Author: XDS

ST. PAUL, Minn. – The Minnesota Department of Revenue announced that the St. Louis County Attorney’s Office recently charged Zhong Wei Lin, Dan Xu, Su Ling Cao, and Osaka Duluth, Inc. with two counts each of aiding in the filing of false tax returns. The St. Louis County Attorney’s Office also charged Zhong Wei Lin and Osaka Duluth, Inc. with 15 additional counts of failing to pay sales tax.

According to the complaint, Xu, Lin, and Cao intentionally used sales suppression software to remove thousands of line items from sales receipts in order to underreport their monthly sales and file at least 15 false sales tax returns in 2015 and 2016. Through their actions, the defendants and Osaka Sushi Hibachi Steak House allegedly deprived the state of more than $27,000 in sales tax revenue and the city of Duluth of more than $7,800 in local sales tax revenue.

Although charges were filed for 15 months beginning in February 2015 through August 2016, the complaint indicates that investigators found evidence that the defendants’ use of the sales suppression software dated back 35 months. The fraudulent activity allegedly cost the state and the city of Duluth more than $125,000 in total lost tax revenue during that period.

Read the full new release here.

Chicago, IL – Attorney General Lisa Madigan today announced that an owner of a Chicago restaurant was charged with under-reporting more than $1 million in sales.

Sandra Sanchez, 43, of Morton Grove, was charged in Cook County with theft and tax evasion for defrauding the state out of more than $100,000. As an owner of Cesar’s Restaurant located at 3166 N. Clark St., Madigan alleged Sanchez used an automated sales suppression device to underreport more than $1 million in sales to the Illinois Department of Revenue (IDOR).

Madigan alleged that between January 2012 and October 2015, Sanchez used a so-called “zapper” or sales suppression software to falsify electronic sales records to avoid paying the full amount of sales and use taxes to the state each month.

Read the full news release here.

An Everett, Washington man who worked for a Canadian company that sells point of sale computer software, was sentenced today in U.S. District Court in Seattle to 18 months in prison and three years of supervised release for his role in a scheme to sell ‘Tax Zapper’ software,  announced U.S. Attorney Annette L. Hayes. JOHN YIN, 66, pleaded guilty in December 2016, to wire fraud and conspiracy to defraud the government admitting that he promoted and sold a revenue suppression software that allowed restaurants to under-report their sales and illegally lower their tax bills. The software – sometimes called a “Zapper” program – resulted in a loss amount of more than $3.4 million. At the sentencing hearing U.S. District Judge Richard A. Jones said YIN served as a facilitator for illegal operations. “This was illegal, this was criminal and you had to know you have to pay taxes… but you continued – motivated by greed.”

Read the full article here.

New York could learn a thing or two from California. The lesson could make Albany richer by billions of dollars.

I’m talking about a sales-tax enforcement effort that started in the Golden State just two weeks ago. It aims to outlaw “zappers,” which are high-tech cash registers that allow stores, restaurants and other businesses to make transactions — and the tax owed on those sales — disappear.

Jerome Horton, a top tax official in California, said, “Unfortunately, sometimes the criminals are one step ahead of us in the use of technology.”

Read the full article here.

There’s a new kind of tax cheat in California.

Unscrupulous retailers are using “zapper” software that lets them remove cash transactions from their receipts to avoid paying taxes, costing the state an estimated $210 million annually.

“Unfortunately, sometimes the criminals are one step ahead of us in the use of technology,” Riverside County District Attorney Paul Zellerbach said at a Wednesday, Jan. 8, news conference that included state Board of Equalization Chairman Jerome E. Horton.

“Not since the days of Al Capone” has tax evasion been so pervasive, said Horton, who said California loses an estimated $8.5 billion in tax revenue annually to all kinds of illegal tax dodges, part of those spawned by a growing “underground economy,” he said.

Read the full news article here.

The Sales and Use Tax is an essential part of Pennsylvania’s revenue profile. Not only is it the State’s second largest revenue source, it has historically played a critical role in reducing the volatility of Pennsylvania’s overall tax collections. The sales tax is also critical to the city of Philadelphia, and Allegheny County. During the current economic downturn both the revenue and structural attributes of this levy should be pushing it to the front of the tax policy line.

In short, the observation is – if revenue is going to be hard to come by for a period of time, then at least it needs to be dependable. In Pennsylvania, dependable revenue means sales and use tax revenue. It would also be helpful if revenue could be found that did not involve a rate increase or a tax base expansion.

As a result, the two topics that should rest atop Pennsylvania’s tax policy agenda should be: (1) joining the Streamlined Sales Tax initiative and (2) stemming revenue losses from automated sales suppression software (Zappers). The first initiative would yield additional revenue of $220 – $384 million (from e-commerce alone); the second effort (based on the author’s estimates) would yield additional $922 million in revenue (in the restaurant industry alone). One of the more attractive aspects of both of these efforts is that neither involves changing rates. Both provide additional revenue primarily by improving enforcement.

Read the full paper here.

No other State is as vulnerable to Zappers as is the State of New Hampshire. Zappers and related software programming, Phantom-ware, facilitate an old tax fraud – skimming cash receipts. In this instance skimming is performed with modern electronic cash registers (ECRs). Zappers are a global revenue problem, but to the best of this author’s knowledge they have not been uncovered in New Hampshire. Seen from a global perspective however, it seems unlikely that they are not here.

New Hampshire’s fiscal vulnerability to Zappers comes from its heavy reliance on precisely the industry segment that has been found to be the “hot bed” of this fraud – the restaurant industry. In the most recent fiscal year the Meals and Room Tax (M&RT) trailed only the Business Profits Tax (BPT) in revenue yield ($206,726 to $317,439 million). Taxes on meals approximate 70% of the M&RT. As a result, when tax fraud arises in this industry segment it is a significant concern.

Read the full paper here.