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.

66 Replies to "Owner of Tacos Guaymas restaurants charged with theft, accused of not paying $5.6 million in sales tax"

  • dcn March 9, 2018 (4:28 pm)

    Hmm, if he pocketed more than $5.6 million in unpaid sales tax, but would only have to pay “up to $5 million in restitution” and “$150,000” in penalties, doesn’t the owner still come out ahead in his scam? I guess only the potential prison sentence (which probably won’t happen) would be the punishment for his crime.

    • Swede. March 9, 2018 (8:09 pm)

      I noticed the difference in eventual ‘penalties’ and amounts ‘taken’ myself . Still a minimum of $450000 extra is pretty good right! Sure a lot more than I made the same time period. 

      It’s a ‘white collar’ crime so like you said, slap on the wrist, small penalty payment and off he goes. 

  • Vanessa March 9, 2018 (4:44 pm)

    So sad. Good people gone bad. 

    • Mark C March 9, 2018 (7:13 pm)

      Good people gone bad, or bad people got caught?

      • Dennis March 9, 2018 (8:42 pm)

        Bingo – busted, still comes out 450k to the good – great legal system. .

    • Steve Schwab March 9, 2018 (7:34 pm)

      Hmm, I’m not so sure. I’d call him a thief. How many children can 5 million dollars help? 

      • Itsoverman March 11, 2018 (2:56 pm)

        Is that what tax money does? Help children?

  • newnative March 9, 2018 (5:01 pm)

    this is heartbreaking. 

    • Dramabomb March 10, 2018 (8:59 am)

      No, someone cheating on their taxes is not heartbreaking

      • newnative March 15, 2018 (4:32 pm)

        Dramabomb, I can feel the way I want about my favorite restaurant. I can’t imagine telling someone how to feel. 

      • rupert March 19, 2018 (3:57 pm)

        Excuse me. No one knows if they cheated on their taxes. Saying so is factually wrong. People are innocent til proven guilty.  It is heart breaking that people are ready to jump to conclusions. 

  • CryingInMyCeviche March 9, 2018 (5:16 pm)

    This is disappointing on so many levels.  With the influx of larger chain restaurants like Chipotle into West Seattle, we’ve remained loyal customers at Taqueria Guaymas.  That ends today.  The owner can’t defraud the state of revenue and expect people to remain invested in his ongoing presence in the neighborhood.  I feel sorry for the staff who had no knowledge of the situation according to the filings, and will likely lose their jobs if he loses his business.

    • rupert March 19, 2018 (4:00 pm)

      Why would you not give them a chance like everyone else to prove their innocence? Based on this article nothing but a hunt for sales tax suppression software was mentioned in the article. Nor did it say how much they paid in sales tax, or give any indication other than the absence of computer tickets that this software was being used. One would expect the size of the restaurant to also play a factor or the amount of payments to vendors for food to play a factor. I see none of this reported. 

  • bolo March 9, 2018 (5:19 pm)

    So if “sales-suppression software” is really a thing and presumably (widely?) available, I wonder how common this type of tax evasion scam might be.

  • JJ37 March 9, 2018 (5:33 pm)

    I will still eat here. The AG only cares about enforcing property laws

    • Jon Wright March 9, 2018 (10:03 pm)

      You sure know how to stick it to The Man!

  • Raised in WS March 9, 2018 (5:52 pm)

    I know that this place used to be cash only, although the last time I was nearby I saw credit card decals in the window so I guess that’s changed. I wonder if that has anything to do with this? I always find it weird when a business/restaurant is cash only, it makes it really inconvenient and I would imagine it makes people feel less inclined to stop in.

    • WSB March 9, 2018 (6:07 pm)

      If they were ever cash only, it’s been a while. We have gone there every couple weeks or so for some time and always paid by card. My co-publisher did recently notice that they were using a new point-of-sale system. – TR

      • fiz March 9, 2018 (6:31 pm)

        It was cash only for several years and inconvenient but we thought worth it for the great burritos.  We were getting carry out prior to 2005 and it was cash then.

