'Tax-Zapping' Morton Grove Restaurant Owner Charged: Feds

MORTON GROVE, IL — Federal prosecutors last week charged a Morton Grove resident with falsifying the tax returns of a Chicago restaurant, prosecutors said. Federal 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, which describes itself as the "home of the killer margaritas," knowingly falsified the business' 2012 taxes. She reported $1,730,642 in revenue despite knowing that "gross receipts of Cesar's Tacos, Inc. were substantially more than the amount reported," according to the indictment.

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 two other restaurant owners as part of the same investigation, which remains ongoing.

They include Huli Zhao, 59, of Westmont, the owner of Katy’s Dumpling House in Westmont and Chun Xu Zhang, 42, of Aurora, who owns Sushi City in Downers Grove; Quan Shun Chen, 42, a Chicago resident and the owner of Hunan Spring in Evanston and Israel Sanchez, 43, of Chicago, the owner of Cesar’s on Broadway on North Broadway in Chicago, 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 Sandra Sanchez would be the first person to be charged in state court under a 2013 law intended to make it easier to prosecute people for using "zappers". The owner of the Lakeview Cesar's Killer Margaritas restaurant faces charges of theft and tax evasion in Cook County court after Madigan said Sanchez used an automated device to avoid paying more than $1 million in sales tax to the state department of revenue.

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.”