Cash Intensive Business Case

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Cash Intensive Business Case

Background

The General Accounting Office (GAO) claims that the individual income “tax gap” is quite large. The GAO is referring to individuals who have the ability to determine their own reported income. These individuals are small business owners – they are self-employed. There are many small businesses that are mostly transacted in cash (cash intensive). There is a tendency for much of this income to go underground, i.e., to be unreported to the government.

Cash Intensive Business

There different definitions of ‘cash intensive business.’ The most appropriate definition is by the Internal Revenue Service (IRS). According to IRS, a cash intensive business is any business that receives a relatively high amount of money in cash (Internal Revenue Service). This implies that transaction of money is done on the ground without formally recording the receipts. Although most of these businesses are small-sized to medium-sized, some of them transact humongous amounts of money in cash. This is a questionable action that the General Accounting Office (GAO) seeks to review further. The main issue of concern in this case is failure by these businesses to report their own income to the IRS. For most cash intensive businesses, there is the tendency of going underground deliberately to evade taxation. However, the federal government of the United States is strict in monitoring these businesses to prevent tax evasion. Consequently, the judiciary has been granted the mandate to prosecute those individuals who ignore the policies of IRS. There have been previous legal battles where some of the cash intensive companies have been prosecuted for not adhering to the policies of IRS.  The law is clear and no business should conduct underground activities that amount to fraud or money laundering.

List of Cash Intensive Businesses

The following is a list of a few cash intensive businesses in the United States of America.

• Restaurants
• Convenience stores
• Cigarette distributors
• Retail stores
• Vending machine operators
• Liquor stores
• Parking garages
• Private ATMs
• Construction industry
• Trucking industry
• Beauty shops
• Coin operated amusement museums
• Laundromats
• Taxicabs

Tax Evasion Case

William V. Commissioner Case

United States Tax Court

28 T.C. 1000, 1957 U.S. Tax Ct.

Facts of the Case

Jay A. William – plaintiff

The commissioner of IRS – defendant

Jay A. William was a businessman who conducted information delivery services. His business involved provision of information to his clients regarding the location of parcels of timberland. His task was to walk around and locate specific locations within the locality that can be potential timberlands for prospective buyers. His job was flowing smoothly until 1951 when he faced unavoidable business hurdles. During this year, he provided his services to a client known as J. M. Housley. The business was complete because William carried out his duties of locating a parcel for Housley. The remaining element of the agreement was to be paid for the services and then seal the business deal completely. However, after securing the parcel, Housley was unable to pay the required amount of money. He acknowledged the money as debt and wrote a promissory note to William regarding the time he would be able to pay the money. On realizing that Housley would be unable to pay the money until he starts getting profits from the timber property, William accepted the promissory note for later payment of the debt. Note that the promissory note was unsecured and interest-free. The amount written in the promissory note was $7, 166 and was payable on or before the 240th day after the agreement (Casebriefs LLC).