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AG: Tebb’s Headshop owner evaded $300K in sales tax

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The state attorney general has charged the owner of nine Tebb’s Headshops, including one in Watertown that has closed, with evading more than $300,000 in taxes due the state.

John E. Tebbetts III, 34, Rome, faces a single count of second-degree grand larceny and two counts of second-degree criminal tax fraud, all felonies, according to a statement issued Monday by Attorney General Eric T. Schneiderman. If convicted of the charges, Mr. Tebbetts, who ran a store in Northland Plaza on Eastern Boulevard, faces up to 15 years in prison.

Mr. Schneiderman said the charges resulted from a three-year investigation conducted by his office and the state Department of Taxation and Finance. It is alleged that from March 2007 to September 2012, Mr. Tebbetts collected state sales taxes on the sale of items such as herbal incense, pipes, hookahs, body jewelry and dart supplies, with all the taxes collected due the state. It is claimed that during that time, Mr. Tebbetts did not return the full amount of sales tax collected from customers in excess of $364,000, with the intent to evade the taxes due.

Mr. Tebbetts also is charged with failure to report taxable sales from his head shops for the periods between March 2007 and August 2012, resulting in sales tax liability in excess of $500,000 that was not remitted to the state, Mr. Schneiderman said.

Mr. Tebbetts has been on the attorney general’s radar since August 2012, when Mr. Schneiderman brought action against Mr. Tebbetts and owners of 15 other head shops across the state, saying the businesses were selling mislabeled products, such as bath salts and window cleaner, that were actually synthetic drugs. As a result of the attorney general’s investigation, Mr. Tebbetts was fined nearly $200,000 in March by state Supreme Court Judge James P. McClusky for selling mislabeled products.

He also has pleaded guilty in U.S. District Court, Syracuse, and is awaiting sentencing on a charge that he possessed controlled substances with the intent to distribute them. He faces up to 20 years in federal prison and potentially more than $5 million in fines.

Earlier this month, a Watertown man filed suit against Mr. Tebbetts and his business, claiming he suffered serious health problems after consuming synthetic drugs purchased at the Watertown store.

That suit, brought by Tyler M. Snyder, does not specify an amount being sought in damages.

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