New audit of Carson City Harley Davidson tax debt ordered

The former owner of the Carson City Harley Davidson dealership agrees he owes the state a significant amount of sales and use taxes.

But the Nevada Tax Commission was told on Monday the $1.1 million the state wants is more than three times what Jose Richard Tapia actually owes.

After hearing from both sides, the commission sent the entire case back to the administrative law judge to re-determine the tax bill. That order also directs both sides to get the financial and sales records that will answer some of the questions.

Katherine Hoffman representing Tapia and his company Gato Malo, said the $1.1 million debt is unreasonable. She said the ruling was based on records that treat non-taxable transfers of motorcycles through auctions, wholesale transfers and sales to out of state customers as taxable sales. The commission was told those non-taxable transfers make up more than $7 million in transactions.

Hoffman said Tapia actually owes just more than $304,000 and urged the commission to order a complete recalculation of the sales tax debt.

Deputy Attorney General Peter Keegan said the auction records Tapia provided are incomplete Excel spreadsheets, not the statutory retail certificates that prove the sales are non-taxable.

But Commissioner George Kelesis said he has been in the business for 17 years and auction houses “just don’t do that, they don’t give you a resale certificate.” He said the auction house reports have always been good enough.

Commissioner Sharon Rigby agreed pointing out the state has always accepted those records when vehicles go to a business that’s in the business of reselling them like an auction house.

Hoffman also pointed out taxation’s first audit came up with a debt of $313,000 — close to what she said Tapia actually owes — before completely redoing the audit and inflating the debt to more than $1 million.

Kelesis made the motion to send the case back for a new audit evaluation saying some of the financial records that can clear things up are in the hands of Carson auto dealer Michael Hohl who took over all of Tapia’s accounting system when he purchased the dealership and re-opened it as Battle Born Harley Davidson.

The motion, which was approved unanimously, gives both sides 90 days to get the necessary records and resolve the dispute.

Tapia’s Carson City Harley Davidson ran into trouble in the fall of 2016 when Harley Davidson Credit Corp. charged he owed it more than $4 million.

Under the dealership trust agreement with Harley Davidson, Tapia received loans to buy the bikes and other products. Those loans are paid back with the proceeds of sales. Harley Davidson filed suit saying Tapia sold hundreds of thousands of dollars worth of motorcycles and accessories without paying back the loans used to buy the bikes and other products.

The lawsuit accused Tapia of keeping the money instead of paying back the loans.

That lawsuit was put on hold when Hohl bought the dealership and its inventory.