New York State has the most advanced whistleblower law in the country which, among other things, allows for whistleblower claims against state tax cheats and for the whistleblowers to collect a percentage of the moneys reimbursed. The question is, why is New York the only state to pass such a law? It is well established that millions in state taxes go unpaid each year due to tax evasion. Although the New York law has not been in existence very long, it has been very effective in catching tax cheats. To the benefit of the New York economy. It also gives incentives to whistleblowers who are entitled to up to 30% of the amounts collected by the state.
Note today’s announcement from New York Attorney General Eric T. Schneiderman that Topline Appliance Center and its principal owner, Michael Moretti, have agreed to pay $1.56 million to settle allegations that they knowingly failed to collect and pay sales taxes and corporate franchise taxes to New York over an almost 10-year period. Topline Appliance Center has multiple locations in New Jersey, and it sells and delivers high-end appliances to New York customers.
Attorney General Schneiderman alleges that over the course of almost 10 years, Topline Appliance Center and Moretti sold or delivered high-end appliances to New Yorkers from their New Jersey stores without collecting any New York State and local sales taxes. Topline also failed to pay proper New York corporate franchise taxes despite doing business in New York. Failing to collect and pay these taxes gave Topline an improper competitive advantage over appliance stores located in New York.
This action began when a whistleblower filed a complaint in state Supreme Court in Manhattan. Attorney General Schneiderman’s investigation concluded that Topline and its principal owner evaded approximately $668,000 in taxes.
Under the False Claims Act, whistleblowers may be eligible to receive up to 30 percent of any money recovered by the government as a result of information they provide. The whistleblower in this action will receive $313,984 from the settlement proceeds.
So why doesn’t Massachusetts pass a similar law given that estimates show that millions of dollars in state taxes go unpaid due to tax evasion. Couldn’t we use the funds to rebuild the roads, fund our schools and house the homeless? The law requires specific and detailed evidence of the tax evasion which is not found in public records. This would be a boost to our economy and would rectify a longstanding problem.
