Enacts the automated sales suppression act to study and report on the use of automated sales suppression devices that falsify the electronic records of point-of-sale systems for the purpose of tax evasion.
Sponsor: KRUEGER FINANCE
Law Section: Executive Law
Law: Add S170-c, Exec L
Law Section: Executive Law
Law: Add S170-c, Exec L
- Jan 4, 2012: REFERRED TO FINANCE
- Jan 26, 2011: REFERRED TO FINANCE
BILL NUMBER:S2611 TITLE OF BILL: An act to amend the executive law, in relation to enacting the automated sales suppression act PURPOSE: 1. Requires the Department Of Taxation and Finance to prepare an automated sales tax suppression study. SUMMARY OF PROVISIONS: � 170-c. Automated Sales Suppression Study. 1. Definitions. 2. Directs the Department of Taxation and Finance to prepare a comprehensive study on the prevalence of automated sales suppression technology (e.g. zappers and phantom-ware) within the state's retail industry, focusing on, but not limited to, restaurants, movie theaters, hairdressers, amusement parks, grocery stores and convenience stores. 3. Automated Sales Suppression report deadline. 4. Report information exemptions. EXISTING LAW: None. JUSTIFICATION: For years, foreign countries with national sales taxes have struggled to combat technology that enables retailers to skim sales taxes and under report other tax liabilities (e.g. personal income tax, corporate income tax) by concealing from auditors their actual sales data. This technology, which includes so-called "zappers" and "phantom-ware.," automatically suppresses digital sales figures recorded at electronic cash registers. It is difficult for auditors to detect the use of zappers and phantom-ware through the traditional process of cross checking transaction documents because the technology conceals almost all traces of the digital manipulation. Countries such as Germany and Greece have required retailers to install technological countermeasures that make it easier for auditors to detect the use of zappers and phantom-ware. In September 2010, the Canadian province of Quebec began requiring all restaurants to install in their electronic cash registers anti-sales suppression devices. Zappers cost Quebec an estimated $425 million ($410 million U.S.) in 2007-2008. Because the United States lacks a national sales tax, there is no federal initiative to combat this tax fraud and most states are ill-prepared to deal with this issue. Nationwide, only a handful of people have been caught using this technology, including two in Michigan and one in Connecticut. Richard T. Ainsworth, a Boston University school of Law tax professor and a leading expert on zappers, has published several papers documenting the spread of zappers and phantom-ware in Quebec, Greece, Germany, the Netherlands and other European nations. Given that that the first zappers were made in the United States and that this technology is widely used in the Canadian province just above of the New York's northern border, it is imperative for the State to address this issue. Prior to requiring restaurants in the province to install anti-automated sales suppression technology in electronic cash registers, Quebec conducted two empirical studies on the problem. This legislation, likewise, would direct and authorize the Department of Taxation and Finance to prepare a study on the prevalence of zappers and phantom-ware in cash-oriented businesses statewide, such as restaurants, movie theaters and convenience stores. FISCAL IMPACTS: Approximately $250,000 to cover auditor expenses throughout the 18-month study and to produce a report, according to an estimate by the Senate Select Committee on Budget and Tax Reform. EFFECTIVE DATE: This act shall take effect ninety days after enactment.
