Government is, as we all know, just a word for the things we do together. But unfortunately government has an appetite for tax revenue that would put your average overweight consumer of cheap high carb ethnic food look like an anorexic on a kale diet. The result of this is that government revenuers are always looking for businesses that might be cheating the voracious state of their morsels of tasty tax revenue.

One such case was brought against Tacos Guaymas, a small taco chain in the Seattle area:

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.

Fortunately for the lovers of Tacos and the owner of the chain all these charges have been dismissed, with one restaurant pleading guilty to a separate minor charge of under-reporting by $800 due to a management employee embezzling revenue from the chain (and the taxman). However, in my opinion the claim above of “pocketing more than $5.6 million in sales tax” didn’t pass the laugh test if presented to anyone with some basic capability of doing sums.

If you look at the actual charging document you see that the charges refer to four restaurants over a period of 5 years (2012-2016). During that period it is alleged that 5.6 million dollars of sales tax was underpaid. Seattle has a sales tax rate of 10% (6.5% state, 3.5% city) so that implies that customers paid the taco shops $56 million for extra meals that were not reported to the state. And this is where we realize that some people in the Washington Department of Revenue has apparently been at the wacky baccy.

If you look at the menu for these shops (e.g. this one for Broadway – one of the locations mentioned in the complaint) you see that a burrito or taco plate costs a bit under $10. Add a drink and we’re looking at $12-15, add an appetizer and we’re up at $20. To keep the sums simple and to be generous to the DoR we’ll assume that the average customer spends $20 on his meal and thus the average sales tax owed per customer is $2. $2/customer means that $5.6 million alleged unpaid tax is the equivalent of 2.8 million additional customers. Assuming each location is the same then that’s 700k/location over 5 years and anaverage of 140,000 per location per year. 140,000 customers at a restaurant open 365 days per year works out at a bit over 380 customers per day. Assuming the restaurant is open for 12 hours/day (11am-11pm) that works out at 32 additional customers every hour. (if the restaurants aren’t open 12 hours a day 365 days per year then that number goes up, and bear in mind that some hours and days are unlikely to be as busy as others

This is how the astute realizes the sum claimed is absurd. The tax people should have too, especially since they apparently visited some or all of the locations in question. Unless the Tacos Guaymas outlets had an enormous takeout business or did a massive amount of catering there was no physical way that an additional 30+ customers could be fitted in the shops because these are not large locations. You can take a look on google streetview and see that these are locations where you can seat maybe 30 diners at any one time. In other words: given that there is no claim that the taco chain paid no sales tax, but rather that it underpaid, the claimed revenue could only have been generated if every seat in every restaurant was occupied almost continuously during the entire time the restaurants were open and no customer spent more than about half an hour on their food.


I’m sure the owner would be delighted to have that kind of a popularity problem but one imagines he’d have expanded to larger premises if he had.

Now it turns out if you read some of the coverage there were some other fundamental flaws in the case because the government agents apparently didn’t understand some fairly basic things about how modern PoS systems work and generate receipts, but what concerns me is that no one in the Department of Revenue, the AGs office or any other part of the bureaucrcy that is Washington State’s revenue collection or law enforcement did the back of the envelope calculation I just did and realized that they were claiming the impossible.

Happily for the bureaucrats, due to customs and laws about prosecutorial immunity and the like, none of them will suffer for causing the Taco owner to defend himself against such bogus charges. Plus the fact that it turns out one shift manager was skimming means that actually they’ll be able to claim a victory even if the amount fined was a measly $800 instead of $5,600,000. So bonuses all round. Maybe they’ll patronize one of the Tacos Guaymas locations to spend their bonuses and thus help the owner pay for his legal fees.