Taxes

Minnesota's Aggressive Bar Tax Audits Face Court Challenge

Tax collectors pull numbers out of their asses and tell bars to pay up

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The case and wider controversy come down to whether the state should audit a business's books or booze.

Department of Revenue procedures call for auditors to focus first on a bar's point-of-sale and related records if reliable. But critics claim investigators too easily default to so-called indirect markup audits that reconstruct hypothetical sales figures based on estimates of drinks poured from a bottle or keg and stock purchased from distributors, often leading to excessive back tax bills. The variables can include everything from happy hours to how strong bartenders pour drinks to breakage, spillage, tip jars and even extra shots on the side.