The state has filed a $6.9-million lien alleging non-payment of taxes against the owner of a Los Angeles service station chain who helped push through legislation aimed at making sure that deadbeat self-serve operators pay their sales taxes.
Charles N. Shooster of Beverly Hills, president of the 14-station Sunny Oil Co., confirmed that the lien was placed against his real estate holdings by the State Board of Equalization for what the agency charged was failure to pay sales taxes for five years, starting in 1980.
Shooster said in an interview that the “cutthroat” competition of the Southern California self-serve gasoline market slashed so deeply into his thin profit margin that he was unable to pay his full sales tax liability.
He insisted that many of his competitors were in the same situation.
“We paid all that we could pay in terms of the very bad (competitive) situation that we had at the retail level,” said Shooster, who also asserted that the board’s determination of the taxes he owed was “totally in error.”
In the lien filed Sept. 11, the board asserted that Shooster owed $4.2 million in back taxes, $1.7 million in interest, plus $1 million in penalties as of last March. Consequently, Shooster is unable to sell, transfer or otherwise dispose of any of his real property in Los Angeles County until the sum is paid in full.
Shooster’s lawyer, John Hanrahan, who declined to discuss what real estate Shooster owns, except his home in Beverly Hills, termed him a victim of “selective” enforcement by the state agency.
However, Rick Slater, director of collections for the board, denied that Shooster was singled out for special handling. Asked about how many other station operators also might have similar action taken against them, Slater said the board does not maintain such records by occupational category.
Shooster is a spokesman for the Serve Yourself and Multiple Pump Assn., an organization of about 2,000 independent self-serve operators that sponsored a bill designed to assure that service stations pay part of their gasoline sales tax before the fuel is actually sold to motorists. Currently, the operators pay after the gasoline has been pumped into vehicles.
The bill was pushed during the summer and passed on the final day of the legislative session, Sept. 13. Gov. George Deukmejian has not said whether he intends to sign the measure.
The Board of Equalization, which collects the sales tax, has complained about what it calls an “increasing pattern of tax evasion” by service station operators. Legislative and industry sources have estimated that from $150 million to $500 million in taxes annually never reach state coffers.
Shooster and other self-pump operators concede that they were looking after their own self-interest in pushing the legislation. If all of the approximately 22,400 service stations in California had to pay a partial tax in advance, they argue, it would make them equal at the retail starting gate and there would be less incentive to drastically cut prices at the pump.
Shooster and his colleagues contend that “predatory” cut-rate pricing in the self-serve gasoline industry is so vicious that to stay in business, station owners underreport their tax liability to the state.
“If you pay the sales tax, you are out of business,” attorney Hanrahan said.
Shooster likened the situation of self-serve operators to that of the maximum 55-m.p.h. speed limit.
“It’s the law, but people are driving 65 m.p.h.,” Shooster said.
However, Slater said he “can’t find it a valid excuse that they must break the law in order to make a living or make an appropriate profit margin.”
Currently, station operators pay the sales tax on gross proceeds after the gasoline is sold. Statewide the tax is 6%, but in Los Angeles and other transit district counties it is 6.5%.
Under the bill, the retailers would pay five-cents-per-gallon in sales taxes to the refiner when a station’s tanks are filled. This pre-payment of tax would be passed along by the refiner to the board, while the remaining balance of the tax would continue to be paid by the dealer after the gasoline sale.