High Tech Tax Evasion Seen in Minneapolis

Published On: 5th May 2015

From the internet

Minnesota lawmakers have turned their attentions toward a form of tax evasion that utilizes technology and this technology is actually being marketed to retailers.

The technology is known as a “zapper” and it utilizes hardware or software that allows a cash register to create a second record, a false record, for any transaction that it processes.

When a retailer underreports their sales receipts, they can reduce the amount of Minnesota sales tax that they owe. Retailers collect sales tax on behalf of the state, so it is very important that they accurately report what they collect. Basically, a retailer can trick the Revenue Department by simply keeping a second set of books that contain the false transactions. The books are very convincing.

The way this works is this:

An individual buys something at a retailer and their total comes to $100. The zapper program can then create a second record that says the transaction was only $50.

For those playing by the rules, this is a practice that is seen as ripping them off. This is why there is a proposed bill that would outlaw zappers that have already been banned in 20 other states.

This is a form of technology that is very new, but it is one that is rather common. Cash register and point of sale computer distributors are the ones that are offering this technology to their business customers. It is estimated that Minnesota has lost $17 million annually because of the convenience stores that are using the zapper. This total is estimated to increase to $41 million in restaurants and bars. That translates into a six percent loss in sales tax from restaurants alone.

Each year, the hospitality industry receives a legal guide that gives a great deal of information regarding sales tax. The credit card companies also generate tax forms annually, which reflect the volume of transactions that are completed using credit cards.

Cash transactions are easy to hide because there is no paper trail. However, the zapper program is so sophisticated that it can be used with credit card transactions as well. It has also been pointed out that an embezzler could steal money from an establishment by using the program or device to underreport sales. What that does to the owner is cause them to lose money due to embezzlement and they become a tax evader without knowing it.

One lawmaker said that it is very likely that the proposed bill will be amended to only include business owners who knowingly try and evade their taxes.