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Arizona considers criminalizing use of sales suppression devices


 Arizona may soon zap businesses that use tax zappers to evade sales tax remittance.

Arizona lawmakers are considering legislation that would criminalize the use of sales suppression devices and services, also known as tax zappers.

Arizona Senate Bill 1386, introduced Jan. 29, 2018, would make it a class 5 felony “to purchase, install, or use any automated sales suppression device or service or zapper or phantom-ware with the intent to defeat or evade any tax … due or believed to be due by the taxpayer.”

The measure defines “automated sales suppression device” as “a computer software program that falsifies the electronic records of electronic cash registers and other point-of-sale systems, including transaction data and transaction reports.”

“Phantom-ware” is defined as “hidden or concealed computer software or hardware of an electronic cash register or other point-of-sale system that can create a second set of records or eliminate or manipulate transaction records that may or may not be preserved in digital formats in order to misrepresent the existence or the true record of a transaction in the electronic cash register.”

If enacted, the measure would impose a fine of not more than $100,000 for individuals found guilty of using such devices in Arizona. Corporations could be subject to a fine of up to $500,000. Taxpayers would also be liable for all taxes, fees, penalties, and interest due as a result of using these devices.

States prosecute businesses that use sales tax suppression devices

Numerous states have enacted similar policies since Georgia first banned and criminalized tax zappers in May 2011. Yet, it was not until February 2016 that a state — Washington — first used such a law to prosecute a business. The law proved effective, and in August 2017, a Bellevue restaurant was convicted of using illegal sales suppression software to pocket close to $400,000 in sales tax collected from patrons. Vikki Smith, director of the Washington State Department of Revenue, said at the time, “Our staff is working diligently to identify this type of theft, and we are actively going after businesses that use sales suppression software.” Other states, including Illinois, are following suit.

Instead of using software to avoid payment of taxes, businesses should consider using it to facilitate sales and use tax compliance. Learn how sales tax automation software works.

 


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.