PL restaurant has tax troubles

A Pequot Lakes restaurant failed to pay sales tax to the state resulting in a revocation of its sales tax permit, the Minnesota Department of Revenue reported Tuesday.

The Department of Revenue reported Sibley Station owes $146,805 to the state.

"Joseph and Deborah Hallbeck, doing business as Sibley Station, 31026 Government Dr., failed to pay a significant portion of their sales tax from 2002 through 2006," the Department of Revenue reported.

The department cited data privacy when questioned about the length of time involved or what triggered the discovery of Sibley Station's failure to pay. Deborah Hallbeck said a state audit in January 2006 preceded the sales tax permit revocation.

Hallbeck said the business recently incorporated as Sibley Station Inc. and is operating under a new sales tax permit. Since January 2006, Hallbeck said the business has been current in its monthly sales tax payments. She said more than half the $146,805 due to the state is from penalties and interest.

"We are really trying to figure this out and make this work," Hallbeck said.

The Hallbecks have owned the restaurant for 14 years and have 30 employees. The Department of Revenue reported it seized about $700 in cash from the business in an effort to collect the debt with the assistance of the Pequot Lakes Police Department.

Hallbeck said the decision to withhold the sales tax was hers. Six years ago Sibley Station moved into a bigger building. That move and the seasonality of the business were involved when Hallbeck said she decided to keep sales tax dollars and put the money back into her business instead of paying the state.

Mike Teegardin, Minnesota Department of Revenue communications director, said the sales tax is a trust tax with customers paying for their meal and drink assuming the extra sales tax percentage they are charged is going where it is supposed to - not where ever the business decides to spend it.

"Customers are paying in good faith," Teegardin said. "We have an obligation on their behalf."

Hallbeck said she knew what she was doing was illegal. She could not easily put into words the decision she made to keep the sales tax she collected.

"I don't know that you have an answer," she said. "I'm not sure that there is one. I don't know. I guess it is what it is. ... It's a bad situation and we're just hoping to come out of this and keep going I guess. We do feel it's important for the staff and community to keep going."

Hallbeck said she kept thinking the business was going to turn around. Efforts to refinance and to sell the business haven't been easy and this news won't help, Hallbeck said. She said the restaurant has been listed for sale for 18 months without lookers.

Teegardin said the Hallbecks are not prohibited from selling the business and a new buyer could operate the restaurant, but a tax lien is attached. Reached late in the day on Tuesday, Teegardin was not able to confirm if Sibley Station has new articles of incorporation or a new tax identification number but he planned to look into the restaurant's current status on behalf of taxpayers.

Businesses cannot use sales tax dollars for additional operating capital or for any other purpose. If an individual or company makes retail sales after the revocation of a Minnesota sales tax permit, the Department of Revenue reported the action is considered a felony by state law.

RENEE RICHARDSON may be reached at renee.richardson@brainerddispatch.com or 855-5852.