The Nebraska Department of Revenue says four now-closed beer stores in Whiteclay together owe more than $600,000 in state taxes after an audit determined they underreported sales by nearly $1.7 million in a three-year period.
But the owners of Arrowhead Inn, State Line Liquor, D&S Pioneer Service and Jumping Eagle Inn have mounted a legal challenge, asking a Lincoln judge to review Tax Commissioner Tony Fulton's Nov. 22 findings, which they say were based on flawed estimates.
It's just the latest setback for the controversy-plagued stores forced to close in April after decades of serving millions of cans of beer each year to the Oglala Lakota people of South Dakota’s nearby Pine Ridge Indian Reservation, where alcohol is banned.
This spring, the Nebraska Liquor Control Commission voted 3-0 to deny the renewal of the stores' licenses following a hearing at the Capitol on whether law enforcement in Whiteclay was adequate to let beer sales continue.
That decision, hailed by activists, led to a court fight which ended in September with the Nebraska Supreme Court rejecting the store owners' bid to reopen, citing a technical flaw in their appeal.
Now to reopen, they would need to reapply for liquor licenses.
But as the issue over their licenses raged, a second, behind-the-scenes fight was brewing over taxes.
On Friday, attorney Benjamin Moore, of Rembolt Ludtke LLP, filed nine petitions for review for the individual store owners after each was issued a notice of deficiency determination earlier this year. The notices reflected they owed additional income taxes, sales and consumer use taxes, as well as a litter fee (a tax assessed to those making gross proceeds of $100,000 or more in retail sales).
In the petitions, Moore said the Department of Revenue's decisions were not supported by evidence, were contrary to law and were "arbitrary, capricious and/or unreasonable."
The dispute boils down to how the state's auditors recalculated each of the businesses' gross receipts — and therefore taxes due — for the period from August 2013 to August 2016.
According to court records, department auditors first audited the books of the individual stores, then did on-site audits in September 2016 after the owners asked for re-determinations.
In the on-site visits, they were looking for documentation to support the stores' reported sales and use tax returns. But the Liquor Control Commission had taken their z-tapes, records from their cash registers, so the owners of Arrowhead Inn, D&S Pioneer Service and Jumping Eagle Inn couldn't provide them. State Line did not use a register, according to the state's order.
Instead, auditors subpoenaed the alcohol suppliers' records of all sales to the businesses for the audit period.
Department auditors reconstructed total sales with the help of price lists from the owners. But auditors had no way of knowing how many of the six-packs, 18-packs and cases delivered to the stores had been sold as singles, and made calculations assuming the largest packs were broken down and sold by the can.
The owners took issue with the new calculations, which they said didn't reflect wholesale price increases or an accurate number of individual can sales. They argued the Department of Revenue should have gotten their z-tapes from the Liquor Control Commission.
But Fulton, the tax commissioner, said that was the petitioners' job. Last month, he affirmed the numbers, saying the owners hadn't retained the records they were required to under Nebraska law, "which made it necessary to look beyond petitioner's records to calculate total sales."
In his order, Fulton said there may have been a more precise method of determining how much was sold as single cans, "but the taxpayer did not provide information that would allow the department to formulate that more precise methodology."
In the end, he upheld the department's findings that:
Together, it adds up to $607,926.
Now, a Lancaster County District Judge will review the record to see if he or she agrees.
In 2017, the area has seen several new business ventures begin and innovative ideas developed for dilapidated properties, capping what some are calling a successful year for Beatrice.
Mayor Stan Wirth shared his thoughts on some of 2017’s high points, and what trends he hopes to see in 2018.
“We have a lot of what I view as progressive business that’s going on,” he said. “Not only with the infrastructure repairs we accomplished this year, but also through economic development and some of the successes we’ve had there and what we hope will continue to enhance job creation.”
The opening of Hybrid Turkeys in the industrial park is one new business bringing jobs to the Sunland, while several others have found success as well, prompting others to take notice.
Beatrice was selected by the Nebraska Diplomats as the community of the year for being a leader in community growth and business partnerships.
The group also named a Beatrice business, Rare Earth Salts, as the innovator of the year.
And while new beginnings demonstrated growth in the area, Wirth said the demise of old commercial buildings is also a step forward.
The former Store Kraft building is currently being demolished to make way for an anticipated new commercial development. Plans are in place to demolish the former Beatrice Community Hospital building in 2018 to make room for additional housing and steps, albeit small ones, are being taken to potentially demolish the former Dempster Industries building in south Beatrice.
While these three buildings each have deep roots in Beatrice’s history, they haven’t been used to their full potential in years.
