The New Hampshire Attorney General is paying a tax consultancy firm up to $900 an hour to help determine if the state Liquor Commission’s policies for handling large all-cash transactions violate federal tax regulations.
According to a contract obtained by NHPR through a public records request, PricewaterhouseCoopers has been approved to bill the state up to $30,000 to provide tax services to determine “currency reporting requirements” to the Internal Revenue Service.
The state has also entered into a second contract with Concord-based law firm of Rath, Young and Pignatelli. That contract shows the firm is providing the state a discounted rate of $350 per hour for work on the same topic. To date, Rath, Young and Pignatelli has billed $15,216, according to invoices provided by the Attorney General’s office.
Both firms are assisting the Attorney General in what it calls “discussions” with the IRS over the Liquor Commission’s handling of large all-cash transactions. Many of those transactions involve out-of-state bootleggers, who buy massive quantities of liquor - mostly Hennessy cognac - at state-run liquor stores.
Last year, Executive Councilor Andru Volinsky raised concerns that the Liquor Commission was turning a blind eye to potentially illegal transactions. Under IRS rules, businesses are required to report most cash transactions in excess of $10,000.
Volinsky alleges that customers from out-of-state violate those rules by travelling to multiple liquor stores in a single day, spending just under the $10,000 threshold at each location to avoid having to notify the IRS.
In some cases, bootleggers are alleged to have divided large cash purchases into several smaller purchases at the cash register, in order to avoid IRS reporting requirements.
Last November, the Attorney General’s office, which helped write the Liquor Commission’s policies on the transactions, released a brief report clearing the Liquor Commission of any wrongdoing. It concludes that because the Liquor Commission functions as a governmental unit, it is exempt from having to complete IRS documentation.
The IRS has previously questioned the state’s interpretation of its cash-reporting rules. That includes a lengthy investigation in 2012, and unannounced visits to Liquor Commission properties last year.
At the conclusion of its November report, the Attorney General said it would engage with the IRS for a final ruling on the matter. The report failed to mention that the state was already paying both Rath, Young, and Pignatelli as well as PWC for its advice on the topic.
According to a spokesperson for the state's Department of Justice, neither contract was put out for bid due to the “unique and specialized expertise” of the topic. The Attorney General didn’t announce its retention of the firms until questioned by NHPR.
The contracts are paid using litigation funds appropriated through the budget process.
The government says it remains in discussions with the IRS over the Liquor Commission’s obligations to report large all-cash sales.
However, the agency says it may ultimately decide not to request a formal Private Letter Ruling from the IRS, a move Volinsky criticized earlier this month.