Apr 17 2014, 6:26pm CDT | by Forbes
In 2003, country singer Toby Keith went all the way to #1 with his mega-hit, “I Love This Bar.” The incredible popularity of the song inspired a chain of restaurants called Toby Keith’s I Love This Bar & Grill with fifteen locations across the country including a spot in Keith’s hometown of Oklahoma City, Oklahoma.
Today, it appears that at least one location may be singing a different sort of tune: Toby Keith’s I Love This Bar & Grill in Destiny USA is said to owe more than $189,000 in back taxes. Destiny USA is the sixth largest shopping center in the nation and the largest in the state of New York. The shopping center attracts more than 20 million visitors each year, which makes it an attractive spot for a franchise like Toby Keith’s.
However, while it appeared that the restaurant was doing well (this according to Destiny USA’s general manager, Rob Schoeneck), the state of New York has a different take. The state has filed a tax warrant Toby Keith’s, claiming the location owes $189,392.17 in back taxes.
The source of those back taxes: unpaid sales taxes. Sales taxes are collected and treated a little differently from regular business income taxes. Sales taxes are not paid out of the business but rather are collected from customers to be turned over to the taxing authorities. Since sales taxes are collected from customers and held by the business, they’re often referred to as “trust fund taxes.”
Trust fund taxes also include other taxes collected from a third party like employee withholding. In many cases, the liability for trust fund taxes can be transferred personally to business owners or those in charge of financial operations. Additionally, trust fund taxes like sales taxes are not usually dischargeable or forgiven, even if a business is struggling.
Sales taxes can be tricky for businesses to maneuver since the cash is paid over directly but doesn’t belong to the business. When businesses find themselves in financial difficulty, it can be tempting to dip into trust fund tax accounts, like sales tax accounts, to pay bills to keep the lights on. It’s easy to think that the money can be replaced before it’s time to pay up: when that doesn’t happen, the business finds itself in tax trouble.
That tax trouble can result in seizures and forfeitures. In this case, the State of New York has filed a tax warrant against Toby Keith’s which allows it to satisfy the tax liability by levying the business’ bank accounts. The state could also seize the business to satisfy the debt: for now, however, the restaurant remains open.
This isn’t the first time that Toby Keith’s restaurant chain has drawn scrutiny for reasons other than its food: Toby Keith’s I Love This Bar & Grill in Woodbridge, Virginia made news for instituting a no-guns policy, even though Virginia allows firearms in bars and restaurants (although carrying a concealed weapon while under the influence of alcohol is prohibited in the Commonwealth).
It’s worth noting that Toby Keith (of whom, full disclosure, I’m a big fan) doesn’t actually own the restaurants that bear his name: he has a licensing agreement that allows the restaurants to use his name.
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