High‐Tech Sales Tax Evasion

AuthorOuadie Akaaboune,Jim Cali
Date01 November 2013
Published date01 November 2013
© 2013 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI 10.1002/jcaf.21904
Ouadie Akaaboune and Jim Cali
Dishonest businesses and individuals now have a
high-tech device to help them evade paying taxes:
the tax zapper. The authors explain how it works,
the threat it poses to honest companies, and what
can be done to stop fraudsters who would use it.
© 2013 Wiley Periodicals, Inc.
High-Tech Sales Tax Evasion
Since the imple-
mentation of the first
laws to collect taxes,
individuals and busi-
nesses have been devis-
ing means and methods
to evade the payment
of some or all of their
taxes. In the past, these tax
cheats had to exert a great deal
of effort and skill to create the
perfect “second set of books” to
hide their income from the tax-
ing authorities.
With the technological
advances that have brought us
the smartphone, tablet comput-
ers, and sophisticated artificial
intelligence software called tax
zappers, the ability to cheat gov-
ernmental agencies has become
easier than ever. For a few hun-
dred dollars, a business can pur-
chase this automated sales sup-
pression device, plug it directly
into their cash registers, and
immediately begin to skim cash
and delete credit card transac-
tions to underreport sales taxes
and income taxes.
A tax zapper works like this:
During regular business hours,
the cash register records the true
sales and provides the customer
with a correct and accurate
receipt. But after the business
closes for the day, the tax zapper
is inserted into the cash register.
Once the tax zapper is activated,
it quickly accesses the real sales
data and begins to remove or
reduce sales by a preset percent-
age from that day’s receipts.
When the tax zapper has fin-
ished, the daily sales totals have
been altered, the original sales
data have been electronically
deleted from the cash register,
and the “second set of books”
has been created to support
the documentation for the
bogus sales tax and income tax
If states do not take action
to enact strong laws making
it illegal for businesses and/
or individuals to possess or
install automated sales sup-
pression devices or tax zappers
designed to falsify the electronic
records of cash registers, then
they must increase their audit
and investigation
resources to root
out the use of tax
zappers, or else the
state and the gov-
ernmental agencies
that depend on sales
tax revenue stand to
lose a great deal of
tax revenue.
During the current down-
turn in the economy, many cities,
counties, and school districts
that depend on sales tax receipts
are experiencing huge shortfalls.
As these governmental agencies
rack up huge deficits resulting
from reduced tax receipts, they
are forced to cut services. In
an effort to combat the ongo-
ing decline in sales tax receipts,
many states have implemented
aggressive enforcement mea-
sures coupled with on-site
audits to search for evidence of
unreported income. In short,
these auditors are looking for
that proverbial “second set of
Historically, the creation
of the “second set of books”
would involve the well-known
fraudulent practice known as

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT