Tax Scam Labels ( Such As Guinness) Fully Explained

[Derek Pearson]

Despite having read a few descriptions of tax scam labels I still really hadn’t grasped what they were all about.

 

True the descriptions could’ve been badly written and didn’t explain the issue properly or I didn’t read it properly and/or give the subject enough thought.

 

Either way, I still didn’t fully understand how these illegal labels functioned.

 

But then ironically my curiosity in a big hit record paved the way to a full understanding of just how and why tax scam labels operated.

 

How it all started: One dinnertime as several more important jobs piled up I drank coffee and started reading online about “Mony Mony” a big hit song for Tommy James & The Shondells in 1968.

 

My interest in both the song and the group had been sparked as earlier in the day I’d found a copy of the record in one of my sales boxes and wondered how the song came about.

 

As Tommy James and the group were signed up with Roulette Records at the time this lead me into the murky world of the notorious gangster Morris Levy who controlled and ran the label.

 

And from there a link took me to this fascinating interview article on tax scam record labels which explained much of the background as to why these labels were so profitable.

 

Aaron Milenski on Tax Scam Releases

(Opening papagraph copied here:)

 

“Shit-Fi is proud to present an interview with Aaron Milenski, co-author (with Patrick Lundborg and Ron Moore) of the recently released The Acid Archives, on the subject of tax scam releases. Because Shit-Fi is concerned with the economics behind the production of music, especially the oddities and mysteries that challenge–or illuminate–conventions, this particular phenomenon is highly interesting to us, even if the music on many of these records otherwise would not warrant our attention. It’s true that the tax scam is a strange footnote to the history of the record industry, but looked at another way, it demonstrates exactly what is simultaneously alluring and repulsive about the industry, which remains rife with rip-offs, scam artists, criminality, and injustice. The history of the American music business prior to the corporate consolidation of the 1980s could not be written without mention of organized crime, but even as mainstream musicologists recognize the role of criminality in the business, we are not aware of anyone other than collectors who has documented the tax scam phenomenon”.

 

(link to interview here)  https://www.shit-fi.com/interviews/AaronMilenski

 

And lo and behold - I should have guessed it and seen it coming miles away — but when ever tax scam record labels are mentioned, not far behind the name of Guinness always seems to pop up.

 

(link to Guinness label listing here)  https://forbiddeneye.com/labels/guinness.html

 

Derek

 

[Roburt]

There have been threads that have tried to explain this topic in the past ..........

 ..........

 ..........

 

With regard to a statement in the Shit-fi article above ..............

Is there any evidence of 45s on any of the tax scam labels?

..... There are a couple on Dellwood, but I don’t know if they were released before or after the albums. My guess is that Dellwood was a real label, and then was transformed into the tax scam

It didn't seem to make any difference at all to the tax scam whether the releases were 45's or LP's though I guess it was easier to make much more money from releasing LP's. You make a claim saying you pressed up 10,000 LP's and can claim back a decent % of the wholesale price of around $4.30 (for a $7.98 retail cost release) ... say $30,000. If you did the same for scam 45 releases, no doubt you could only claim back around $5,000. 

So it was much easier to make loads of money by claiming for unsold LP's 
 

One tax scam label I do know quite a bit about was the LA based Emkay Records.

In all there were 12 releases on the Emkay label in 1979 ........

10 No. 45’s + 2 No. LPs. Six of the 45’s were soul outings with four being rock.

The label's releases only included tracks that they legitimately owned whereas many labels put out stuff that didn't even hold the rights to (no doubt using tapes originally sent out by the artist reps in an effort to secure a record deal). In Emkay's case, the guys at the record company were approached by a 'wide-boy' lawyer who told them about the scheme and then operated the scam tax rebate claim on their behalf. Many of these lawyers sailed close to the wind with regard to what they actually claimed back (to increase their fees) and the guy who did this work for Emkay had to head across to Canada, when his dealings were discovered by the US Revenue Service, to escape jail.

 

I guess some of these labels might have actually pressed up their releases in the quantities that were actually claimed back (i.e. 1000's of copies of each release) BUT as most 45's / LP's involved have remained scarce, I guess they did only actually press up dozens of copies of each rather than the 1,000's claimed for.   

Edited October 7, 2013 by Roburt

[Steve G]

Interesting, I agree with Roburt on Dellwood they put out 7s as well on promotion, which shows that there was an intent to try and have a hit record.

 

Crazy Cajun, not sure this weas a tax scam just the weird and eclectic world of Huey P Meaux.....which may have included various tax scams....

[Mal C]

believe Musette was a label financed by Doctors, as was Revere and most of Jesse Davis's work.... dr Michael Dean was it..

 

Here's another angle, I worked and represented a picture agency in Germany some years ago, basically we co produced photo productions, we did glamor type shoots for FHM and so on, through a Hollywood fixer, financed by Roba Press in Germany for world wide syndication, the law in Germany being you could plough so much into the arts tax free, so it was a no brianer really, and quite profitable for a year or so. One of the silent partners in Roba press also owned some long standing German record labels,  so it was a tried and tested formula from that industry, I wouldn't call it a dodge as such, both came under the banner of the arts, so totally legit in that sense, I dont know what the laws in the states was in the sixties or now, but it seems to be something you an do in allot of countries..

 

 

 

Malcolm

Edited October 7, 2013 by Mal.C.

[boba]

i think it's much harder to identify a 45 "tax scam label" as there were so many tiny labels, who knows what the motivations of the owners were. probably most legitimate labels were tax losses.

 

also, 45 labels don't make as much sense for "tax scam" because the whole point is to pretend to lose as much money as possible. If you get ahold of some random old tapes and release an LP's worth, you can claim all sorts of studio time and other costs for all the songs on the LP, press it up, instantly cut it out, and get the loss. a 45 doesn't have as much loss. I've read that article before, i think the dellwood inclusion is just sort of random. either way, the acid archives has a whole section on tax scam labels.