How the state of Indiana seized dogs as payment for outstanding sales tax.
Back in 2009, on the eve of the nation’s renewed Battle to Eradicate Puppy Mills, Indiana Attorney General Greg Zoeller used suspected sales tax evasion to obtain a search warrant and raid two alleged puppy mills owned by Virginia Garwood. At 7 a.m. on June 2, employees of the Office of the Attorney General (OAG) and the Department of Revenue served Garwood and her daughter with “several jeopardy tax assessments which provided that she owed approximately $125,000 in sales tax, penalties, and interest on her sales of dogs for the January 1, 2007 through April 30, 2009 tax period.” When both women indicated that they could not pay, investigators from the AG’s office and the Indiana State Police, with the help of approximately 60 volunteers from the Humane Society, seized 240 dogs—“including the Garwood’s house pets and farm dogs.”
At the time, newspapers reported conditions at the dog farms as “squalid.” Many of the dogs were diseased; one was dead. The dogs were then sold by the DOR for a total of $300, half of which went toward the “purported tax liability.” Cash and uncashed checks were also seized during the raid.
If raiding a farm and seizing dogs over sales tax seems a bit unusual, it is. Indeed, a 2010 OAG press release announced that for “the first time since the 1970s, the Attorney’s General office used its rarely-invoked criminal law jurisdiction to file charges of sales tax evasion.” The OAG said the tax jeopardy assessments, filed on behalf of the Department of Revenue, permitted them to “seize personal property in order to recoup the money.”
The OAG began investigating the Garwoods after an Animal Control Officer revealed the existence of the suspected puppy mill. The investigation uncovered the fact that the Garwoods routinely advertised dog and puppy sales in local newspapers between 2007 and 2009 but “were not registered retail merchants, had never remitted sales tax or filed sales tax returns, and had not reported the income derived from or tax due on their income from dog sales” (Indiana Tax Court August 2011 judiciary opinion).
This information sparked an undercover operation. The Garwoods issued no receipts when two OAG special investigators purchased puppies on separate occasions. However, during one transaction, the seller “verbally indicated the purchase price included sales tax.” It seems, then, that the Garwoods knew of their obligation to collect and remit Indiana sales tax to the state.
The battle continues
Virginia Garwood fought back after her dogs were seized, filing a timely protest with the Department of Revenue on June 10, 2009. Since then, the battle between the state and the Garwoods has been ongoing, if slow, with Virginia seeking compensation for the dogs seized by the government. See the Indiana Tax Court December 2014 judiciary opinion for more details.
The Garwood’s story serves as a reminder that following the money (the sales tax) can indeed lead to wacky places, some of them darker than others.
Share your wacky tax tales in the comments below. We’d love to hear them.