JACKSON — The recent indictment of Fannin Mart Restaurant owner Steve Page on charges of felony tax evasion highlights what state revenue officials call a growing epidemic costing Mississippi nearly $190 million last year alone.
Tax dodging has soared among businesses and corporations in the Magnolia State, particularly in the past five years, said Department of Revenue spokeswoman Kathy Waterbury.
Unpaid sales taxes and use taxes due to under-reporting reached a record high in fiscal 2014, nearly doubling from the previous fiscal year’s $103.5 million.
“And those are just the cases we know about,” Waterbury said.
The agency audited just 2 percent of businesses operating in the state last year. Among them, it found seven of every 10 foreign corporations and nearly nine of every 10 locally owned entities owed taxes.
“Some of it is people just making mistakes; they don’t know that something is taxable,” Waterbury said. “And then there are those who intentionally set about to not report what they owe.”
The Department of Revenue alleges Page falls under the second category of business owners. After its criminal investigators turned over their case to the district attorney, Page was indicted on eight counts of tax evasion and eight counts of fraudulent statements and representations.
The indictment, filed in Rankin County Circuit Court on Oct. 6, alleges Page had significantly under-reported his gross retail taxable sales for an eight-month period spanning parts of 2012 and 2013 and, as a result, paid just a fraction of the sales taxes he owed the state.
Page’s cozy restaurant on Miss. Highway 25 in Flowood bustled during a recent lunch rush with customers dining on home-cooked favorites like fried chicken and mashed potatoes with gravy.
Menus are hand-written daily on paper bags; staff greets diners warmly; antique items decorate the walls.
Its popular meat-and-three plate costs $9.20 with tax. If everyone in the eatery ordered that and nothing else, Fannin Mart would have rung up about $450 in sales on a recent afternoon.
At that rate, the restaurant, which is open for lunch six days a week, would earn $10,800 per month.
That’s almost exactly how much Page reported to have sold in the average month during the period in question. But the indictment alleges Fannin Mart actually sold an average of $35,720 per month.
And instead of paying roughly $700 in monthly sales taxes, the indictment said, Page should have been paying more than $3,200 monthly.
Rankin County court records show Page also twice filed jointly with his wife for Chapter 13 bankruptcy and has several state tax liens on his home and business, in addition to civil judgments against him from past creditors.
Waterbury would not comment specifically on Page’s case, but she said retailers must collect and turn over sales tax to the state in exchange for the privilege of doing business in Mississippi.
“Sales tax and withholding taxes are trust fund taxes,” she said, and crimes involving businesses that fail to report them or pay them to the state “are more serious than some of the others, because that money’s not theirs to begin with.”
The Department of Revenue prosecutes about a dozen such cases annually, but Waterbury said the agency could easily pursue five times as many if it had more staff.
In its budget presentation to the state, the agency requested funds to hire six additional auditors to detect cases of inaccurate reporting and 19 additional revenue officers to collect on tax debt, including the nearly $1.2 billion outstanding overall.
Three-fourths of those outstanding debts are just 3 years old, according to a recent Department of Revenue report.
“A debt to the state of Mississippi never goes away,” Waterbury said. “Sometimes we know we’ll never collect it (if) there’s no assets, no income, nothing. We don’t have that in our active collection cases. But it’s out there.”
By the numbers
■ $189.8 million: Unpaid taxes owed by businesses to the state of Mississippi
■ 216,700: Approximate number of businesses in Mississippi
■ 3,943: Audits conducted on in-state businesses in FY ’14
■ 588: Audits conducted on foreign corporation doing business in Mississippi in FY ’14
■ 86: Percent of locally owned businesses audited that underpaid state taxes
■ 70: Percent of foreign corporations that underpaid state taxes
■ 102: Auditors at the Mississippi Department of Revenue
■ 2: Percent of businesses audited in FY ’12
Source: Mississippi Department of Revenue