"The Department of Revenue promotes voluntary taxpayer compliance by educating taxpayers, aggressively pursuing criminal sanctions and demanding accountability when taxpayers engage in fraudulent activity," said Revenue Commissioner Loren L. Chumley. "This investigation underscores our department's ongoing efforts to enforce Tennessee's tax laws."

The investigation was conducted by the Special Investigations Section of the Tennessee Department of Revenue. District Attorney General Lawrence Ray Whitley initially provided information to the department indicating McCarthy was understating the sales tax liability of Gourmet Pizza Plus, Inc. d/b/a Gourmet Pizza, 408 Main St., Hendersonville, Tenn. Based on this information and other evidence gathered, McCarthy was indicted by the Sumner County Grand Jury on Feb. 10, 2005, on 21 counts of evading sales tax and one count of theft. The 21 counts charge McCarthy with unlawfully and knowingly evading and defeating sales tax collected and due to the state of Tennessee by filing false sales tax returns on behalf of Gourmet Pizza Plus, Inc., during the period Jan. 1, 2002, through Sept. 30, 2003. These fraudulent actions resulted in Gourmet Pizza Plus, Inc., failing to report $546,202.47 of taxable sales for the business and failing to remit $49,139.26 of the sales tax collected and due. This is in violation of Tenn. Code Ann. Section 67-1-1440(g).

A $5,000 bond was set. If convicted, McCarthy could be sentenced to a maximum of two years on each count in the state penitentiary and fined $3,000 for the 21 counts relating to his failure to remit sales tax collected and filing false returns. If convicted on theft of property, McCarthy could be sentenced to a maximum of six years in prison and fined up to $10,000. In addition, civil tax and penalties are due the state.

Citizens who suspect violations of the Tennessee revenue laws should call the toll-free tax fraud hot line at (800) FRAUDTX (372-8389).

The Department of Revenue collects approximately 92 percent of total state tax revenue. During the 2003-2004 fiscal year, the department collected $9.1 billion in state taxes and fees. In addition to collecting state taxes, $1.6 billion of local sales tax was collected by the department for local governments during the 2003-2004 fiscal year. Besides collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to www.Tennessee.gov/revenue.

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