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News Release from Comptroller Susan Combs

For Immediate Release
February 17, 2011

Tobacconists Accused of State Tax Evasion

(AUSTIN) — Two Eastland County residents have been indicted on felony tax evasion charges following a criminal investigation of Tobacco Plus, an Eastland smoke shop, by the state Comptroller’s office.

On Jan. 27, Nazia Javaid, 37, was indicted for failing to remit sales tax collected, a third-degree felony. Ilyas Javaid, 52, was indicted for two third-degree tobacco tax felonies. The cases are currently pending in the 91st District Court of Eastland County.

According to court documents, Tobacco Plus made wholesale purchases of more than $307,000 worth of cigarettes and tobacco during an eight-month period beginning in December 2009. During that same period, Tobacco Plus reported only $129,000 in retail sales to the Comptroller — a difference of more than $177,000 in taxable sales.

The discrepancy was discovered by using a recent state law (House Bill 11, 80th Legislature) requiring distributors and wholesalers who sell beer, wine, ale, cigarettes, cigars and tobacco products to Texas retailers to report those sales monthly to the Comptroller’s office. State tax auditors can compare those monthly reports with retailers’ reported sales to ensure that sales tax is collected on taxable merchandise and the revenue is forwarded to the state. If fraud is suspected, a criminal investigation may follow.

Ilyas Javaid allegedly evaded Texas tobacco tax by purchasing some of the store’s tobacco products from out-of-state distributors who do not hold Texas tobacco tax permits. Permitted distributors are required to pay Texas’ tobacco tax directly to the Comptroller, and retailers are required to keep records that show their tobacco products were purchased from a permitted distributor. By purchasing from an unpermitted distributor, an unscrupulous retailer can obtain products whose price does not include a markup for tax already paid. This not only results in a loss to the state, but it gives unscrupulous retailers an unfair advantage, because they can sell tobacco products at a lower price than their competitors.

“Since House Bill 11 took effect, it has helped uncover more than $230 million in potentially unreported sales tax,” said Texas Comptroller Susan Combs. “In the Javaid case, our investigators also discovered tobacco tax violations that might have gone undetected if House Bill 11 reporting requirements hadn’t drawn our attention to this particular store. I am very pleased with the way the law is working to ensure that businesses pay the tax they owe and to protect honest retailers against cheaters.”

Investigators from the Comptroller’s Criminal Investigation Division worked with the Eastland County Sheriff’s Office and District Attorney’s office to arrest and charge Nazia and Ilyas Javaid.

To learn more about the Criminal Investigation Division of the Texas Comptroller of Public Accounts, visit www.window.state.tx.us/about/cid/.

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