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“Zappers” back in the news with fraud charges filed

The sales suppression software, often referred to as “zappers” secretly delete most cash transaction. They make a company’s books appear accurate, but in fact they under report actual sales. Some estimates suggest this software exists on 30 percent of electronic cash registers.

Minnesota is one of about five states cracking down on owners of companies that use the technology, while federal prosecutions lag. These businesses tend to be in the restaurant industry.

Felony charges filed against Burnsville owners

Failing to pay sales taxes to the Minnesota Department of Revenue is a serious offense. Tax-related felony charges come with the potential for prison time (up to five years), fines ($10,000 for each offense) and potential civil penalties.

The Department of Revenue charged two restaurant owners with four counts each of filing false tax returns and failure to pay sales taxes. The scheme involved sales suppression software. The owners allegedly underpaid approximately $40,000 in sales tax over a three-year period.

In a statement related to the charges, the department cited its “growing ability to recognize when these illegal products are being used and [that it will] hold those who use them accountable.” For any restaurant owner who may have purchased point of sale (POS) systems (whether from Profitek or another firm claiming the ability to suppress sales), it is crucial to ask questions about the legality of the software.

In 2017, a Washington state man who sold a “high-tech tool that had only one purpose” received an 18 months stint in federal prison. His role promoting and selling “Tax Zapper” software allegedly resulted in a tax loss of more than $3.4 million.

Fighting fraud accusations

At the first sign of civil tax audit or criminal tax fraud investigation, it is crucial to consult a tax attorney. Negotiation room may exist to resolve back tax issues and possibly even avoid criminal charges.

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