        We will miss it.

        • Juan March 10, 2018 (6:32 pm)

          Insist until proven guilty right ?

  • MJ March 9, 2018 (5:53 pm)

    That is a lot of Tacos!  When one party pays evades taxes the rest of us pay more that is not fair.

    • Swede. March 9, 2018 (8:14 pm)

      Like amazon! Paid zero taxes but will get $789 millions in benefit from the new tax reform. 

  • JeffK March 9, 2018 (6:09 pm)

    What is it with the crooked Mexican restaurants in the Junction?!

    • WSB March 9, 2018 (6:16 pm)

      There is only one other that has had trouble, to my knowledge in 10 years of coverage.

  • Azimuth March 9, 2018 (6:25 pm)

    If he had used software that rounded to a fraction of a penny he would have been fine, unless he relied on Michael Bolton’s software

    • Swede. March 9, 2018 (8:15 pm)

      Damnit! Always put that decimal in the wrong place! 

    • The Man March 10, 2018 (10:57 am)

      Hahaha! Great post :)

  • Joan March 9, 2018 (7:32 pm)

    Another person who has cheated our state of precious tax money. This is why our schools have no money and every budget session is excruciating.

    • pw March 10, 2018 (12:27 pm)

       Wrong.  The state and the schools get plenty of money.  Just have too many hands in the pockets of crooked politicians who can’t/won’t budget the money properly.  

  • TreeHouse March 9, 2018 (7:35 pm)

    And these numbers only relate to the sales tax theft aspect of it. If he was underreporting cash transactions for sales tax, then he most likely was not reporting it for federal tax either. Defrauding $5.6 million dollars of sales tax at 9.6% means he most likely did not report $58,333,333 of gross income for federal taxes. The community loses big time when people don’t pay their share. I thought I was doing good when I gave them my business instead of chipotle. 

    • WS Mom March 10, 2018 (12:18 pm)

      Is anyone else thinking $58 million worth of Mexican food sales over 4 years seems like a lot? Even over 7 locations? Holy burritos!!

      • Good point March 10, 2018 (11:27 pm)

        Such a good point. I find it fairly unlikely that this restustant  was capable of selling that many tacos in this period of time. Basic math at 9% sales tax does not add up. I will continue to support this business As this sounds like a young buck itching for a case to win against a small family business 

        • rupert March 19, 2018 (4:02 pm)

          Agreed!

      • Bob March 15, 2018 (3:29 pm)

        It’s not an exact science.  The state doesn’t know exactly how much they under paid.  Sounds like they did a sample using 35 under cover cash buys and seeing how many actually showed up on point of sale system and then projected the underreported amount based on the results.   What I want to know is where do I sign up to be an under cover restaurant food eater?

         

  • Pete March 9, 2018 (8:31 pm)

    Greedy and so incredibly stupid.  An immigrant, whether he is now a citizen or not is subject to deportation if they are convicted of a crime.  $5 mil in tax fraud has deportation written all over it. 

    • WSB March 9, 2018 (8:45 pm)

      (A) Unless you have some direct knowledge, there is no information about the defendant’s citizenship in anything I’ve seen, nor is it relevant to anything about the case that I found in research.

      (B) Your claim about being subject to deportation if convicted of a crime, if you are a naturalized citizen, is wrong, according to multiple references (here’s one and another).

    • Hatedoesnotlivehere March 9, 2018 (9:11 pm)

      Hate has no place in WS and racist individuals like yourself don’t either 

    • Jort March 9, 2018 (11:04 pm)

      A U.S. citizen is subject to deportation from their own country?! Wow! News to me! And probably also news to the constitution, since what you’re saying is literally untrue. 

