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New York State Fights Sales Tax Fraud in New Way

  • Sep 7, 2012 | Logan Conner

New York State has implemented a new method for catching retailers practicing sales tax fraud

The New York Department of Taxation is comparing debit and credit card purchase data to retailer tax returns and wholesaler records. They hope this will lead to finding retailers who fail to accurately collect and remit sales tax.

Last fiscal year, sales tax accounted for over $25 billion of New York’s $101 billion in tax revenue. New York has turned to electronic means to make sure it collects all the sales tax it is owed. Since 2003 the state has worked to gather the necessary data to find fraud cases with highest chance of tax recovery for the state.

New York’s Case Identification and Selection System (CISS) is being used to compare sales tax returns with sales reported by credit card companies. It determines which returns are most likely fraudulent by spotting discrepancies between consumer purchases from a particular business and the amount of sales tax that business reported and remitted to the state.

Despite all CISS’s methods for flagging fraudulent taxpayers, it lacks the ability to analyze the cash economy. Some New York residents have been abusing the Earned Income Tax Credit (EITC), a credit for low to moderate income taxpayers. This has become an increasingly popular form of fraud for those who earn and spend mostly cash. The state is working towards a more stringent review of those claiming the EITC.

This year, the New York Department of Taxation received three awards for high-tech innovation (though not for its CISS).

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Logan Conner
Avalara Author
Logan Conner
Logan Conner
Avalara Author Logan Conner