OK Tax vs Myspace Ouch!
MySpace boasting has turned into a $320,000 tax nightmare for five current and former University of Central Oklahoma students.
By Randy Ellis
Staff Writer
A youthful attempt to party their way to popularity and some exaggerated MySpace boasting have turned into a $320,000 tax nightmare for five current and former University of Central Oklahoma students
“This is crazy,” said Julius Baroi, co-founder of Kegheadz, a loosely organized Edmond-based party business. “The Tax Commission claims we owe more than $300,000. We don't have enough money between us to pay $6,000 to hire an attorney. They won't listen to us.”
Paula Ross, spokesperson for the Oklahoma Tax Commission, said she couldn't comment on an individual taxpayer's case.
Although the Tax Commission wants to tax Kegheadz like a million-dollar business, Kegheadz was really just a group of college guys who got together to throw parties, said Baroi, 29, and co-founder Jordan Glover, 23.
Overall, Baroi estimates Kegheadz only netted about $1,700.
Tax officials got the wrong idea because of embellishments on the Kegheadz MySpace Web site that boasted things like “Over a billion served,” “Biggest party in the state,” and “Biggest party in the country,” Glover said.
But that was just “exaggerated hype” designed to create a buzz and attract people to the parties, Glover said.
The group threw 22 parties in Edmond and Oklahoma City in 2006 and the first half of 2007, Baroi said.
The goal was to meet college women and hopefully make enough money to pay their personal bar tabs, Glover said.
“It wasn't a career choice,” he said. “The goal was to have fun in college. Being a cool guy was the main objective.... You'd think they could tell we weren't masterminds. We were just college students having fun and acting stupid.”
Baroi said his group operated Kegheadz by going to Edmond and Oklahoma City restaurants and businesses and persuading them to host college parties. Off- duty law enforcement officers were hired to provide security and prevent problems, he said.
Men were charged a $5 cover charge. Women were let in free.
“If a guy brought three or four girls, we'd let him in free, too,” Glover said.
Kegheadz paid building owners $100 to $800 from the cover charge and a disc jockey was paid $50 to $200. The building owner got to keep money received from bar sales. If there was money left over from the cover charge at the end of the night, it was split among the Kegheadz friends who had promoted the event, Baroi said.
He said from 60 to 275 people showed up for the 22 parties Kegheadz promoted. Baroi said he made a few hundred dollars on some events and lost money on others.
He said they never really thought about Kegheadz as a business, so they never filed any paperwork with tax officials.
“We're not denying that we threw parties and probably owe the Tax Commission something,” Baroi said.
But $320,000?
“That's ridiculous,” Glover said.
How did the Tax Commission arrive at such a high figure?
Baroi and Glover said when they met with tax officials, they were shown a huge stack of evidence that appeared to be page after page printed off the Kegheadz' MySpace Web site.
In the absence of business records, Tax Commission auditors apparently built their tax case around the statements made on the MySpace site, one of several Internet social networking sites the students used to promote their parties, Baroi said.
The former students said they were just having fun. Embellishing on social networking sites by college students is pretty much the norm, they said.
“People thought we were a lot bigger status than we were and we enjoyed people thinking that,” Glover said.
They just don't enjoy tax officials thinking that.
Documents given to the students by tax officials indicate auditors concluded Kegheadz hosted 108 events over a 4.5-year period and that their average paid attendance was 675.
Auditors estimated they had $919,506 in mixed beverage sales, from which they would owe $162,832 in mixed beverage tax, penalties and interest.
The Tax Commission also is trying to assess them $155,294 for sales tax, penalties and interest and $1,856 for tourism tax, penalties and interest.
Baroi said none of that makes any sense.
Kegheadz never received any money from mixed beverage sales, he said. That revenue went to venue operators.
The group only held 22 parties and never had close to 675 people attend any of them, Baroi said. That's counting women, who got in free, he said.
Baroi said Kegheadz stopped hosting parties after some of their later ones lost money.
An April 2007 party planned for the Oklahoma City Farmers Market turned into a disaster when the disc jockey couldn't get the sound system to work, and a November 2006 party at Midsouth Pro Wrestling went south when it was raided by the state Alcoholic Beverage Laws Enforcement Commission and Oklahoma City police, Baroi said.
Businessman Mike Crawford, 38, said all he did was sublease the Midsouth Pro Wrestling building to Kegheadz three times and now the Tax Commission is claiming he was part of Kegheadz and should share in the disputed $320,000 tax liability.
Baroi said Kegheadz was originally scheduled to argue its tax case Sept. 24, but has been given a delay until the last week in October.
“I think common sense will prevail,” Glover said. “But if there's any attorney out there who remembers what it was like in college and wants to give us some free help, we could sure use it.”
Glynda Chu, spokeswoman for the Edmond Police Department, said she didn't specifically remember Kegheadz, but college parties like the ones they hosted used to be a problem in Edmond because they often involved underage drinking. The parties dried up after Edmond adopted a social host ordinance and began arresting adults at parties where underage drinking was found, she said.
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