    • SoCal562 March 10, 2018 (2:30 am)

      #FakeNews  Check your facts and research before spreading false information on community boards. These incorrect comments may not affect you, don’t walk on territory you aren’t familiar with.

  • jissy March 9, 2018 (9:13 pm)

    No Bueno.

  • Fire Ball March 9, 2018 (9:22 pm)
    Something doesn’t add up, If he owes $5.6m in unpaid taxes..
    Based on what the State says at 10% tax rate, 

    Tacos Guaymas would have to do over $38,000.00 a day in taco sales…
    • AJP March 9, 2018 (9:38 pm)

      Between all its locations, I could see it. Also, being an auditor on this case would have one perk: getting to eat tacos! 

    • rupert March 19, 2018 (2:52 pm)

      Question. Has anyone stopped for a minute to consider why this article isn’t asking how auditor came up with such a huge some?

      At $38,000 a day at five locations that is still assuming these locations sold $7,600 a piece.  Without liquor sales that seems unreasonably high based on the size of these restaurants.

      Let’s all stop for a min and take a min to stop and think what is the most expensive thing we’ve ever ordered here.  Almost everyone I know orders the tacos or burritos…some spring for plates but for a quick lunch the $7 burrito is where I am at.

        Let’s be generous and assume it is $9 order. At $9 food orders to make $7600 a day that means there would have to be 844 sales a day. 

      Even on a busy day I have never seen where there could have been that many people at TG in a day. 

      So based on common sense here…I am going to assume innocent until proven guilty.  Let’s not trash a small business because someone came in and told them their computers numbers didn’t add up. Without actually looking at the size of the restaurant. 

  • West Seattle Hipster March 9, 2018 (10:09 pm)

    There are much better Mexican restaurants in West Seattle to dine at, and not ones that broke the law.  Shameful!

    • Alki resident March 9, 2018 (10:30 pm)

      You mean like Puerto Vallarta?

      • SoCal562 March 10, 2018 (2:33 am)

        Lmao. There is that great taco truck in White Center if you haven’t tried it, cheaper than Guaymas too. Can’t dine it but what’s better than enjoying a cheap authentic meal at home with your family?

        • Guy March 10, 2018 (3:07 pm)

          Pecado Bueno.

  • Anthony March 9, 2018 (11:43 pm)

    I’d guess that a percentage of that number is interest and penalties, which add up verrrrry quickly. 

  • WSeattleite March 10, 2018 (3:41 am)

    5.6 million in 5 years for 6 small establishments.   One signs on the dotted line when one goes into business these days , so no excuses for not paying up.  That said, I can see where the real theft is happening.  Rampant taxation from our very own local government.  Many people decry the lost funding to the “public” coffers.   I wish more attention were paid to what was being done with  tax money.  There is no efficiency there, there is no option there, there only is what it is.  Yes, a democratic system is a check in the process, but where we are at now is where it will take 2 generations to make any real shift in direction.  Fellow neighbors, please pay attention.  We could have had a public transit system years ago mostly paid off if all of the onerous layers of Government handled their budget as all of us are forced to do, with the money they have been handed.   Look closely at each  proposed levy in the elections, keeping in mind that your tax dollars are funding a portion of the glossy brochures and catchy marketing nomenclature on issues still to be voted upon. 

    • WestyD March 10, 2018 (8:24 am)

      This!! ^^^

    • Jort March 10, 2018 (10:43 am)

      I’m impressed that you are able to twist the news about an individual’s massive tax fraud into an anti-government screed. That is some really impressive mental gymnastics. 

      • WSeattleite March 10, 2018 (4:04 pm)

        Jort, a sincere thank you for your compliment.  Mental gymnastics has been one of my stronger suites in life.  That said, my thoughts were not meant to be “anti-government”.  I am very pro-government as there is a real value to the people that is necessitated within population centers that must take care of common social issues.  I will always support good governance that supports the common good.  What I am against, is government with little accountability, and wanton waste of the taxpayers hard earned dollars.  This is what I see in our Locale, and beyond to a State and Federal level.  Tax fraud is wrong and should be punished.  Involuntary taxation with little return to benefit the tax payers is wrong and should be punished. 

