STILLWATER, Minn. — A co-owner of a boat and marine business in Cottage Grove is accused of defrauding Minnesota of approximately $3.2 million in sales tax, penalty and interest.
Jeffrey S. McKenzie, 59, of Hastings, was charged by summons last week in Washington County District Court in Stillwater with three felony counts of knowingly aiding in the preparation of tax returns that were fraudulent or false.
61 Marine and Sports, which opened in August 1997, sells boats, boat motors, ATVs, snowmobiles, and parts and accessories.
A preliminary investigation in August 2018 found that a sales tax audit had been initiated on the business by the Minnesota Department of Revenue, leading to a criminal investigation by the agency and the Washington County sheriff’s office.
According to the criminal complaint, McKenzie was in charge of providing the monthly sales tax collection information to the business accountant who filed the sales tax returns. The complaint alleges that McKenzie knowingly under-reported the monthly taxable sales to the accountant, who then filed the false sales tax returns.
Minnesota sales tax is a “trust tax,” meaning a consumer pays sales tax to the retailer who is then entrusted to remit the collected sales tax to the Department of Revenue.
The complaint states that computer files, sales tax returns and paper documentation seized during the execution of several search warrants showed the business under-remitted its monthly sales tax in 59 periods from January 2013 through September 2018.
McKenzie admitted the numbers were wrong, but could not explain why, according to the complaint.
According to the complaint, indicators of fraud discovered included the filing of round numbers on sales tax returns over multiple periods; multiple current and former employees alleging fraudulent tactics; structuring cash deposits to avoid the Bank Secrecy Act reporting requirements; and using sales tax as a bargaining chip to close deals with customers.
An attorney for McKenzie was not listed on court documents, and he did not return a message Monday left for him at the business seeking comment.
Each tax-related felony charge carries a maximum penalty of five years in prison, a $10,000 fine, or both.
McKenzie is scheduled to make an initial court appearance on the charges Sept. 3.