CALIFORNIA RAIDS Business That Refuses to Withhold Taxes

The California tax authorities and local police yesterday raided the factory and home of a California businessman who does not withhold taxes from his workers' paychecks, one of a small but growing number

of business owners who contend the tax laws are a hoax.

No Time Delay Electronics in Huntington Beach, Calif., and the home of its owners, Nick and Trina Vu Jesson, in nearby Fountain Valley, were raided by about a dozen agents of the California Franchise Tax

Board with support from local police. The search warrant maintained that a felony had been committed and authorized the seizure of business records, including computer hard drives.

Mrs. Jesson said the California tax investigators entered her office with guns drawn and ordered everyone out of the factory, which makes electronic components for Motorola, I.B.M., Texas Instruments and other large manufacturers. The tax agents at the scene declined to comment.

The company, also known as N.T.D. Electronics, was one of 23 businesses identified in an article in The New York Times last

November about a movement that contends that no law requires payments of taxes by Americans working for companies owned by Americans. The movement is a significant development among tax protesters because it involves not individuals, but business owners, who refuse to withhold taxes and turn them over.

Under California law, an employer who fails to withhold taxes and turn them over is liable for as much as double the taxes plus interest and can be prosecuted for felony tax evasion.

No federal tax agents took part in the raid, said Lt. Luis Ochoa of the Huntington Beach police.

The action by the California authorities contrasts with that of the Internal Revenue Service, which so far has only sent letters to Mr. Jesson and others in the movement advising them that they are required to withhold taxes.

The owner of a second California business that does not withhold taxes, Al Thompson of Cencal Aviation in Lake Shasta, said that he had not been raided. He denounced the raid at N.T.D. Electronics as lawless.

"It's just brute force," Mr. Thompson said. "When it gets to court, the state is going to be really embarrassed because they have no authority."

Mr. Thompson reiterated a view, common to those in the movement, that the I.R.S. has taken no action because "they know there is no law that gives them authority."

The warrant concerned taxes it said were not withheld from paychecks in 1997 through 1999, but Mr. Jesson said he did not stop withholding taxes until the beginning of 2000. And he noted that the I.R.S. refunded all of the taxes he withheld from paychecks in 1997, money that he said was returned to the workers.

Mr. Jesson said he would also challenge the warrant in court because the magistrate who signed it dated it May 1, 2000, more than a year ago. He said that he called the Huntington Beach police back to the factory and asked them to oust the agents because he thought the warrant was invalid, but the police declined to act.

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Last revision: August 14, 2009 08:07 AM
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