$13.6 Million forfeiture in tobacco tax evasion case


SACRAMENTO
August 12, 2014 9:01pm


•  Settles charges from complex shipping scheme

•  “Tax fraud hurts all Californians, especially those who rely on the vital programs these taxes fund”


The tax man does not like to be stiffed. That’s something the owners of the House of Oxford Inc., of New Jersey have found out.

The company and its officers have agreed to forfeit to the United States more than $13.6 million in cash, property, jewelry, artwork, and luxury automobiles that were acquired with proceeds of the sale of tobacco products in California in a manner that evaded the payment of the required state excise tax, says U.S. Attorney Benjamin Wagner.

California imposes an excise tax, which is set annually, on non-cigarette tobacco products known as “other tobacco products” (OTP). The 2014-15 rate is 28.95 percent. California law defines OTP as all forms of cigars, smoking tobacco, chewing tobacco, snuff, and any other items made of or containing at least 50 percent tobacco.

A large percentage of the proceeds of the excise tax are used to fund California’s early childhood development program, First 5 California.

According to court documents filed in the civil settlement, House of Oxford helped other companies evade the California OTP excise tax by shipping OTP to California, but falsely billing the sales to other states, shipping OTP to states located near California knowing that it would be shipped into California without the tax being paid, and by shipping to addresses in California that were not licensed to receive tobacco by the California Board of Equalization.

“Today’s forfeiture is the latest result of the collaborative effort of federal and state investigators and prosecutors into systematic tax evasion in the distribution of tobacco products in California,” says Mr. Wagner. “We have obtained criminal convictions of 23 persons in this effort. The $13.6 million forfeiture announced today, one of the largest civil forfeitures ever in this district, serves as a further warning to anyone who would be tempted to defraud the State of California.”

“This recovering of tax dollars lost to the underground economy is crucial to leveling the playing field for California businesses. Tax fraud hurts all Californians, especially those who rely on the vital programs these taxes fund,” says state Board of Equalization Chairman Jerome Horton.

The BOE estimates the state will lose approximately $87.8 million in excise taxes for 2014 due to untaxed distributions of non-cigarette tobacco products. This is down from the BOE’s 2007 estimate of $94 million in annual losses.

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