The Mafia Gas Tax Skim

Didn’t the NY Mafia sort-of try this, I may have the details wrong but in the mid-late 70s they began operating “fake” gas stations. Something on the order of close to a billion dollars in unpaid taxes? Correct me please, it’s late and I’m too tired after work to be bothered googling

dumnhpy

You’re very close, and the details are pretty interesting. There have been multiple rounds of this, the one you’re talking about was the late 70s early 80s. It popped back up around the turn of the millennium, with Russian mobsters.

The issue wasn’t fake gas stations, it was fake gas distributors. These are the companies that sell gas to the stations themselves. At the time, they were responsible for collecting any sales taxes on the gasoline. So, a real station would buy gas from the distributor. The distributor would keep the 9 cents a gallon, to hand over to the IRS and any relevant state revenue services.

In the mid-70s, some people in the distribution industry realized that there was a potential loophole. If the distributor that collected the tax money no longer existed or was bankrupt by the time tax collectors came for their payout, there was no money to take.

There were (at least) four geographic areas where this scam started gaining traction, Southern California, Southern Florida, Houston, and New York City. I don’t have firm numbers on how long this continued undetected. By the late 70s, a couple of The Families had learned about this, and muscled their way in. At that point, the Mafia started skimming off the stolen tax money, so for roughly five years, the Mafia was getting one cent for every gallon of gas sold in the Tri-State area. (I’ve seen some conflicting numbers for how much money was taken, though estimates put this at a billion dollars over the life of the skim, though I’m unsure if that was the Mafia’s cut, or if that was the total skim.)

So, it wasn’t a Mafia plan, so much as the Mafia sniffed out corruption (which they are very adept at), and then inserted themselves into the processes. (It’s also worth noting that the operations in SoCal, Florida, and Texas never came under Mafia control. Those remained independent operations.)

It’s a little unclear whether Mafia involvement accelerated the skim’s discovery. There were already criminal investigations going back into the 70s, trying to figure out where the money was going. At the same time, the Mafia brought their signature degree of violence, and lack of subtly.

By the mid-to-late 80s, this was mostly exposed, and shut down. There were changes to make this kind of skimming operation more difficult. As mentioned earlier, it didn’t completely prevent this kind of skim, and there was a brief resurgence twenty years ago, again in the Tri-State area, but it failed to take hold and remain undetected.

It is an interesting footnote and worth digging up. As I mentioned, the Mafia had a real knack for sniffing out corruption or graft and then inserting themselves into the process.

-Starke

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