In October of 2013, Governor Jerry Brown signed Assembly Bill No. 781 into law. This Bill adds Sections 7153.6 and 55363.5 to the California Revenue and Taxation Code, which make it a crime to knowingly purchase, install, use, transfer, or sell any “automated sales suppression device or zapper or phantom-ware” with the intent to defeat or evade the determination of California’s sales or use taxes by falsifying records. The new law goes into effect on January 1, 2014. Texas, North Carolina, Connecticut, Maine, Tennessee, West Virginia, and other states have already enacted similar laws.

The Special Notice from the California State Board of Equalization detailing this change can be found here:

http://www.boe.ca.gov/news/pdf/l369.pdf

Now, any person found guilty of using an automated sales suppression device, zapper, or phantom-ware can be imprisoned in county jail for up to three years, and is responsible for all taxes, interest, and penalties from their use. There is also a fine of up to $10,000 for a violation of this new law.

So what exactly is automated sales suppression software?

Automated sales suppression software includes tax zappers and phantom-ware. Tax zappers are software programs that falsify “the electronic records of electronic cash registers and other point-of-sale systems, including transaction data and transaction reports.” Phantom-ware is a “hidden programming option embedded in the operating system of an electronic cash register or hardwired into the electronic cash register that can be used to create a second set of records or may eliminate or manipulate transaction records.”

Tax zappers and phantom-ware are used to evade submitting sales tax to the state of California. Records of actual sales are made to disappear. Thus, if there are no sales on record, then the state of California cannot ask for the sales tax that was collected on those sales.

How do you comply with all these sales tax laws, which are constantly changing? We can help guide you through these laws to make sure you are in full compliance.  If you happened to face charges related to this new law our firm can vigorously defend you and try to keep you out of jail!  If you’re facing a sales tax audit and you have used one of these devices in the recent past, do not dare face that audit alone!  We can help…