Citizens Entrapped Into Skipping the Sales Tax

By Sydney H. Schanberg

New York Newsday, December 5, 1986

Why do people generally believe that the prominent and powerful get special treatment from government agencies, officeholders, police brass, prosecutors and the courts? I suppose it’s because there’s so much evidence that it’s true.

One of the latest demonstrations of the unevenness in the application of society’s rules has to do with the collection of the local sales tax. Most of us would like to avoid paying this surcharge of 8.25 percent on the goods we purchase, but haven’t found a way to escape it. Now, however, we learn that paying the tax is for schnooks, because the rich and famous are exempt.

The city and state tax departments won’t use the word “exempt” officially, but that’s the de facto policy for high rollers. Not for schnooks.

It seems that when New York’s tax officials decided not long ago to go after sales-tax evasion by posh jewelers and fur salons and other purveyors of “big-ticket” items, they weren’t prepared for a problem that immediately cropped up. The problem was that a lot of the customers were Very Important People and — I know this is going to shock you — these Very Important People were acting in collusion with the store owners and managers to evade the tax on their five- and six-figure purchases.

What happened next is often described as “politics.” The tax officials got nervous. They consulted with higher authorities. And, lo and behold, instead of being prosecuted or at least pursued for the money they owed the public treasury, the famous and potent customers were put in a special category known as unsuspecting dupes. They weren’t tax evaders, they were victims. Poor things.

So certain executives of such exclusive emporiums as Cartier and Bulgari and Van Cleef & Arpels were snared and indicted, but the bejeweled VIPs were excused from having to obey the tax laws. Amnesty for the special people. Not for the schnooks who shop at Alexander’s or Macy’s or Fortunoff’s.

Mayor Edward Koch explained the legal distinction between seller and buyer at these exclusive emporiums by saying that the customers had fallen prey to “moral entrapment.”

Although the courts have not conveniently sealed the records that contain the identities of these innocent souls, some of their names have nonetheless leaked into public print. I have no desire to add to their certain embarrassment at being morally entrapped, so I shall not list any of the names here. Rather, they can be described generically — though only for the public morale, so that the schnooks can sympathize with their mortification.

Thus, according to knowledgeable informants, the innocents include a former national security adviser, a billionaire arms dealer from the Arab world, a “queen” of a hotel empire, a real estate developer now specializing in skating rinks, a famous azure-eyed singer who appears in casino ads, a casino owner who also appears in the ads, a liquor magnate whose family originally ran hooch out of Canada and a television interview personality with a slight lisp.

The roster runs the gamut from the high to the mighty, from circles of New York pelf to friends of the White House family, but the list needs no further expansion to get the idea of who has membership in the tax-exempt, morally entrapped minority.

City and state officials all deny that these people were shielded from prosecution because they are influential or prominent or generous with their campaign contributions. That had nothing to do with their protected status, the officials say.

They insist instead that the reason for the customer amnesty lies in the language of the existing statutes, which is said to put the onus on the seller of the goods and makes it difficult to establish collusion by the buyer. But other law enforcement sources say the decision to give the VIP customers a free ride had little to do with the law and a lot to do with their status and influence.

One might well ask why, even if criminal prosecution proved difficult, civil action was not taken to recover the proper sales taxes from the customers. We are told frequently by our elected officials that we live in a time of scarce government resources; the lost taxes clearly run into the millions of dollars.

Further questions also come to mind. In addition to the expensive jewelry and fur salons, other businesses would seem to offer opportunities for sales tax collection. One obvious one is the world of art, where evasion is said to be rampant.

Last month, two art auctions alone — at Christie’s and Sotheby’s — ran up a total of $155 million in sales. Did all the New York buyers pay the sales tax?

There are 550 art galleries in New York City. Is the tax collected on all their sales or are the scams of the rich and famous in operation there, too, as they were with jewels and furs — such dodges as the empty package and the fake out-of-state address?

Yesterday, Mayor Koch announced a major investigative campaign to recover tax money from evaders who operate in what he called, in capital letters, The Underground Economy. Would it be presumptuous to suggest that before he burrows into the subterranean, he might start by looking above ground, at some of the important people he has come to know?

Just to reassure the schnooks that life isn’t all that unfair.

Powered by WordPress. Designed by WooThemes