LI Vending Company To Pay $4.3 Million Over ‘Tired Scheme’: AG

FLORAl PARK, NY — Quarters collected over the years added up for a Long Island coin-operated air vending machine company that recently struck an agreement to pay $4.3 million after evading taxes, according to a news release from the office of Attorney General Letitia James.

James said on Monday that she has secured the funds from the Floral Park-based Service Station Vending Equipment, Inc., which provides self-service, coin-operated air inflation machines that are used to inflate automobile tires, and the company’s owner, William McCabe, who evaded paying sales on its air inflation services, as well as engaged in “fraudulent tax avoidance schemes by underreporting sales and paying workers off the books.”

As part of the agreement, SSVE and McCabe “admitted and accepted responsibility” for failing to pay the full amount of sales tax for air inflation services and admitted that such conduct violated both the state’s False Claims Act and tax law, James said.

James said that as the state continues to suffer budget shortfalls, her office will not allow "any company to further deflate our state’s finances and avoid millions in tax payments."

“While a few quarters may not seem like a lot at once, over nearly a decade, SSVE and its owner pocketed $2.4 million through their tired scheme,” said James. “If New Yorkers need to pay for their air, we’re going to ensure those selling it pay their taxes.”

“Those who aim to cheat the system should know that their fraud will blow up in their faces because my office will continue to aggressively pursue those who defraud taxpayers and the state,” she added.

Lake Success attorney Amy Marion, who represented the company in the agreement with James’ office, could not be immediately reached for comment.

An investigation was launched into the company after whistleblowers filed a lawsuit under the False Claims Act, which allows people to file civil actions on behalf of the government and share in any recovery, according to James.

The company requested an advisory opinion from the state’s Department of Taxation and Finance on whether sales from its machines were exempt from sales tax in 1997, and in response, the department issued an advisory opinion “explicitly” stating that they were subject to sales tax, James said.

Twenty years later, in January 2016, SSVE’s newly-hired accounting firm discussed several tax and accounting issues with McCabe, including the failure to collect the “appropriate amount” of sales tax, and despite that discussion, he “continued his behavior and refused to change his sales tax collection practices with respect to air inflation services,” James said.

Between 2016 and 2017, SSVE and McCabe hired lobbyists to lobby state legislators on two pieces of proposed legislation which would have provided an exemption for sales tax on sales from coin-operated air inflation machines, in an effort to further avoid the payment of sales tax, James said.

Both bills eventually failed.

SSVE and McCabe evaded more than $2.4 million in sales taxes from 2010 to 2018, as well as evaded income taxes, employee withholding taxes, and workers’ compensation payments to the New York State Insurance Fund by underreporting sales and paying workers off the books, according to James. That amount is included in the $4.3 million the company will pay, as well as about $1.9 million in penalties and fees, James’ office said.