A.G. Schneiderman And NYS Tax Commissioner Mattox Announce Guilty Plea Of Tax-Evading Former Head Shop Owner

John Tebbetts, Owner Of Several Central New York Head Shops, Swindled New York Taxpayers Out Of $600K In Taxes

Schneiderman: My Office Will Keep Working To Prevent Dishonest Individuals From Skirting The Law And Threatening The Safety Of Our Communities

SYRACUSE – Attorney General Eric T. Schneiderman and Commissioner of Taxation and Finance Thomas H. Mattox today announced that John Tebbetts, the former owner and operator of Tebb’s Head Shops, located throughout Central New York, pleaded guilty to felony charges related to a five-year scheme to avoid paying New York sales and income tax. Tebbetts, the sole owner of head shops in Onondaga, Oneida, Herkimer, Madison, and Jefferson counties, admitted that he failed to remit sales tax collected between March 2007 and September 2012 on the sale of herbal incense, pipes, hookahs, body jewelry, dart supplies and other items sold in his stores. Tebbetts has already admitted to selling dangerous synthetic drugs, known as bath salts, at his stores. 

“Tebbetts jeopardized the health and well-being of Central New Yorkers by using his head shops to sell bath salts – synthetic drugs that have wreaked havoc on our communities in recent years – and added insult to injury by defrauding taxpayers in the process,” said Attorney General Schneiderman. “I am committed to continuing our tough, smart approach to crime, using every tool at our disposal to prevent dishonest individuals from skirting the law and threatening the safety of our communities.”

“Tebbetts brazenly pilfered sales tax monies from his customers, the State, and the local communities where his stores were located, even after the Tax Department revoked his authority to collect tax,” said Commissioner Mattox. “In so doing, he deprived those communities of sales tax revenues desperately needed to combat the public safety and health crisis he created with his sale of synthetic drugs.”  

Tebbetts, 34, of Rome, pleaded guilty in Onondaga County Court to charges of Grand Larceny in the Third Degree, a class D felony, for which he will be sentenced to 3 to 6 years in prison, and Criminal Tax Fraud in the Fourth Degree, a class E felony, for which he will be sentenced to 1 1/3 to 4 years in prison. As part of his plea, Tebbetts also agreed that he owes New York State in excess of $616,000 in unpaid sales tax and personal income tax. 

Sales tax money collected by businesses from their customers belongs to state and local governments, and businesses are responsible for ensuring that these funds are remitted to the State when due, typically on a quarterly basis.  The State then returns a portion of the funds to local governments to fund government operations.  

In August 2012, the Attorney General filed a lawsuit against Tebb's Head Shops for the sale of bath salts and synthetic drugs in violation of the state's labeling laws. In January 2013, a state Supreme Court justice ruled in OAG’s favor, permanently banning Tebb’s from selling any mislabeled, misbranded or unapproved drugs or intoxicants.

In December 2012, Tebbetts pleaded guilty in United States District Court, Northern District of New York, to numerous federal criminal charges, including possession with intent to distribute a controlled substance. On July 8, 2014, Tebbetts was sentenced to 87 months in federal prison on those charges. 

Tebbetts will be sentenced on today’s tax evasion counts on August 15 in Onondaga County Court. 

The tax evasion case was investigated by Associate Attorney Carla DiMarco and the Syracuse Criminal Investigations Division office of the New York State Department of Taxation and Finance. Investigators Joel Cordone and David Buske, Supervising Investigator Richard Doyle and Deputy Bureau Chief Tony Karam of the Office of the Attorney General also assisted in the investigation.

The case was prosecuted by Assistant Attorney General Nicholas J. DeMartino of the Criminal Enforcement and Financial Crimes Bureau. The Criminal Enforcement and Financial Crimes Bureau is led by Bureau Chief Gary Fishman, Deputy Bureau Chief Stephen Maher and Deputy Bureau Chief Stephanie Swenton. The Criminal Enforcement and Financial Crimes Bureau is part of the Criminal Justice Division, led by Executive Deputy Attorney General for Criminal Justice Kelly Donovan.