Img_3508Harry’s, in a photo taken in February.

Harry’s Lobster House in Sea Bright is in bankruptcy, trying to stave off a sale of its assets by state tax officials, and a story in Sunday’s Asbury Park Press business section attempts to explain how the 75-year-old eatery wound up in the jam.

When the results of the New Jersey Division of Taxation’s audit arrived by certified mail on May 12, 2003, J. Louis Jacoubs, the owner of Harry’s Lobster House in Sea Bright, had to do a double take.

After reviewing his books and operations, the auditors concluded that he owed more than $600,000 in taxes from 1997 through 2001 — an amount that left Jacoubs incredulous.

“I said, “Oh my God. What the (heck) am I going to do?’ ” Jacoubs recalled.

Five years later, Harry’s Lobster House is in bankruptcy in a last-ditch attempt to keep the state from taking it over and auctioning it off.

The article says state auditors contend that over that period, Jacoubs racked up unpaid corporate business tax, unpaid gross income withholding tax, unpaid litter tax and unpaid sales and use taxes totalling $603,463.83, interest included. It doesn’t say how much of that amount, which dates back to 1997, is interest.

The Pres raises themes of heavy-handedness by state auditors and a regulatory climate that’s unfriendly to small businesses:

“Harry’s is not the only one that’s been tortured by that,” said former Assemblyman Steve Corodemus, who sat in on meetings between Jacoubs and the Division of Taxation after Jacoubs unsuccessfully tried to contest the results.

For small-business owners, the state is “dealing with a different type of sophistication. It doesn’t make them crooks. It means they’re fighting Big Brother. And we need to bring the pendulum back in balance again,” Corodemus said.

The article quotes Jacoubs as saying his business was never robust enough to generate the tax liability the state says he owes. And his lawyer says there’s something wrong with the state’s audit approach:

“I think the state’s methodology misses the mark in this case, and that’s what we’ll try to convince the bankruptcy judge of,” said Timothy Neumann, a Manasquan-based attorney who is representing Harry’s Lobster House.

One thing the article doesn’t spell out, though, is how much, if anything, the business actually paid in taxes.

Jacoubs, too, is rather vague on how he missed the 90-day deadline in which to file a challenge to the state’s claim, even though he took the Division of Taxation to the state Supreme Court for refusing to accept a late challenge, and lost.

Why did he miss the deadline? “I guess we just didn’t respond,” Jacoubs said. “I guess we didn’t know.”