IRS weighs in on NH Liquor Commission’s cash sales policy – Manchester Ink Link

Employees of the NH Liquor store will get a pay rise. Courtesy picture

CONCORD, NH – The State Liquor Commission (SLC) and its employees are not required to report large cash sales over $10,000 to the IRS because “government units” are exempt under federal law.

Attorney General John M. Formella on Friday released a letter from the IRS regarding the decision along with its report regarding large volume cash sales (LVCS) by the SLC, an investigation that was triggered in February 2019 by the adviser. executive at the time, Andru Volinsky.

He wrote a letter to Governor and then Attorney General Gordon MacDonald regarding a $24,000 sale he witnessed on February 3, 2018 at the State Liquor and Wine Outlet in Keene.

The sale was also observed by Richard Gulla, president of the Association of State Employees.

In her letter, Volinsky said a woman named Anna called the Keene store and asked staff to place an order for her that totaled more than $24,000, the majority of which was Hennessy cognac.

Andru Volinsky. File photo/Stacy Harrison

The woman and a man arrived at the store later that day to pick up the order. Volinsky said he saw the man take “a very large wad of cash out of his pocket and give about half of it to Anna.”

They then used the money to make each of the purchases just under the $10,000 threshold, with the rest of the transaction – around $5,600 – being charged to the man’s credit card.

Volinsky expressed concern that the man and woman had structured their transaction to avoid the $10,000 reporting requirement.

Pamela Wilson Fuller, IRS Senior Technician Reviewer Procedure & Administration, said in a November 18, 2020 letter to Senior Assistant Attorney Geenral Jill A. Perlow that the state did not have to report these sales because “government units” are exempt. of declaration conditions.

The IRS ruling also said that neither state nor federal laws impose a limit on the amount of money that can be spent at liquor stores, or require reporting of LVCs greater than 10. $000. Such transactions, she said, are completely legal.

“This IRS decision and DOJ report puts a final and long-awaited end to an attempt to smear the reputation of one of the nation’s leading retailers and the states’ top performers in liquor control.” , said NHLC President Joseph Mollica. “As we have said from day one, NHLC has fulfilled its legal obligation to maximize revenue for New Hampshire taxpayers, which we have done for more than 85 years, generating more than $4 billion for the state and delivering an unparalleled experience to tens of millions of customers across North America.We thank the IRS and DOJ for their efforts.

When reached for comment on Friday, Volinsky said he had not yet read the report but would provide a response once he did. On Saturday, he provided the following detailed commentary with hyperlinked references:

Apparently late Friday, March 25, 2022, more than a year after receiving a private ruling from the IRS, the NH Department of Justice (NH DOJ) released a statement and report regarding its investigation into illegal sales made cash for more than $10,000 at the state liquor stores near the New Hampshire borders. The report purports to respond to concerns raised by former executive adviser Andru Volinsky in February 2018 and reported in writing to Governor Sununu and then Attorney General Gordon MacDonald shortly thereafter. The report also discusses a private letter ruling issued by the IRS in February 2021 which concludes that cash transaction reports (Form 8300) are not required when suspicious sales are made in cash by government units such as ‘a state. The IRS has accepted, without analysis, that alcohol sales are an integral part of New Hampshire state government. It is important to note that the IRS has stated: “The IRS has not verified any of the items submitted in support of the Ruling Request and those items are subject to verification during the review. This letter does not constitute a decision that Entity 2 [the NH State Liquor Commission] is an integral part of Entity 1 [the State of New Hampshire.]”.

Volinsky said, “First of all, I’m glad the state took my advice and finally got a straight ruling from the IRS on their contraband practices that some have called ‘organized crime.’ Second, I would be concerned about this decision because the decision rests on the legal conclusion that the State Liquor Commission’s sales monopoly is an integral part of the state. Given that 33 states do not operate similar monopolies, it is difficult to understand how maintaining a liquor sales monopoly is integral to New Hampshire’s state existence. Third, the state’s assertion that the money involved in these transactions is not related to illegal activity fails any test of credibility. » [See this New York Times story from 2018 “Tracking Graft, From the Bootlegger to the Mayor,” which involves New Hampshire.]

Finally, it is worth acknowledging and thanking the brave women and men who work in the state liquor stores who brought their concerns to my attention despite pressure from the Liquor Commission to remain silent.

Volinsky had asked Gordon MacDonald, then Attorney General to find out if the SLC deliberately instructed employees not to report large cash alcohol purchases and whether this allowed out-of-state purchasers to illegally bring the alcohol home and even resell it.

After Volinsky filed his lawsuit, the SLC fired an employee involved in the sale of Keene.

The SLC, which issued a press release in response to the Attorney General’s report, said the IRS findings and the NH Department of Justice report were in response to an “undercover operation” on the 3 February 2018 orchestrated by Volinsky and Gulla and to a subsequent letter from Volinsky. , raising baseless accusations about NHLC’s sales practices and accepting money from “illegal trafficking, whether it’s guns, drugs, or people.”

The Attorney General said in his report that there was no evidence that the money from these large cash sales came from illegal activities.

“There is no evidence to support Councilor Volinsky’s assertion in his February 13, 2018 letter that the money for the LVCS comes from ‘illegal trafficking, whether in firearms, drugs or human beings”. Councilor Volinsky has no personal knowledge of the genesis of the money used to purchase alcohol at the SLC and the concern stems instead from background information he obtained as a white-collar criminal defense attorney,” according to the report.

The report also says the state has no legal obligation to enforce the laws of other states regarding the purchase and transportation of alcohol across borders and faces no legal exposure for not doing so. .

Volinsky, in his letter, also raised the issue of large cash sales exposing the state to potential lawsuits from neighboring states to “facilitate efforts to avoid their tax regimes.”

The Attorney General, however, said the SLC has neither the power nor the legal obligation to enforce laws imposed on individuals by other states regarding the sale or purchase of alcohol.

“As a result, there is no reason for another state to sue SLC for its handling of the LVCS and the AGO (Attorney General’s Office) would vigorously defend itself against such a lawsuit.”

The Attorney General said the events that occurred on February 3, 2018 at the Keene Liquor Store were an “isolated and serious violation of SLC policies and practices” and that the SLC, after being informed by staff of what happened had passed, conducted an investigation. internal review of the event and took the necessary corrective measures.

The attorney general, in the report, also criticized the actions of Volinsky and Gulla.

He said state officials are expected to use appropriate methods to address serious concerns, such as potential violations of law or policy.

“That didn’t happen here,” according to the report. “It is undisputed that an elected official and the president of one of the state employees unions observed what they knew to be violations of SLC policy and what Councilman Volinsky considered a violation of the federal law. Yet neither made the decision to quickly contact SLC leadership or law enforcement. Officials or citizens conducting their own investigations can jeopardize state government functions and law enforcement efforts, and put not only themselves, but the public at risk. Persons concerned about state operations should contact the appropriate state or law enforcement authorities and should not attempt to conduct their own investigation.

Since 2015, SLC, “to promote a culture of honesty and prevention of fraud, criminal conduct and loss prevention”, has implemented a policy requiring the reporting of cash sales over 10 $000 to the IRS. Although the IRS has now said SLC is not required to do so, Formella said the policy remains in place.

Aurora J. William