“While I understand the nostalgic benefit of these structures, at some point in time, you just have to let it go,” Wirth said. “Time marches on and progress marches on. We have a new state of the art facility today in the new Beatrice Community Hospital and (demolishing the old hospital) is going to give way to additional economic development with the workforce housing and also some senior living projects.”
Once demolished, houses and duplexes will be constructed at the site to house 16 families in the area of 10th and Arthur streets.
The structure is planned to come down in spring 2018, and the total project is expected to be finished in early 2019.
A small portion of the former Demspter Industries building is still being used by Dempster Manufacturing – a different company than the longtime Beatrice windmill manufacturer – to assemble spreaders and recycling trailers, but long-term plans call for the building to eventually come down, as renovating the structure would likely cost more than it’s worth.
“There’s a lot of buildings in our community that are in such disrepair that unless someone comes in here with a pile of money, there’s not much that’s going to happen,” Wirth said.
He added that the city doesn’t own the property and he doubts the building will come down in 2018, but he sees potential in the location, possibly to solve two problems at once and use the area to build a new fire department.
“The crowded condition that the fire station is in today is, in my opinion, not acceptable,” Wirth said. “Where that location is going to be, there’s several of them that I think would work. My vision is to utilize the former Dempster facility. It is a building that is in tremendous disrepair and to try to bring that back to some semblance of utilization is just not economically feasible.”
The department currently operates out of the lower level of the city auditorium on Ella Street, and has outgrown the space.
Not all the highlights from 2017 have been large scale projects or grand plans. Wirth said one big success story from the year has been the city’s facade improvement program.
As a part of a downtown revitalization grant from the state, the forgivable loan program helps downtown property owners improve the appearance of their buildings while keeping in mind the historical significance, environmental impact, economic potential and property value of each building.
Wirth said there have been 18 projects awarded through the program, with more applications pending, since it was approved by the City Council in June.
“I think that it exceeded my expectations, and I’m happy that it did,” he said. “The downtown property owners really embraced it and I think they see there was a real benefit to them to enhance their structures and revitalize our downtown area as much as we can."
Looking ahead, Wirth believes Beatrice will continue to see economic growth and said there are several projects in the works.
“We need to continue to create jobs for this area,” he said. “We may continue to create jobs that are attracting people from a wider area than just Beatrice itself. Our NGage economic development group has quite a few inquiries on the drawing board today that may or may not come to fruition, but we’re going to do our best using all the economic development tools that we have available to us to try to make that happen.”
Bond has been set at $100,000 for a Beatrice man accused of sexually assaulting a child.
James A. Richards, 36, was arrested earlier this week on a warrant. he appeared in Gage County Court Thursday morning for a bond setting.
Richards is charged with first-degree sexual assault of a child, a class 1B felony. His next hearing is set for Jan. 4.
The charge stems from incidents that occurred in Wymore with a female victim who was 3 years old at the time.
The Child Advocacy Center conducted a forensic interview of the victim and it was that interview, along with an interview of the suspect, that resulted in the issuance of the warrant.
According to the warrant, the alleged events took place in a bathroom of a residence between May 25 and July 20 of this year. The alleged assault was reported to authorities by the victim’s parents in late July.
Richards previously agreed to speak with authorities and said that he lived in the same residence as the victim at the time of the incidents.
The warrant states Richards said he changed the victim out of her swimsuit on occasion, and allegedly admitted to touching her inappropriately during one of these instances.
Richards is a registered sex offender and was arrested at the residence he had listed on the sex offender registry.
Beatrice police arrested a woman for domestic assault following a disturbance reported in the 1400 block of North 11th Street.
The disturbance was reported shortly after 11 p.m. on Tuesday. A female, later identified as 27-year-old Ashley O'Keefe, could be heard yelling inside the house and a man outside said she was assaulting another man.
Gage County Court documents state a man who was allegedly assaulted came out of the residence and had blood all over his lips. He told police he was missing part of a tooth.
O'Keefe came outside, and continued yelling.
After multiple attempts to calm her down, court documents state she wanted the officer to leave and no longer wanted the victim removed from the residence. The victim then reported he wanted nothing done about his injury.
Less than 30 minutes later, dispatch received a 911 hangup from the same residence.
Upon the officers' arrival, O'Keefe said the three men had all assaulted her, and police observed a pushing match between her and one of the men at the front door.
Officers attempted to put her in handcuffs to prevent further assaults, and she kicked one of the men.
O’Keefe’s bond was set at $3,000, with a 10 percent deposit in Gage County Court. Her next hearing is set for Jan. 16.