Gas Station Owner Given 3-Year Term for Tax Fraud

A Torrance gas station owner convicted of pocketing more than $700,000 in sales tax receipts was sentenced last week to three years in County Jail and ordered to pay back the money.

Jon Kinsey, 57, has until March 15, 1990, to repay the state “a substantial portion” of the stolen tax money, penalties and interest--estimated at nearly $1.2 million--or face additional jail time, South Bay Municipal Court Judge Thomas R. Sokolov said Friday.

Torrance City Prosecutor J. D. Lord urged Sokolov to give Kinsey the maximum eight-year sentence, but reduce it if he made restitution. He said he is afraid it will be impossible to increase the sentence if Kinsey does not repay the money.

The case is one of the first in the state in which a jury has convicted a retailer of stealing sales tax, said Robert Peterson, State Board of Equalization district administrator.

Jurors convicted Kinsey last January of eight counts of tax fraud for withholding taxes between 1982 and 1986 from sales at an Arco gasoline station he owned at Crenshaw Boulevard and 235th Street. The station was sold to pay a portion of the back taxes after Kinsey was charged in 1987.

Lord said Kinsey withheld the money by sharply under-reporting his overall sales.

“He testified himself that his gas prices were lower than the gas prices of any other station in the South Bay area, which is not surprising” Lord said. “Where most guys are working on a half-penny profit margin per gallon, this guy is getting half a dozen pennies, so obviously he would charge less.”

The fraud was discovered when the state changed the way it collects sales taxes, requiring station owners to pay sales tax on each shipment of gasoline before its sale. Station owners then would submit quarterly refund claims for any amounts not sold.

Immediately after that change, Kinsey’s reported sales rocketed from $500,000 each quarter to more than $1 million, Lord said.

In addition to this fraud case, Lord recently filed additional fraud charges against Kinsey for failing to file state sales tax reports for the last half of 1988, before the gas station’s sale.

Federal and state income tax regulators also have filed claims for back taxes against Kinsey, Lord said.