Former Red’s Owner Pleads Guilty to Tax Fraud

The former owner of Red’s restaurants pleaded guilty Friday to defrauding the IRS on federal employment taxes and the Massachusetts Department of Revenue on state meals taxes over a six-year period, authorities said.

John Drivas, 66, owned and operated Red’s Sandwich Shop in Salem, Massachusetts, Red’s Kitchen and Tavern in Peabody, Massachusetts, and Red’s Seabrook in Seabrook, New Hampshire, according to a Justice Department statement.

Drivas paid the wages of several restaurant employees in paychecks and cash, and he failed to report the cash wages to the IRS or pay employment taxes, resulting in lost employment taxes of $439,341, the U.S. Attorney’s Office said.

Employers are required to withhold an amount for income taxes, Social Security and Medicare taxes from employees’ wages, the statement said.

Drivas also collected $1.5 million in food taxes paid by restaurant customers that he was supposed to pay to the state, authorities said.

In Massachusetts, all restaurant and bar owners and operators are required to collect a 6.25% sales tax on meals, and Salem and Peabody require restaurants and bars to collect an additional 0.75% excise tax on locally-optioned meals, according to the release.

Drivas pleaded guilty to five counts of failing to collect and pay employment taxes owed to the IRS, and four counts of wire fraud for state meals taxes he collected from restaurant customers but failed to pay to the Massachusetts Department of Revenue.

Drivas’ sentencing is scheduled for December 5.