CAPITOL — Tax evasion for businesses operating in New York was once as simple as ignoring the mail — the state would assume they were out of business and stop asking for tax payments.

“Smaller or medium-sized businesses [would sometimes just] stop filing sales tax returns,” said New York State Office of Tax Enforcement Commissioner William Comiskey. “They’d get notified, they’d get assessed, but if they just continued to not respond and not file it would hit a point where we would stop giving them notices saying ‘where’s our sales tax returns’ and they could go forward doing business and no one was really paying attention.

“If they were on the list for four times and had gotten the warning four times, the presumption there was that these folks went out of business. With a little bit of examination we’ve [now seen] that a good percentage of them didn’t go out of business.”

Times have changed. Comiskey said over the last year he has led an effort to reorganize New York’s tax collection apparatus, putting all of the state’s tax enforcement tools — previously divided between separate departments for civil audits, collections and criminal enforcement — under his command. He’s created Special Investigations Units throughout the state teaming forensic auditors trained to uncover criminal fraud with criminal investigators under the leadership of veteran white-collar crime prosecutors.

The reforms have increased the number of state personnel examining fraud cases from 25 to 125. Comiskey said the results will soon be obvious for New York tax criminals.

“In the first three months of 2008 the audit division referred more cases to the SIU for criminal investigation than it had in total for the four prior years. They averaged something like 25 annually before and they were up around 100 for the first quarter of 2008, he said.

Increased enforcement efforts began even before the projected budget deficit for the 2009-10 fiscal year increased to $6.4 billion, up $1 billion in projections since April. State officials estimate that unpaid taxes, both from fraud and error, total several billion dollars annually.

Comiskey, a former prosecutor who led the Medicaid Fraud unit of the New York Attorney General’s office, was appointed by then-Gov. Eliot Spitzer to head up the new Office of Tax Enforcement in April 2007. He said prior to his arrival, the state’s tax enforcement personnel spent most of their time doing investigative work for county district attorneys requesting assistance for specific prosecutions.

“That meant that the decision-making and prioritizing of which cases are costing us the most and need the most attention, wasn’t being made by anyone. Our work was being driven by outside forces … we now literally churn through [tax data] and see how we are being beaten in a [specific] area and decide what we can do to stop it,” Comiskey said.

Where once it was common for the New York Department of Taxation and Finance to issue news releases explaining new tax breaks, Comiskey’s department has begun racking up releases touting arrests for tax evasion and investigations leading to prosecutions for tax fraud. Using tactics that echo the aggressive posture of Spitzer’s tenure as attorney general, Comiskey said publicizing arrests for tax evasion and communicating increased enforcement measures to the professional tax preparation community is just as important to changing the behavior of citizens and businesses as the prosecution of tax fraud cases.

“He’s now arresting people for not paying sales tax,” Latham-based accountant Gerald DeAngelus said.

DeAngelus said he attended a conference in New York City earlier this year where Comiskey outlined the state’s new Tax Gap Enforcement Strategy. “He told us flat out, and told us to pass this on to our clients, that he’ll use any method available, subpoenas, third party verifications, search warrants, he’ll make arrests,” DeAngelus said. “I’ve seen the sales tax audits increasing among my own clients and the auditors have admitted they’re always being pestered to refer these things to the [Office of Tax Enforcement Special Investigations Units] if they suspect fraud.”

Comiskey said his investigation units are now deploying undercover agents to smoke out tax preparers who advise clients to cheat on their taxes. He said he’s also “wiring up” taxpayers who are caught cheating in order to gather evidence against the accountants or tax preparers who taught them how. And he’s doing the same to tax professionals caught advising illegalities — to gather evidence against their own clients.

But he said increased tax enforcement is not all stick and no carrot. He said the state recently passed a law allowing tax evaders who come to the state and admit they have cheated on past taxes to avoid all criminal prosecution and punitive interest penalties and enter into a payment plan.

“That’s kind of the yin and the yang of tax enforcement,” he said.

DeAngelus said now more than ever it is important for citizens and businesses to maintain good records in case they are audited by the state.

Rebecca Marion Flach, director of public affairs for the Retail Council of New York, said her members are not complaining about increased enforcement measures by the state. She said businesses that don’t pay taxes put a greater burden on those that do.

“It’s New York state law, regardless of whether you like it or not, if you open your doors in New York state you are responsible for collecting those sales taxes and that’s it,” she said.