Originally published on Forbes.com July 31st, 2013
If you are in North Carolina and have a zapper you better unload it before December. After that, if you are caught with one you could be guilty of a Class H felony and subject to a fine of up to $10,000. The more formal name for a zapper is “automated sales suppression device”. That made me picture a really obnoxious robot that insults potential customers. That’s not it. A zapper does not suppress sales. It suppresses the record of sales. The definition in the North Carolina statute is:
A software program that falsifies the electronic records of electronic cash registers and other point-of-sale systems, including 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.
In the good old days of mechanical cash registers, I have heard that people would sometimes hit a subtotal on the day’s tape (Called X-out) to have a tape that matched the days deposit. They would X-out a couple of hours before closing and only Z-out (which resets the mechanical totals), when they actually closed.
Zapper technology is much fancier. According to this story in the New York Times
The more sophisticated zappers are easy to use, according to several experts. A dialogue box, which shows the day’s tally, pops up on the register’s screen.
In a second dialogue box, the thief chooses to take a dollar amount or percentage of the till. The program then calculates which orders to erase to get close to the amount of cash the person wants to remove. Then it suggests how much cash to take, and it erases the entries from the books and a corresponding amount in orders, so the register balances.
The Fight Against Zappers
Apparently North Carolina is not exactly leading the pack with this legislation. According to this paper by Richard Ainsworth:
Georgia is the first state to take action. On May 3, 2011 Georgia enacted H.B. 415, which added code section 16-9-62 to Georgia statutes. This law made it illegal to willfully and knowingly sell, purchase, install, transfer, or possess any automated sales suppression device, zapper or phantom-ware in the state. Prior to this date only the actual fraud was penalized; now the technology that facilitates the fraud is subject to enforcement measures. Before Georgia, no state penalized fraud-facilitating technology.
Mr. Ainsworth’s paper looks at what other countries are doing in response to zappers. There is a regulatory approach that requires manufacturers to produce cash registers that are zapper proof. Mr. Ainsworth questions whether this would work in the United States.
Where Do You Get a Zapper ?
Of all the ways that you can come up with to avoid taxes, skimming is my least favorite. Unlike questionable deductions it is just in your face blatantly wrong. My research on the topic was not that deep, so I was unable to discover where you can buy this nifty software.
My friend James once told me about a client he turned down who had been trapped into skimming. He borrowed the money for his business from some folks from “the old country” who did not want any 1099-INT. He also felt obligated to employ cousins from “the old country” in his operation.
The cousins not having green cards could not be getting W-2s. Of course all that skimming to pay wages and interest is going to throw your cost of sales out of whack, so he needed to skim some more to buy some of his product with cash. James figured that the guy was probably overpaying his own income taxes. Oh what a tangled web we weave, when first we practice to deceive.
Somebody enchanted with the idea of zapping might want to reflect on the fact that they are loading software into their POS system that has not been created by a legitimate vendor. I wouldn’t be shocked to discover that there is zapping software that has additional features – like collecting credit card numbers and transmitting them to well – “the old country”.
You can follow me on twitter @peterreillycpa.