State wants to stop being ‘zapped’ by sales tax software

The state is most likely losing thousands of dollars a year in sales tax revenue because of something known as a “zapper.” Installed on point-of-sales systems, the automated sales suppression device hides certain transactions on which sales tax is collected.

“We’re not talking petty change here,” said Rep. Linda Slocum (DFL-Richfield).

Rep. Linda Slocum

She sponsors HF1825 that would create gross misdemeanor and felony penalties for a person who sells, purchases, installs, transfer, possess, accesses or uses a sales suppression device. The maximum punishment for the felony conviction would be five years in prison and a $5,000 fine.

The bill was approved by the House Commerce and Regulatory Reform Committee Tuesday and sent to the House Public Safety and Crime Prevention Policy and Finance Committee.

Slocum noted that the National Restaurant Association, based on 2011 data, estimates a tax loss of approximately $41.2 million from the 9,767 restaurants in the state and an estimated $17.89 million loss from convenience stores, due to sales suppression devices and software.

“Just think about what we are talking about,” said Rep. Greg Davids (R-Preston) “This is outright theft. This is costing the state a lot of money ... It is something we need to put a stop to right away.”

Twenty state have laws that make it illegal to possess the sales suppression devices, said Paul Cummings, tax policy manager for the Revenue Department. He said the software is clearly designed for tax evasion purposes and is available on flash drives, removable CDs and through cloud-based services. “It allows businesses to retain sales taxes collected from their consumers. … Some businesses create two sets of books,” he said.

The bill’s companion, SF1603, is sponsored by Sen. Chris Eaton (DFL-Brooklyn Center). It awaits action on the Senate Floor.