A Bar Called Murphs – New Jersey Politics – Underestimated Income

There are cases that I cannot resist. ANTHONY MURPHY, INC. t / a MURPHS LIQUOR & BAR and PETER MURPHY, as individuals, plaintiffs-appellants, v. DIRECTOR, NEW JERSEY DIVISION OF TAXATION, Defendant-Respondent is one of them.

Murphs Liquor & Bar at Totowa seems to me to be the kind of place where I spent too much time when I was young. This is arguably the kind of place where everyone knows your name:

unless you are under witness protection.

here is some pictures from a site called the Totowa’s Book of the Dead through Laurie Giardino. Looking at some of these guys, I think it might have been a little intimidating for Hyacinth Thompson, an agent in the great state of New Jersey, tasked with auditing the “Murphs”. On top of that, it looks like Peter Murphy is some sort of political force at least in his county, if not the state according to. This article:

The power struggle between Rumana and Murphy’s loyalists dates back five years, after Murphy – the county leader of the GOP until a federal conviction in 2001 – felt betrayed by Rumana, who took the reins and became a member of the State Assembly. The clash has deepened into many elections since then. The GOP Strong last year, for example, backed the Democratic Party Passaic County Freeholder Terry Duffy, whose campaign posters adorned Peter Murphy’s bar in Totowa.

Murphs had only one non-computerized cash register and apparently the owner was less than diligent in preserving the tapes in the cash register. Ms. Thompson had to do a mark-up analysis to arrive at estimated gross receipts. It found a deficit of just under $ 140,000 from various taxes, including the sales and use tax and personal income tax. Apparently she had tried to be generous:

Therefore, it performed a mark-up analysis, which required the calculation of the percentage mark-up of the cost of various goods. In doing his calculations, Thompson allowed a ten percent allowance for merchandise lost for reasons such as deterioration, theft, waste, gifts, discounts, and personal use. The usual compensation was five percent, but Thompson used the higher figure in an attempt to get an amicable resolution of the audit.

The “gifts” factor brings back memories. If I remember correctly, the procedure was to sit at the bar and place a big banknote in front of you, like the one with a picture of Lincoln. Every time the bartender refilled your glass, he would extract something from the shrinking pile of money. Except that every third or fourth fill would be a “hit” meaning he hadn’t taken anything. The etiquette was that you couldn’t go all at once, which was pretty insidious as it meant that if you had more than one beer, you’d have at least four. After drinking four beers, it was relatively easy to have a fifth, which, thanks to the label of the shot, would get you to seven. When I arrived in Massachusetts, someone told me that the practice was illegal there, which would be a very wise law.

Jerry Schwab, an appeal speaker, who was perhaps more covering up with beatings that Ms Thompson slashed the bill by over $ 15,000, but that was not enough to stop Mr Murphy from going to court . He didn’t do too well. Apparently the plan for the trial was to cross-examine the listeners, but the court had none of these:

In that case, the plaintiffs sought to overcome the presumption of nearness by attacking the credibility of Thompson and Schwab, as well as by questioning their methodology. They do it in generalities rather than in details. They do not contradict the manager’s assertions that most of the cash register tapes were not produced or that there were insufficient books and records to complete the audit. They do not refer to particular documents or calculations that demonstrate one or more specific errors with respect to the assessments. They did not provide any expert report indicating errors of fact, methodology or calculation with regard to the analysis of the division’s mark-up.

In this case, the taxpayer is simply providing the certificate of its chairman expressing an unfounded allegation that the division’s assessment was “too high”. It should be reiterated that the court granted additional time at the taxpayer’s request to present sufficient evidence to rebut the presumption of correctness of the division.

Considering Mr. Murphy’s political connections, it wouldn’t surprise me if there was even more story here, but I pushed it as far as possible.

You can follow me on twitter @peterreillycpa.



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