'Tax-Zapping' Taqueria Owners Charged With Hiding Sales: Feds

CHICAGO — Federal prosecutors last week charged the owners of a pair of North Side restaurants with of falsifying tax returns, prosecutors said. Investigators have been focusing on sales suppression software and other ways that restaurants owners hide revenue by falsifying receipts, according to the U.S. Department of Justice. Such suppression software or devices, so-called "zappers", automatically delete and falsify sales data to make records of cash sales appear to match reported income.

Sandra Sanchez, 44, a Morton Grove resident and the owner of Cesar’s Tacos at 3166 N. Clark St. in Chicago and Israel Sanchez, 43, of Chicago, the owner of Cesar’s on Broadway at 2924 N. Broadway St. in Chicago were each charged with knowingly filing false tax returns Tuesday in U.S. District Court in Chicago. Both restaurants are also known as "Cesar's Killer Margaritas."

U.S. Attorney for the Northern District of Illinois John Lausch said in a release announcing the charges that recovering funds for the federal treasury was a top priority in his office.

“These charges send a clear message that restaurant owners who choose to illegally underreport gross receipts will be held accountable,” Lausch said.

Federal prosecutors also announced criminal charges against three other restaurant owners as part of the same investigation, which remains ongoing.

They include Shuli Zhao, 59, of Westmont, the owner of Katy’s Dumpling House in Westmont; Chun Xu Zhang, 42, of Aurora, who owns Sushi City in Downers Grove and Quan Shun Chen, a Chicago resident and the owner of Hunan Spring in Evanston, according to the U.S. attorney's office.

The maximum penalty for each count of knowingly filing false tax returns carries a maximum sentence of three years in prison, prosecutors said. In a 2017 report from Bloomberg BNA, a tax law professor estimated states lose about $21 billion in tax revenue every year from the restaurant industry alone.

Last August, Illinois Attorney General Lisa Madigan announced the first criminal charges under a 2013 state law had been brought against restaurant owner accused of using a "zapper" in the case of Sandra Sanchez. She faces charges of theft and tax evasion in Cook County court. Madigan said she used an automated device to avoid paying more than$1 million in sales tax to the state department of revenue. Now the owners of both business also face criminal prosecution in federal court.

Announcing the latest charges Thursday, the chief of the Internal Revenue Service's Chicago criminal investigative division warned anyone considering cheating on their taxes.

"This is only the beginning. I want to warn those restaurants, gas stations, convenience stores, and other establishments that are currently using or thinking of using sales suppression software, that we are on to you and your methods," Special Agent-in-Charge Gabriel Grchan. "If you steal from the federal government, there will be serious consequences.”