Amid Calls for Investigation, IRS Agents Said to Have Visited N.H. Liquor Stores

Apr 2, 2018

A customer loads a case of Hennessy cognac into his vehicle.
Credit Todd Bookman/NHPR

Agents from the Internal Revenue Service made unannounced visits to New Hampshire liquor stores last week, according to multiple sources. The action comes in the wake of allegations made by an elected official that the state-run stores aren’t doing enough to stop potentially illegal all-cash transactions, exposing the state and liquor store employees to possible lawsuits and harm.

During their visits, IRS agents asked questions of store employees, as well as customers making large purchases, according to sources.

A spokesperson for the Boston field office of the IRS confirmed that agents were “conducting official business” on March 28th in New Hampshire, but wouldn’t provide details on the nature of that work or confirm if it is related to recent concerns raised by Executive Councilor Andru Volinsky about all-cash bulk sales at state liquor outlets.

In February, Volinsky wrote a letter to Gov. Chris Sununu and state Attorney General Gordon MacDonald expressing concern that the New Hampshire Liquor Commission, a state agency that oversees 79 retail stores, has policies in place that “appear designed to avoid federal financial reporting requirements related to large cash transactions.”

Acting on a tip from a store employee who has since been fired, Volinsky says he witnessed customers inside the Keene retail store divide a large transaction into multiple smaller transactions in order to keep the purchases under $10,000. IRS rules require most businesses to complete a form when customers make all-cash purchases in excess of $10,000. The policy is intended to combat money laundering activities. It is illegal to “structure” a transaction--by either splitting up a purchase or making multiple purchases at different stores--to avoid the $10,000 reporting threshold.

The state Liquor Commission denies that it is turning a blind eye to these transactions, and said that it is “committed to following state and federal laws and we have an 85-year track record of doing just that.” A spokesperson for the Liquor Commission says the agency is unable to comment on last week’s IRS activities.

Last Wednesday--the day IRS agents were on the ground--was the final day of a two-week promotional period during which customers who make large purchases are rewarded with gift cards, something Volinsky criticized in his letter as akin to providing “a state discount to customers who are illegally structuring the transactions.”

Publicly available inventories during the two week period showed a spike in sales of certain spirits, including Hennessy cognac, the state’s top selling brand in 2017 and an apparent favored drink of customers who make bulk purchases using cash. There have been several high profile arrests in nearby states in recent years involving people buying large quantities of Hennessy in New Hampshire, with the intent to resell that liquor elsewhere.

During the promotional period, an NHPR reporter observed within an hour of arriving at a retail liquor store a van with New York license plates back into a parking spot near the store’s entrance. Approximately twenty minutes later, the driver and a second man exited the store pushing a cart stacked with boxes containing both Hennessy cognac and Johnny Walker scotch. When approached, the driver of the van declined to comment, but did say that “bootlegging” activities have been taking place in New Hampshire for decades, and were unlikely to stop despite recent scrutiny.

It remains unclear if the Liquor Commission is legally required to file IRS Form 8300. In 2012, the New Hampshire Attorney General’s office informed a special committee set up by House Speaker Bill O’Brien that looked into the Commission that it believes it is doubtful that the Commission must comply with filing Form 8300. The Attorney General’s written opinion detailing that decision is protected under attorney-client privilege.

A few years later, the AG’s office again reviewed the Commission’s policies in this area.

“We worked with the Commission in 2014-15 on their policies related to large cash transactions,” Deputy Attorney General Ann Rice wrote in an email. She declined to explain what prompted the New Hampshire Department of Justice to engage in that specific policy review. She adds that Volinsky's "letter has raised concerns about how the policies are actually being implemented, which we will look into.”

In his February letter, Volinsky requests that the Attorney General seek clarity on the issue from the IRS. For its part, the state Liquor Commission says its policies regarding large cash transactions have been reviewed on “numerous occasions” and have always been found legally sound.

According to records obtained by NHPR, the New Hampshire Liquor Commission has filed only a single Form 8300 with the IRS since the beginning of 2016. That form refers to a $28,000 cash purchase. However, the form doesn’t contain the name of the purchaser, which is listed simply as “unknown.”  It isn’t clear why the Commission would have voluntarily filed this form, given its position that it isn’t required to do so.

The IRS’s website states that there are sharp penalties for intentionally failing to file Form 8300 when required, including a $25,000 fine and up to five years in prison.