Category: General

Businesses  have been cheating, ahem…I mean suppressing, the amount due on sales tax for ages.  Traditional methods of suppression include removing cash out of the till, not ringing up cash transactions and under-reporting of sales.   In the digital age, software has supplemented most of these traditional methods.  Using software to reduce tax liability is called “zapping”.   Zapping can be done using software that is included with point-of-sale systems, using plug-in devices, or by using cloud-based “suppression as a service” providers.

It has been estimated that states are losing $1 billion in sales tax annually from cash-intensive businesses.  XDS can help your state solve this problem.   Contact us soon to find out how.  In the meantime, here are some links that will help you get familiar with this costly topic:

Everett Software Salesman Pleads Guilty to Selling ‘Tax Zapper’ Software to Enable Cheating on State and Federal Taxes

NY’s sales-tax losses don’t register

Zappers – Technological Tax Fraud in New Hampshire

Pennsylvania’s Sales and Use Tax: Has Nearly $1 Billion Been “Zapped” Away in Fraud?

CALIFORNIA TAXES: ‘Zapper’ software for retail tax evasion an emerging concern

External data is only worth the cost if the value you get from the data is more than the purchase price.   With that said, the right external data can make a big difference!  One great tax example is “Use Tax”.  If you can buy external data with company information like square footage, inventory size, credit score, and employee count then estimating Use Tax using a predictive model becomes much easier.   One of our clients increased the predictive capability of the Use Tax models by 10%.   That may not sound like much, but if you are going from 75% to 85% confidence in a predictive model, it is huge!

If you are on the Personal Income Tax side of the organization, we suggest you purchase IP information.  IP data contains a lot more than just the IP address.  It includes the name and location of the service provider (country,  region, state, and city).   IP information is really useful in creating fraud models but most organizations don’t purchase it on a regular basis.  If you buy IP data, we recommend getting a subscription that updates your files on a regular basis.

Whether you are buying business  or IP data, the “magic” happens when the external data is “matched” to your internal data.   Be warned, however,  if you buy external data and can’t match it to the data you have, it becomes instantly useless.   So be sure that you have data matching software available BEFORE you buy, or have access to some data professionals that can match it for you.

When you contact XDS, be sure to ask us about our experience with using external data.  We are experts at finding it and making it work in your environment.