Hey to all. I have a quick question. I’ll try and keep it short and to the point. A run down tavern who only has “liquor” to sell (i.e., no cigarettes or food etc) - claims on their income tax return that even though they only spent $7,000 on “purchase of goods / inventory” - yet somehow “gross sales” were $250,000 - what the hell is up with that ? Is this a classic example of MONEY LAUNDERING ? Just curious. (**Oh and keep in mind - by “run down” - I mean seriously ?? There is no way this place makes $500 a week much less over $5k per week). And that’s a fact jack!
Reported.
Actually, this emerged as a subtopic in a recent thread about money launderng in general. Looks like the people running the scam you are referring to were a particular kind of stupid. Here is the link to the first post in the discussion I referred to above, if you’re interested - keep reading down the thread to see how it evolved.
Thank you - and why or what did the other poster mean by “reported” ? What kind of crap is that ?
All I know is if you’re having a drink in one don’t remind any other guys that they used to be shoe shine boys.
You’re new here (only two posts and a July 2016 join date). You posted something the other poster thought might be suspect. The “reported” statement is a flag to the mods to check this thread. One of three things will occur:
[ol]
[li]Nothing.[/li][li]A mod will stop by and make a comment.[/li][li]Guido will make you an offer you can’t refuse.[/li][/ol]
The reported post is more to alert non-mods that the post has been reported once already and there’s no need for anyone else to report it.
Reporting a post automatically alerts the relevant mods in the super-secret forum.
OH - ok I got you . . Yes Im brand new - just joined “TODAY” - so yeah hopefully not breaking any ‘forum rules’ which I dont think I am … thanks for the heads up !
And thank you SKDO - I did check that other forum post out - very interesting! But yeah I’m concerned because I’m not quite calculating in my brain how you can have “X” for purchase of sellable goods and turn a profit of “Y” which any one that’s around here know that there has NOT been ‘those said purchases’ bought - much less sold … I’m thinking a lot of different things right now …
[Moderating]
I don’t see a problem with your question. However, since we don’t have much information on the example you mention this requires speculation, so I am going to move this to our In My Humble Opinion forum.
I would, however, not give identifiable information about the business you mention, since you are making serious accusations as well as disclosing what may be confidential information from their tax returns. Let’s keep this a hypothetical discussion.
Colibri
General Questions Moderator
PS. You may want to avoid posting words in ALL CAPS. People on this forum may look askance at that, since it looks like you are shouting.
Around these parts you can buy a liter of vodka for about $7 which will pour 20 drinks at $8/drink (way more in some places but your place is run down) so they should make 160 for every 7 they spend (soda is basically free). So I wouldn’t be surprised by $160k on 7k of costs. To get to 250 their per drink cost would have to be about $12.50/drink which is a bit high depending on the area. It’s nuts how little the booze costs in running a bar it’s the rent and the employees that kill you.
Also were only talking about 20k drinks per year assuming they’re open normal bar hours about 30 hr/week and 50 weeks per year they would only need 10-15 people in the bar to achieve this and may not even look busy. All in all it may be money laundering but probably not more than a 100 grand or so.
Nicely played Leo, I’m pleased I’m on the same wavelength as one other person at least.
Now go get yer fuckin’ shinebox
That ratio is incredibly unlikely. Most people buying small, run down bars would be well advised to ignore the offered financials as they likely to be 50+% BS at a minimum. The best way to evaluate the investment is to strike an agreement with a competent, experienced bar operator in the same area who is not directly competitive to the tavern you are interested in. Agree to pay them some fee for consultation have them scope out the bar and the observed customer flow. They should be able to tell with 90% or better accuracy what the real world numbers you can expect are. If you are also buying the real estate you need to get a full property inspection.
You’d really have to look at the detailed numbers to know what was going on.
For example, tax returns calculate cost of goods sold by taking beginning inventory, adding purchases and subtracting ending inventory. So when you say they only “spent” 7,000 is that the purchases or the cost of goods line? If it’s the purchases line, then maybe they started with a large inventory and sold it down over the year.
Did they actually pay for the booze? Lots of unsuccessful businesses get behind on payments to suppliers. Maybe they sold $10,000 worth of booze that they haven’t paid for yet and so they didn’t claim it as a tax deduction.
What is their total profit, and what are their other expenses? Maybe they have a sloppy bookkeeper who put most of alcohol purchases on the return as “Supplies” instead of cost of goods sold? (I’ve seen bigger mistakes made by accounting professionals who should have known better.)
Did they record tips and sales tax as part of their gross receipts? Around here, those two non-income items could be 25-30% of receipts. Plenty of people screw up their bookkeeping and record them as income when received and expenses when paid. If we make that assumption, then the correct gross sales of this bar might be more like 190,000.
Many taverns make money on things that don’t get documented, even if we don’t count the sex workers who work the customers and pay the management to look the other way. Around here, it’s unusual to find a bar without some gambling going on. There’s games of chance presented as pull-tab cards, the big bowl of tear-apart tickets, sports boards for racing and basketball, punch boards, and such. There may be bets laid on pool games, but the coin-op pool table rakes in a lot more than you might suspect. The list goes on to video slot machines, leased from the local coin-op mogul. The sign says “for amusement only,” but a customer with a positive score can wave the bartender over and get paid. Truth be told, winnings are only a fraction of the money the sucker has poured into the bill slot.
In this state, bar gambling is illegal, so all that dough is folded into the till, or not, and accounted for, or not, as some other kind of sales.
Yes there are many numbers I’ve seen from the actual tax returns and nothing adds up. And yes I will keep this all a “hypothetical” scenario as to not incriminate anyone as these are not “serous accusations” but “serious infractions”. It’s not like there’s $100M moving through this ‘corporation’ - but there is obviously “over $200k” so I’m sure even though this is not a “big fish” there still could be trouble if this is discovered - “I’d Think” …
We are not in a state where there are gambling legally in the establishments so I don’t think that’s a factor here - however - I think it always raises eyebrows when there is a cash run business (primarily) and no payroll basically - yet there are so many checks wrote to cash and who does one even prove where that went ? (obviously everyone knows that only “One” person does not work so that sort of diffuses the “one person on the payroll” idea) - so all the other employees get cash (hence all the checks to cash) - but anyway ya I’m thinking there could be in this “hypothetical situation” that there is some definite money laundering going on.
I’m not clear at all on your objective here. Unless you are in law enforcement this overwhelming concern you have about “money laundering” going on seems a bit misplaced unless you are going to be impacted by it. If you have the returns in hand I’m assuming you are evaluating the business for purchase or investment. The numbers you have given so far seem to indicate the financial statements and returns are largely a fiction. It seems very sketchy. Just don’t buy or invest in the property and just move on. There are better places to put your money.
Out of curiosity how is it you know the details of the tax returns on this run down tavern ?
Bars are audit central for the IRS. There are reasons - as Dracoi said, why you could get $250k worth of revenue off $7k investment - but it honestly isn’t likely. Usually, bars work the other way - its easy to take in money under the table in a bar and not report it to the IRS - that 20 drink bottle of vodka pours 15 drinks that go into the till to get counted for taxation and 5 drinks that go under the table to not get taxed - which is why the IRS likes to audit them. However, its hard to tell if its owners stiffing the IRS or if its employee theft. Inventory control in a bar is hellish.
If you have concerns, call the IRS tip line and report them. (assuming you are in the U.S.) If astro is right and you are looking to invest, bars are tough.
I don’t know how universal this is, but in my state, liquor that is sold through bars is taxed at a much higher rate than what you can buy at a liquor store. A bottle of Jim Beam that I could pick up at $12 at an ABC store actually costs a bar $21. A bottle usually only pours about 15 drinks using a 1.5oz jigger, not 20.
This theoretical bar would have to be running close to $50 a shot for rail liquor to make up that kind of margin. Your mileage might vary based on locale, or shorting drinks, but not that much.