Prohibits the use of automated sales suppression devices, zappers or phantom-ware

1 Co-sponsor

• Liz Krueger

BILL NUMBER:S5308

Title of bill

An act to amend the tax law, in relation to prohibiting the use of auto- mated sales suppression devices, zappers or phantom-ware

Purpose

To make it illegal for a person to knowingly purchase, possess, install, update, maintain, upgrade, transfer or use any automated sales suppression device, zapper or phantom-ware.

Summary of provisions

Section 1: Adds a new section 1816 to the Tax law to define automated sales suppression device or zapper, electronic cash register, phantom- ware, transaction data and transaction data.

Prohibits and makes it an offense for a person to knowingly purchase, possess, install, update, transfer or use any automated sales suppression device, zapper or phantom-ware. It is also an offense to transmit data with the intent of data manipulation.

A violation is a class E felony punishable by a fine between five thou- sand dollars and twenty-five thousand dollars. For a second offense within five years, it is punishable by a fine between twenty-five thou- sand and one hundred thousand dollars, and for a third or subsequent offense within ten years, by a fine of between one hundred thousand dollars and five hundred thousand dollars.

It is an offense for a person to knowingly sell any automated sales suppression device, zapper or phantom-ware. This violation is a class E felony punishable by a fine of twenty-five thousand dollars per inci- dent.

Section 2. This act takes effect on January 1, 2017.

Justification

Automated sales suppression devices can be used to evade sales tax collection, including the so called tax-zapper software that lets busi- nesses, especially those that deal mostly in cash, to underreport taxa- ble sales and pocket money that should be given to the government.

During business hours, cashiers record the true sales and give customers accurate receipts The software also stores real sales electronically. After hours, a memory stick that contains the zapper is inserted to remove a given amount in the sales from the day's receipts. For each altered transaction, the zapper software will also re-total and recalcu- late the individuals receipts. This action alters the tax due and creates a second set of books.

The Internal Revenue Service finds more than half of all cash businesses under-report income from their sales. The IRS does not track the use of zapper software. As a result, New York State has increased their focus on cash businesses It is estimated that New York State loses over $1 billion in tax revenue annually as a result of these devices.

It has been reported that New York State operated a series of stings operations in which cash register vendors were invited to pitch their equipment to phony restaurants. The results were shocking. In many cases, the vendors offered the phony restaurant opportunities to under- pay their taxes using zapper software.

The majority of the businesses in our State are complying with New York State sales tax laws and properly remitting the money collected. This legislation is focused on the small number of businesses which are ille- gally underreporting their tax collections.

Legislative history

2012: S.7733 Passed Senate/No Same As.

2013-14: S.3612-A Passed Senate/ A. 7420 Ways & Means

Fiscal implications

None.

Effective date

This act shall take effect on January 1, 2017.