        • Noway March 11, 2018 (8:38 pm)

          Wseattleite + 1

  • DD March 10, 2018 (11:48 am)

    If the software repressed data on cash sales, despite the experiment of the auditors buying meals and then comparing that day’s receipts to their actual purchases, how do they know the actual charges/receipts on prior years’ sales?  That data is gone.

    • LDB March 10, 2018 (10:10 pm)

      The auditors are allowed to estimate sales when records are determined to be unsuitable. WAC 458-20-254. 

      • rupert March 19, 2018 (2:59 pm)

        Like I mentioned…Auditors seemed to grossly over estimate here for some publicity. Why is this allowed. Why not simply ask for receipts for food purchased? Based on their food deliveries  they could easily determine how much food was purchased and from that estimate how much was actually sold. If they don’t trust their numbers, i’m sure their are bank statements or vendor had records. Jumping straight to reporting only on the POS seems like a gross overs simplification. 

  • skeeter March 10, 2018 (12:46 pm)

    TG was all cash until a few years ago.  That’s true. 

    I’m frustrated that my money went to this restaurant.  I have zero tolerance for businesses that cheat and steal from the taxpayers.  I will happily support Chipotle or Taco Time instead. 

    Thank you for the reporting WSB. 

     

    • John March 10, 2018 (6:42 pm)

      insist until proven guilty tho bro

  • steve March 10, 2018 (4:04 pm)

    I used to love going to TG.  Still do sometimes, and pay cash, but it’s declined a bit.  I always paid cash, and don’t recall ever getting a receipt. Now that I think about it Taco Del Mar(Baja Taco?) never gives me a receipt either.  Even the taco trucks give receipts, geez…. Hmmm, I gotta think about this.  I may have to become a card carrier.  Sad.  Our system only works if we pay our taxes, and get screwed evenly, right?  Gonna have to put a HOLD on TG.

  • M.B. March 10, 2018 (8:57 pm)

    For those worried that “cash only” may usually mean someone is pulling a scam, please keep in mind that these business owners get charged a processing fee every time someone runs a card. The businesses also aren’t supposed to set a minimum amount for using a credit or debit card (though some do anyway). Running the card as credit usually, but not always, costs a business more than running the card as debit. For places with tight margins like a food truck, those charges add up and can really eat into profits if you get a lot of cards run for relatively low-cost tickets.

  • Jim P. March 11, 2018 (1:52 pm)

    “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.”

    To a net profit of $94,400 it would seem.  So crime *does* pay and fairly well too.

    I completely fail to understand why restitution is not 100% plus interest. The fine should be a multiple of the amount stolen on this stuff.

    Friends in high places protecting each other perhaps?

  • Andrew March 11, 2018 (8:53 pm)

    I knew something was wrong with that place when I asked if their salsa has flour in it and they said no, but I still had a terrible reaction and found out it did.  So Not cool.  who puts flour in their salsa!?!

    • Wth March 12, 2018 (12:48 pm)

      Thank you for this indisputable proof of salsa formulation deception. It appears that you are clearly the expert in such matters, and your tireless efforts broadcasting your salsa analysis lab findings are well beneficial to flour allergists everywhere. 

  • I. Ponder March 12, 2018 (12:22 pm)

    This is common practice for restaurants. I assume they’re grossly under-reporting taxes at any restaurant that’s cash only. Taxes fund public services like schools. We are paying higher property taxes because they must be funded and scammers aren’t contributing. Unfortunately this is the American way.

  • Bill March 12, 2018 (3:45 pm)

    I have been suspicious of several businesses here in White Center that routinely do not offer receipts or they use generic written invoices. It makes it easy to hide income with no software needed.

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