FLORIDA LEGISLATION CRIMINALIZING AUTOMATED SALES SUPRESSION SOFTWARE (aka "ZAPPER SOFTWARE") AWAITS GOVENOR'S SIGNATURE
UPDATE - APRIL 27, 2012 - PENDING STATUTE VETOED BY GOVERNOR RICK SCOTT. What is this state turning into that our politicians are so afraid of voting for something that appears to be a tax increase or non-business friendly that a statute specifically designed to stop sophisticated sales tax fruad is vetoed? Even I was in favor of this legislation.
In March 2012, the Florida legislature passed a rather unique piece of legislation aimed specifically at a new type of tax fraud software moving into the United States. The software is known as "Automated Sales Suppression Device," "Zapper," or "Phantom-ware." The purpose of the software is to suppress the cash sales from the business's accounting records – at the cash register level. The sales are simply eliminated from the system and the user of the software pockets the cash. You can imagine this practice is not only tempting for morally questionable business owners, but that it would also be highly fraudulent for federal income tax and state sales tax purposes as well. The software might be used by an unscrupulous business owner or even an employee (turning the cash register into his personal ATM machine). Businesses that charge rent based on a percentage of sales can also be significantly affected by tenants who fraudulently under report sales using Phantom-ware or Zapper software. Our firm wrote a detailed article on the zapper software in November 2012, which is available by CLICKING HERE.
The purpose of this article to provide the reader updated information concerning the verbiage of the pending statute, criminalizing almost anything related to the software. Upon signature by the Governor, Section 213.295, Florida Statutes, will be created to criminalize Zappers. After the approved legislation becomes law, a person who knowingly sells, purchases, installs, transfers, possesses, utilizes, or accesses any automated sales suppression device is guilty of a felony of the 3rd degree. It is expected that the Governor will sign this piece of legislation and, unlike like most of the other sales and use tax legislation approved by the Florida Legislature, this statute will take effect immediately after it is signed.
If you have any questions about whether your company or a client of yours might be using some type of Automated Sales Suppression Device, then you should be aware that any communications with a consultant or accountant regarding a criminal matter could be obtained by criminal investigators. Take this matter very seriously. When you have questions about possible criminal activity, always make sure to utilize a qualified Florida licensed attorney under attorney-client privilege. The Law Offices of Moffa, Sutton, & Donnini, P.A. is one of the few law firms in the State of Florida that practices in both Florida Sales and Use Tax and Criminal Law.
For your convenience, the verbiage of the pending statute is provided below:
Sec. 213.295, Florida Statutes, Automated sales suppression devices.—
(1) As used in this section, the term:
(a) "Automated sales suppression device" or "zapper" means a software program that falsifies the electronic records of electronic cash registers or other point-of-sale systems, including, but not limited to, transaction data and transaction reports. The term includes the software program, any device that carries the software program, or an Internet link to the software program.
(b) "Electronic cash register" means a device that keeps a register or supporting documents through the use of an electronic device or computer system designed to record transaction data for the purpose of computing, compiling, or processing retail sales transaction data.
(c) "Phantom-ware" means a hidden programming option embedded in the operating system of an electronic cash register or hardwired into the electronic cash register which can be used to create a second set of records or to eliminate or manipulate transaction records, which records may or may not be preserved in a digital format, in order to represent the true or manipulated record of a transaction in the electronic cash register.
(d) "Transaction data" includes data identifying an item purchased by a customer; the price for an item; a taxability determination for an item; a segregated tax amount for each taxed item; the amount of cash or credit tendered; the net amount returned to the customer in change; the date and time of the purchase; the name, address, and identification number of the vendor; and the receipt or invoice number of the transaction.
(e) "Transaction report" means:
1. A report that contains, but is not limited to, documentation of the sales, taxes, or fees collected; media totals; and discount voids at an electronic cash register, and that is printed on a cash register tape at the end of a day or a shift; or
2. A report that documents every action at an electronic cash register and that is stored electronically.
(2) A person may not knowingly sell, purchase, install, transfer, possess, utilize, or access any automated sales suppression device, zapper, or phantom-ware.
(3)(a) A person who violates this section commits a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.
(b) A person who violates this section is liable for all taxes, fees, penalties, and interest due the state as a result of the use of an automated sales suppression device, zapper, or phantom-ware and shall forfeit to the state as an additional penalty all profits associated with the sale or use of an automated sales suppression device, zapper, or phantom-ware.
(4) An automated sales suppression device, zapper, phantom-ware, or any device containing such device or software is a contraband article under ss. 932.701-932.706, the Florida Contraband Forfeiture Act.
ABOUT THE AUTHOR: JAMES H SUTTON IS A FLORIDA LICENSED CPA AND ATTORNEY AND A SHAREHOLDER IN THE LAW FIRM the Law Offices of Moffa, Sutton, & Donnini, P.A. MR. SUTTON IS IN CHARGE OF THE TAMPA OFFICE FOR THE FIRM AND HIS PRIMARY PRACTICE IS FLORIDA TAX CONTROVERSY. MR. SUTTON WORKED FOR THE STATE AND LOCAL TAX DEPARTMENT OF A BIG FIVE ACCOUNTING FIRM FOR A NUMBER OF YEARS AND HAS BEEN AN ADJUNCT PROFESSOR OF LAW AT STETSON UNIVERSITY COLLEGE OF LAW SINCE 2002 TEACHING STATE AND LOCAL TAX, ACCOUNTING FOR LAWYERS, AND FEDERAL INCOME TAX I. YOU CAN READ MORE ABOUT MR. SUTTON IN HIS FIRM BIO.
© 2012 All rights reserved - James H Sutton Jr