BELLINGHAM - The owner of the now-closed Bayside Café has been charged with theft and 24 counts of filing false tax returns, after he allegedly failed to pay at least $286,000 in taxes that had been collected from customers, according to the state Department of Revenue.
An audit found that Bayside owner James Alpha Brown, 78, reported only about 27 percent of retail sales from January 2008 through March 2012 at the restaurant, located at 1801 Roeder Ave., on Squalicum Harbor. Bayside closed suddenly in September 2012.
The state Attorney General's Office has filed the theft and tax charges against Brown in Whatcom County Superior Court, and one of the office's attorneys will prosecute the case. Brown's arraignment is set for April 5, and prosecutors will seek restitution for the back taxes, plus penalties and interest, Department of Revenue spokesman Mike Gowrylow said.
"Customers of this business paid these taxes with the expectation that they would come back to them in the form of state and local government services - not to line the pockets of the business owner and his relatives," Gowrylow said. "That's not acceptable."
The audit of Bayside compared combined excise tax returns filed with the Department of Revenue to the café's computer sales records and bank account records. The audit found Brown was reporting only about 27 percent of the restaurant's retail sales and paying about 27 percent of the sales tax collected from customers at the restaurant. For example, in 2011, the restaurant collected about $100,000 in sales tax, while Brown paid only about $22,000 in sales tax to the Department of Revenue, according to court documents.
When reached by phone Tuesday, Brown declined to comment on the charges. But according to court documents, he told the Department of Revenue that he had been estimating the café's taxable income rather than using business records to complete his excise tax returns. Brown said that his business had "undergone financial difficulties" and that some of the money collected by the business was used to pay family members' salaries, according to court documents.
It's not the first time Brown has had issues underreporting his taxes. Brown is the head of Port Investments, Inc., which did business as the Bayside Café and previously operated the Marina Seafood Broiler restaurant from 1987 to 1997. A Department of Revenue audit on the Marina from 1990 through mid-1994 found that the restaurant underreported its income, and the department assessed about $211,000 in back taxes, according to court documents. Those taxes usually have to be paid before someone can start another business, Gowrylow said.
A new business with new owners and a different name is expected to open in the former Bayside location this year.