SECOND VERSE, VERY SIMILAR TO THE FIRST - FELONY TO EVEN POSSESS SALES SUPPRESSION SOFTWARE
In March 2012, the Florida legislature passed rather unique, at least at that time, legislation aimed at a new type of tax fraud software gaining popularity in the United States. The legislation's subject matter focused on software characterized as "Automated Sales Suppression Device," "Zapper," or "Phantom-ware." The legislation aims to protect tax revenue by outlawing software that specifically manipulates sales data to "intentionally" understate sales. The software operates by adjusting sales (removing them) whereby the sales are eliminated from the system so that the software user (business owner/taxpayer) can keep the cash. This firm noted this and more in a prior article which can be accessed by CLICKING HERE. Our firm wrote another article more detailed on "zapper" software in November 2012 which can be accessed by CLICKING HERE.
Back in 2012, it was widely believed the Governor would sign the legislation into law. That belief proved to be wrong as the Governor vetoed the bill which leads us to this second attempt. The language in the 2014 drafts essentially is the same though there are "minor" changes which arguably broaden the scope of the 2012 proposed legislation. As noted in the prior article from 2012, if approved, the legislation will provide that a person who knowingly sells, purchases, installs, transfers, possesses, uses or accesses an automated sales suppression device, a zapper or phantom-ware is guilty of a felony of the 3rd degree. It is reasonable to think that the legislature will pass the bill and send them to Governor. Like in 2012, the thinking is that the Governor will sign the bill into law. But, like in 2012, the Governor could defy expectations. Add in that it's an election year and there is uncertainty with how this will play out. If it doesn't become law, there's always 2016.
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 three pending statutes are provided below:
FL SPB 7066 (SPB 7066 submitted as a committee bill (SB 1654) by Appropriations)
Section 12. Effective July 1, 2014, section 213.295,
549 Florida Statutes, is created to read:
550 213.295 Automated sales suppression devices.—
551 (1) As used in this section, the term:
552 (a) "Automated sales suppression device" or "zapper" means
553 a software program that falsifies the electronic records of
554 electronic cash registers or other point-of-sale systems,
555 including, but not limited to, transaction data and transaction
556 reports. The term includes the software program, any device that
557 carries the software program, or an Internet link to the
558 software program.
559 (b) "Electronic cash register" means a device that keeps a
560 register or supporting documents through the use of an
561 electronic device or computer system designed to record
562 transaction data for the purpose of computing, compiling, or
563 processing retail sales transaction data in whatever manner.
564 (c) "Phantom-ware" means a hidden programming option
565 embedded in the operating system of an electronic cash register
566 or hardwired into the electronic cash register which may be used
567 to create a second set of records or eliminate or manipulate
568 transaction records, which may or may not be preserved in
569 digital formats, to represent the true or manipulated record of
570 transactions in the electronic cash register.
571 (d) "Transaction data" includes the identification of items
572 purchased by a customer; the price for each item; a taxability
573 determination for each item; a segregated tax amount for each of
574 the taxed items; the amount of cash or credit tendered; the net
575 amount returned to the customer in change; the date and time of
576 the purchase; the name, address, and identification number of
577 the vendor; and the receipt or invoice number of the
578 transaction.
579 (e) "Transaction report" means a report that documents, but
580 is not limited to documenting, the sales, taxes, or fees
581 collected, media totals, and discount voids at an electronic
582 cash register and is printed on a cash register tape at the end
583 of a day or a shift, or a report that documents every action at
584 an electronic cash register and is stored electronically.
585 (2) A person may not knowingly sell, purchase, install,
586 transfer, possess, use, or access an automated sales suppression
587 device, a zapper, or phantom-ware.
588 (3) A person who violates this section:
589 (a) Commits a felony of the third degree, punishable as
590 provided in s. 775.082, s. 775.083, or s. 775.084.
591 (b) Is liable for all taxes, fees, penalties, and interest
592 due the state which result from the use of an automated sales
593 suppression device, a zapper, or phantom-ware and shall forfeit
594 to the state as an additional penalty all profits associated
595 with the sale or use of an automated sales suppression device, a
596 zapper, or phantom-ware.
597 (4) An automated sales suppression device, a zapper,
598 phantom-ware, or any device containing such device or software
599 is a contraband article under ss. 932.701-932.706, the Florida
600 Contraband Forfeiture Act.
(2014) FL HB 7081
Link to the language of the above referenced bill in PDF format:
https://www.flsenate.gov/Session/Bill/2014/7081/BillText/c1/PDF
(2012 – Proposed Bill language)
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: Mr. Parker is a sales and use tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the firm's Tampa office. Mr. Parker's practice includes state tax audits and controversies involving sales and use tax and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Parker received his law degree and L.L.M. in Taxation from the University of Florida. If you have any questions please do not hesitate to contact him via phone as listed on his bio on the firm's website or via email at MatthewParker@FloridaSalesTax.com.
ADDITIONAL RESOURCES
New Legislation to Battle High Tech Sales Tax Fraud - Phantom Zapper Software, dated November 23, 2011, by James Sutton, CPA, Esq.