What if you could deliberately make a bad record, sell zero copies and still turn a tidy profit? And best of all it was all perfectly legal…
Welcome to the curious world of ‘tax scam records’ – records released in the States during a two year window between 1976 and 1978 that not only allowed the companies that made them to avoid taxes but – in 2024 – have produced rare records that keen collectors are now clamouring for.
The stunning new backstory from music’s sordid underbelly comes courtesy of writer Aaron Milenski, who tells the tale in Eilon Paz’s new book on record collectors and collecting, Dust & Grooves Vol. 2: Further Adventures in Record Collecting.
The scam worked like this.
If a label could prove that they’d released a record, and invested in it becoming a hit only for it to fail, they could then write off these losses against the tax that they owed the IRS. All you had to do was appear to make a record, spend say $5000 doing so and, when it sells zero copies, that’s $5000 off your next tax bill.
It was a plain and simple scam therefore and it didn’t take long for smart businessmen in the business of tax avoidance (the legit, rule-bending alternative to straight-up tax evasion) to spot that such a generous loophole could be easily exploited.
The scheme reads stunningly, like the plot of Mel Brook’s 1967 farce, The Producers. In the movie and subsequent stage play, the protagonists hatch a plot to produce the most unpalatable broadway show ever, harvesting cash from over-excited investors before inevitably being forced to close as soon as it opens, thus allowing them to legitimately pocket their investor’s cash.
One might then presume that making and releasing such records would be child's play. Release 40 minutes of silence. Or noise so unpleasant that nobody would ever buy it but Milenski discovered that these albums – in order to avoid an instant ‘You have to be kidding’ from the suspicious IRS, did actually feature some recognisable names.
He writes that albums from credible artists such as Sly Stone, Richard Pryor, and Charlie Daniels had recordings on (what turned out to be) tax scam labels and such releases – all in the name of cunning subterfuge – often wound up bearing alternative takes, or tracks unreleased elsewhere giving rise to albums that are – to today’s eager-beaver record collectors – worth far more than their maker’s ever intended.
In fact their 2024 status as ‘tax scam records’ only makes them more collectable and – the good news for today’s collectors – it seems that once the game was afoot the market was soon awash with such dubious (now highly prized) fare.
In Dust & Grooves Vol.2 Milenski specifically fingers one Morris Levy, known for his mob connections and who, despite running a successful label, was always shy about paying any of the artists signed to it. And more skullduggery was afoot. While the poor sellers on his Roulette label didn’t do much to ease his tax bill, by creating another, seemingly disastrous label – Tiger Lily Records – whose output only ever failed, he was soon – by offsetting one against the other – coining it in.
Unfortunately, the game was soon up as C.C. Records' increasingly outlandish claims of failure prompted further IRS investigation and subsequent changes to the law.
So if you’re next at a record fair do keep an eye out for anything on Tiger Lily… Or Album World, Tomorrow, Illusion, Guinness, Western Hemisphere, C.C., Rocking Horse, TSG, Tribute, Baby Grand and be ready to snap them up.
They might sound awful, but they’re a little bit of music biz history.
“Ten years after the first release, with vinyl sales skyrocketing and a booming popularity among Gen-Zs, Volume Two digs deeper than its predecessor, underscoring gorgeous collections from astute everyday enthusiasts to venerated DJs, musicians, and producers,” reads the book’s release. “Veteran journalist and editor David Ma handles the editorial end to this sequel, making Volume Two a cultural leader in the field, expertly accentuating the world’s unifying devotion to vinyl."
You can get your copy of Dust & Grooves Vol. 2: Further Adventures in Record Collecting here.
