The state alleges that use of “sales-suppression software” enabled the majority owner of the Taiwanese restaurant Facing East to hide cash transactions and illegally avoid paying about $395,000 in sales taxes.
Washington state Attorney General Bob Ferguson has charged a Bellevue restaurant owner with using a software tool to hide cash sales and pocket about $395,000 that would otherwise have been bound for sales-tax payments.
Yu-Ling Wong, majority owner of Facing East, a Taiwanese restaurant in Bellevue, was charged Friday in King County Superior Court with theft, unlawful use of sales-suppression software and filing false tax returns.
Wong’s attorney, Robert Chicoine, said he was reviewing the allegations in preparation for her defense.
“We will reply at the appropriate time during the legal process,” he said in emailed comments. “While we work to resolve this matter, the restaurant’s daily operation continues to serve its many customers.”
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The case began when auditors looking over Facing East’s 2010 to 2013 tax returns in a routine audit found the restaurant was reporting that about 7 percent of its sales were in cash, well below an industry average of 22 percent to 30 percent.
Investigators found other irregularities, the complaint said, including cash tips that on some days exceeded the restaurant’s total cash sales. In other cases, according to the complaint, bills were time-stamped as paid a few minutes after orders were first entered into the system, unusually fast for a dine-in restaurant.
Confronted with a state estimate of additional back taxes owed, Wong admitted to keeping a separate set of books and using software that deleted cash transactions, the complaint said.
Wong told investigators that at the end of each month she would insert a USB drive into the computer that tallied sales, the complaint said. Software housed on the drive would erase sales until the cash transactions reached a specified level. It would then tell her how much cash to remove from the register to make the falsified books line up.
Wong, the complaint says, gave up the USB drive and told state investigators that she would pay the proper amount of taxes in the future. She also told investigators the cash removed from the register was used to pay kitchen staff under the table because they preferred to be paid that way, the complaint said. She told state investigators that she was worried she would be “in trouble in the community for sharing how the software worked because so many restaurants use it,” the complaint said.
State staffers estimated Wong owed $394,835 in back taxes, based on the ratio of cash sales in the restaurant’s prior tax returns.
The charges carry a maximum prison term of 57 months. If a court finds aggravating circumstances, a judge could impose an additional 10 years, the Attorney General’s Office said.
In July, the Attorney General’s Office and the Internal Revenue Service searched the residence of the Washington state sales representative for Profitek, the company that made the point-of-sale software used at Facing East. The representative subsequently admitted he trained Wong in using sales-suppression software.
A voice mail left for Pius Chan, Profitek’s president, was not returned. Profitek is based in Richmond, B.C., near Vancouver.
After investigating the firm, Canadian authorities charged Profitek with tax evasion and fraud. The tax-evasion charges were dismissed, and a fraud conviction was overturned on appeal in 2013, the complaint said. Separate cases against Profitek salespeople and restaurants that use the software resulted in some guilty pleas and convictions, according to the complaint.
The Canadian government in 2014 passed legislation that made development, sale or use of sales-suppression software illegal. The use or possession of such tools has been illegal in Washington since 2013.