Released May 13, 2008
A Los Gatos businessman plead guilty to five felony counts of failure to file annual income tax returns, 17 misdemeanor counts of failure to file quarterly sales tax returns, and one count of operating without a seller’s permit. The BOE and Franchise Tax Board (FTB) collaborated on the case, which was prosecuted by the Santa Clara County District Attorney’s Office.
Kurt C. Scanlin, 50, is the owner of System Form and Label Products of San Jose and California View Fine Arts of Los Gatos. Scanlin failed to report sales of more than $1.2 million during January 1, 2000 through September 20, 2002. In July 2003, Scanlin’s seller’s permit was revoked by the BOE for failure to file sales tax returns. In addition, he failed to file state income tax returns on the more than $870,000 in gross income he earned during 2000 – 2004. As part of the plea agreement, Scanlin will pay restitution to the BOE of $157,650 and $89,484 to the FTB. Scanlin is scheduled to appear for sentencing in Santa Clara County Superior Court on July 11, 2008.
Scanlin operated his business through a trust naming himself as trustee. Scanlin made all the business decisions and controlled the business. The courts routinely strike down the argument that trusts shield income from taxation. Legitimate trusts do not transform a business’ expenses into deductible expenses for tax avoidance.
Anyone who has knowledge of tax fraud may call the FTB’s informant hotline at 800.540.3453 or the BOE’s tax evasion hotline at 888.334.3300. For more information, visit the BOE site on sales taxes at www.boe.ca.gov/sutax/sutprograms.htm.
The five-member California State Board of Equalization is a publicly elected tax board. The BOE collects more than $53 billion annually in taxes and fees supporting state and local government services. It hears business tax appeals, acts as the appellate body for franchise and personal income tax appeals, and serves a significant role in the assessment and administration of property taxes.