Oklahoma Tax Officials Continue Absurdity

December 11, 2008

Back in the fall, we reported on the outrageous overreach of Oklahoma tax officials:

Advertisements often have puffery: statements like “longest lasting” or “best tasting” or the like. Indeed, many advertisements feature the improbable, from cars racing (safely) through obstacles or scantily clad women suddenly dancing when a soda bottle is opened. Most of us take these claims with a healthy amount of skepticism. Officials at the Oklahoma Tax Commission evidently lack this ability.

Evidently they had spare time while “collect[ing] and administ[ering] taxes, licenses, and fees” in Oklahoma, enough to wander around MySpace.com, an online social networking website. There, they came across the profile of Kegheadz, a small group of twenty-something-year-old friends who throw parties for hire. The profile included such puffery as “Over a billion served,” “Biggest party in the state,” and “Biggest party in the country.”

The Oklahoma Tax Commission checked its common sense at the door and spent enough staff time and taxpayer resources to conjure up an estimate on how much Kegheadz owed in back taxes for these billions of customers. Over 4 pages, Commission staffers assumed 675 attendees per party, that they all paid a cover, and that the group threw 2 such events a month [going back to 1999, even though Kegheadz was founded in 2006]. Adding up the tourism taxes, liquor taxes, and sales taxes, and tacking on late fees, interest, and penalties, the Commission sent the kids a bill for $162,832.60 [due in 30 days].

Far from a world-known megaparty contractor, Kegheadz actually threw only 22 events, attended by mostly their friends at small venues incapable of holding 675 people, and, they sheepishly admit, they had to let girls in for free. [And the venues sold the liquor, not Kegheadz.] They concede that they failed to pay tax, but estimate the amount they owe as $1,370.39.

I admit: I expected that the Oklahoma Tax Commission would cut its losses, having squandered scarce resources only to end up way off and looking like a bully. Nope, they’re still trying to collect from Kegheadz:

The Oklahoma Tax Commission claims the now-closed business owes $64,000 in sales tax that they did not pay while in business. Originally, the commission tried to collect $319,983.43 in sales tax for parties the group charged cover fees for between 2006 and 2007.

Gratefully, a lawyer who was outraged by the Tax Commission’s conduct agreed to represent the kids for free. Plus, State Rep. Joe Dornan is calling for an investigation into audit procedures, which is clearly needed. For Kegheadz itself, a hearing occurred before an administrative judge, and a ruling is expected in a few weeks.

The Oklahoma Tax Commission’s numbers are fiction, their persistence is misguided, and their conduct is outrageous and wasteful. I previously noted that this is an example of the backward presumption of guilt that exists in tax cases:

Instead of the government having to prove its case about who these kids are and what they owe, they can just impose a tax assessment based on ridiculous allegations. It’s then up to the kids to prove that they are innocent, or at least less guilty than the tax collector says they are.


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