The owners of Zab Thai in Everett withheld thousands of dollars in sales taxes. (Zachariah Bryan / Herald file)

The owners of Zab Thai in Everett withheld thousands of dollars in sales taxes. (Zachariah Bryan / Herald file)

Everett Thai restaurant owner sentenced for tax fraud

Kay Fuengarom withheld more than $200,000 in sales taxes. A judge ordered two years of probation.

EVERETT — The owner of Zab Thai Restaurant in south Everett has been sentenced for a tax fraud scheme, but she won’t serve jail time.

Instead, Snohomish County Superior Court Judge Janice Ellis ordered two years of probation for Kay Fuengarom, 37, of Lynnwood last month. She could have spent nearly a year behind bars under state sentencing guidelines.

According to charging papers, Fuengarom used sales-suppression software, also called a “zapper,” to delete cash transactions in her point-of-sales system and underreport the money her restaurant was making. The restaurant also gave customers a slightly higher tax rate than normal and kept the change. Auditors estimate Fuengarom withheld more than $200,000 in sales taxes.

Fuengarom pleaded guilty to third-degree theft in September, and agreed to cooperate with the Department of Revenue to obtain information about how sales suppression software works.

She has no other criminal history. A sentencing memorandum submitted by the defense details her history in the restaurant industry and describes how her actions were the result of desperation.

Immigrating from Thailand, Fuengarom began working at her uncle’s business at the age of 15. After she graduated high school, her father offered her part ownership of Chaiyo Restaurant in Northgate, which they ran together for several years.

Fuengarom and her partner opened Zab Thai on Evergreen Way in 2007, which later garnered a positive review in The Daily Herald. And in 2011, she bought Bang Bar in West Seattle.

“Kay’s decision to purchase the Bang Bar proved to be disastrous,” defense attorney David Smith wrote. “In addition to the logistical pressures of trying to manage three geographically separated Thai restaurants … the salaries, overhead expenses and other costs associated with restaurants proved to be too much.”

Soon, the three restaurants fell behind on sales tax remittances to the state Department of Revenue, Smith wrote.

After an audit of Chaiyo Restaurant, Fuengarom sold the business to pay $80,000 owed to the government.

Bang Bar was audited next. She entered a payment agreement for more than $300,000 owed in remittances and added penalties. So far, Fuengarom has paid more than $200,000 of that amount.

The breaking point came in late 2016, Smith wrote, when the Department of Revenue determined Zab Thai owed more than $300,000 for sales tax penalties.

“In desperation Kay called the owner of SMILE, the company who sold Zab 99 its POS system, for help,” the defense attorney wrote.

That person reportedly told Fuengarom of a potential remedy lying within the point of sales system: a hidden program that could delete records of cash sales.

An ensuing criminal investigation unveiled the scheme, and prosecutors charged Fuengarom in December 2018 with first-degree theft.

The “zapper” software has made headlines in recent years. Washington state Attorney General Bob Ferguson pursued a similar case in 2017, involving a chain of Mexican restaurants and reportedly a lot more money, but he eventually dropped those charges.

Correction: An earlier version misidentified the Snohomish County Superior Court Judge who presided over the sentencing. It was Judge Janice Ellis.

Zachariah Bryan: 425-339-3431; Twitter: @zachariahtb.

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