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Tennessee: Tax Evasion Software Now a Felony

  • Apr 19, 2012 | Will Frei

Tennessee passed HB 2226, a bill that makes selling, possessing or using tax evasion programming or software a Class E felony

The bill calls out two technological means of tax evasion:

  • "Zappers"--software programs that falsify electronic records of point-of-sale systems, such as cash registers, including " . . . data on the amount of taxes collected."
  • "Phantom-ware"--a programming function hidden in the operating system of an electronic cash register that can be ". . . used to create a virtual second till or may eliminate or manipulate transaction records."

These technologies are used by some businesses to under-report and under-remit sales tax to state and local governments. HB 2226 now makes it a felony to "knowingly sell, purchase, possess, install, transfer or use . . ." zappers or phantom-ware. The penalty for a conviction is a fine of up to $100,000.

The following states have also recently passed laws explicitly making tax evasion technology illegal:

Unlike these states, Tennessee offers a reward for those who report offenders: 50% of any fine collected against the perpetrator, up to $10,000.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Will Frei
Avalara Author Will Frei
Will Frei covers sales tax news including best practices, legislation and sales tax technology. He is the Social Media Manager at Avalara.