Sunday, February 03, 2008

THE RIGHT THING: SCREAMING FOR ICE CREAM

Gus Rancatore opened Toscanini's Ice Cream in Cambridge, Mass., a couple of blocks from the campus of the Massachusetts Institute of Technology, in 1981. It quickly became a haven for students, Cambridge locals and others craving flavors ranging from cardamom to burnt caramel.

Rancatore became known for his civic involvement, supporting local schools as well as neighborhood associations and arts groups. His neighborliness paid off: In the course of more than 25 years, he built a loyal following of former students, employees and others who became rabid devotees.

In late January, however, the Massachusetts Department of Revenue shut down Toscanini's for failure to pay back taxes. With penalties and interest, the DOR says, Rancatore owes $167,000.

"In legal terms I violated my fiduciary responsibility by not paying the 5-percent meals tax to the state," Rancatore admits.

He takes full responsibility for the mess he's in, Rancatore says, and understands that everyone knows "you should never not pay your taxes." He stresses, however, that he didn't spend the money on himself, but instead put it into the continued operation of his business. His real problems began with a failed effort to expand to more locations.

"It's sort of plain that I'm an occasionally stupid small-business owner," he says.

When news of the shutdown broke, one Toscanini's employee set up a Web site to help Rancatore raise funds to pay off the tax bill. Last I checked, more than $23,750 had poured in from customers, employees and fans.

Shortly after the "Save Toscanini's" Web site went up, however, a regular reader of my column e-mailed me to ask whether I thought it was ethical for Rancatore to be asking for help to pay off the taxes he should have paid when he originally collected them.

While most of the comments on the Web site are supportive, several posters say that there is no way they will contribute.

"How is it ethical," one post asks, "for a for-profit business to ask its customers, whose taxes it apparently pocketed, to pay AGAIN?"

To some, however, the ethics aren't the point.

"I don't really care about the taxes or the ethics," another poster responded. "I just want to keep Burnt Caramel in Cambridge!!"

Rancatore's decision not to pay his taxes was both illegal and unethical. He violated people's trust by collecting tax money from them and using it to operate his business instead of paying those collected taxes to the Department of Revenue. He's being punished for that, and appropriately so.

But that isn't the question posed by my reader. She wants to know if there's anything wrong with Rancatore accepting financial help from loyal customers or fans.

No, there's absolutely nothing wrong with it. It's their money and, if they believe that the value of having his store open outweighs the impropriety of his actions, that's a valid choice for them to make.

"It's certainly voluntary," says Rancatore, who adds that he has been current with his taxes for some time now. "If people don't want to do it, they shouldn't do it."

He's correct. The right thing for people to do is to decide whether or not they want to help Rancatore out of the fix that he has gotten himself into. If they decide that they do, then they can do so without guilt.

And the right thing for Rancatore to do is to pledge that, if he is able to use the raised funds to pay off his sizable tax bill and reopen his shop, he will never again flout the law by spending the tax money he collects for any other purpose, no matter how hard-pressed he may be to cover operating expenses.

c.2008 The New York Times Syndicate (Distributed by The New York Times Syndicate)

1 comment:

Anonymous said...

Hi Jeffrey

Great article on the tax problem with the business man.

That is the biggest problem with any business, is that you have several Government partners when you are in business and they all don’t care about you, only generating money. It’s basically like a mob… they come around on a regular basis and if you pay – well you keep going till the next stop. And of course, you have several mobsters coming in and collecting your money. Why refer to them as mobsters? Well because they come with a ruthless police force method of getting you in compliance.

Sales tax is the one I hate the most. You collect the money for the state, you account for it with forms and you pay it.

If you are one day late paying it you are kicked in the face with a 6% penalty. IF there is a balance it is around 10% additional penalty monthly – not a apr, a flat monthly rate fee. The state will gladly take it from you, but don’t pay it and they have a army to collect it. It like the credit card companies, when you can’t afford to pay – they charge you more… a catch 22.

Anyway… the only real world way to go into business is to never, ever, get yourself in a position to owe the government anything.

Give them their money or You will be the loser.

He needs to get a lawyer if he can raise most of what he owes to try and do a settlement. You and I can’t negotiate that, but a lawyer or even a tax preparer can help out trying to reduce it. Would rather them receive it as a fee that give it away to the government.

Phew… can’t believe I am going on about this…. But as a business man the government is free to do what they want… just like a mobster.

That’s it.

Steve litalien
Creative dezign
Garden grove ca

Ref:
orange county register
Life section mon-feb 4, 2008

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