NY coin-op company to pay $4.3 million for tired inflation scheme

April 7, 2021
Tire inflation vendor evaded sales tax despite a state advisory opinion, the state's attorney general charges

Quarters still add up. A Long Island vending machine company that provides coin-operated air agreed to pay $4.3 million after evading taxes, according to an announcement from NY Attorney General Letitia James.

The attorney general said this week that she has secured the funds from the Floral Park, NY-based Service Station Vending Equipment Inc., which provides self-service air inflation machines that are used to inflate automobile tires.

SSVE's William McCabe allegedly evaded paying sales tax on its air inflation services and engaged in "fraudulent tax avoidance schemes by underreporting sales and paying workers off the books,” James said.

“While a few quarters may not seem like a lot at once, over nearly a decade, SSVE and its owner pocketed $2.4 million through their tired scheme,” she said. “If New Yorkers need to pay for their air, we’re going to ensure those selling it pay their taxes.”

In an effort to further avoid the payment of sales tax, in 2016 and 2017, SSVE hired an advocacy firm to lobby state legislators on two pieces of proposed legislation that would have provided an exemption for sales tax on sales from coin-operated air inflation machines. Neither bill was ever enacted.

Despite their actual knowledge that sales from SSVE’s air inflation machines were subject to sales tax, an investigation by the Office of the Attorney General found that SSVE and McCabe evaded more than $2.4 million in sales taxes for services for the period from 2010 through 2018.

SSVE and McCabe also evaded income taxes, employee withholding taxes, and workers’ compensation payments to the New York state Insurance Fund by underreporting sales and paying workers off the books.

The OAG investigation commenced when whistleblowers filed a lawsuit under the qui tam provisions of the New York False Claims Act, which allows people to file civil actions on behalf of the government and share in any recovery.

SSVE and McCabe admitted and accepted responsibility for their failure to collect and remit the full amount of sales tax for air inflation services and admitted that such conduct violated both the New York False Claims Act and the New York Tax Law.

They will pay more than $4.25 million in damages and penalties.

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