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Tennessee: Tax Evasion Software Now a Felony


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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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.