S T A T E O F N E W Y O R K ________________________________________________________________________ 2611 2011-2012 Regular Sessions I N SENATE January 26, 2011 ___________ Introduced by Sen. KRUEGER -- read twice and ordered printed, and when printed to be committed to the Committee on Finance AN ACT to amend the executive law, in relation to enacting the automated sales suppression act THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS:
Section 1. Short title. This act shall be known and may be cited as the "automated sales suppression act". S 2. The executive law is amended by adding a new section 170-c to read as follows:
S 170-C. AUTOMATED SALES SUPPRESSION STUDY AND REPORT. 1. DEFINITIONS. (A) "AUTOMATED SALES SUPPRESSION DEVICE" OR "ZAPPER" SHALL MEAN A SOFT- WARE PROGRAM, CARRIED ON A MEMORY STICK, REMOVABLE COMPACT DISC, ACCESSED THROUGH AN INTERNET LINK OR ACCESSED THROUGH ANY OTHER MEANS, THAT FALSIFIES THE ELECTRONIC RECORDS OF POINT-OF-SALE SYSTEMS FOR THE PURPOSE OF TAX EVASION. (B) "DEPARTMENT" SHALL MEAN THE STATE DEPARTMENT OF TAXATION AND FINANCE. (C) "ELECTRONIC CASH REGISTER" SHALL MEAN A DEVICE THAT KEEPS A REGIS- TER OR SUPPORTING DOCUMENTS THROUGH THE MEANS OF AN ELECTRONIC DEVICE OR COMPUTER SYSTEM DESIGNED TO RECORD TRANSACTION DATA FOR THE PURPOSE OF COMPUTING, COMPILING OR PROCESSING RETAIL SALES TRANSACTION DATA IN WHATEVER MANNER. (D) "PHANTOM-WARE" SHALL MEAN A HIDDEN, PRE-INSTALLED OR INSTALLED AT A LATER TIME 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 VIRTUAL SECOND TILL OR MAY ELIMINATE OR MANIPULATE RECORDS THAT MAY OR MAY NOT BE PRESERVED IN DIGITAL FORMATS TO REPRESENT THE TRUE OR MANIPULATED RECORD OF TRANSACTIONS IN THE ELEC- TRONIC CASH REGISTER. EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD07846-01-1 S. 2611 2 (E) "SUPPORTING DOCUMENTS" SHALL MEAN ANY RECEIPT, INVOICE OR REPORT THAT PROVIDES A RECORD OF TRANSACTION DATA OR TRANSACTION REPORTS. (F) "TRANSACTION DATA" SHALL INCLUDE ITEMS PURCHASED BY A CUSTOMER, THE PRICE FOR EACH ITEM, A TAXABILITY DETERMINATION FOR EACH ITEM, A SEGREGATED TAX AMOUNT FOR EACH OF THE TAXED ITEMS, THE AMOUNT OF CASH OR CREDIT TENDERED, THE NET AMOUNT RETURNED TO THE CUSTOMER IN CHANGE, THE DATE AND TIME OF THE PURCHASE, THE NAME, ADDRESS AND IDENTIFICATION NUMBER OF THE VENDOR, AND THE RECEIPT OR INVOICE NUMBER OF THE TRANS- ACTION. (G) "TRANSACTION REPORTS" SHALL MEAN A REPORT DOCUMENTING, BUT NOT LIMITED TO, THE SALES, TAXES COLLECTED, MEDIA TOTALS AND DISCOUNT VOIDS AT AN ELECTRONIC CASH REGISTER THAT IS PRINTED ON CASH REGISTER TAPE AT THE END OF A DAY OR SHIFT, OR A REPORT DOCUMENTING EVERY ACTION AT AN ELECTRONIC CASH REGISTER THAT IS STORED ELECTRONICALLY. (H) "TECHNOLOGICAL COUNTERMEASURES" SHALL MEAN ANY ELECTRONIC DEVICE, COMPUTER SYSTEM OR SOFTWARE PROGRAM DESIGNED TO ASSIST AUDITORS IN DETECTING THE PRESENCE AND/OR USE OF ZAPPERS OR PHANTOM-WARE IN ELEC- TRONIC CASH REGISTERS, BY VERIFYING THE AUTHENTICITY OF TRANSACTION DATA RECORDED IN SUPPORTING DOCUMENTS AND/OR TRANSACTION REPORTS. 2. THE DEPARTMENT IS HEREBY AUTHORIZED AND DIRECTED TO PREPARE A COMPREHENSIVE STUDY DOCUMENTING THE PREVALENCE OF ZAPPERS AND PHANTOM-WARE WITHIN THE STATE'S RETAIL INDUSTRY, FOCUSING ON CASH TRANS- ACTIONS, BUT NOT LIMITED TO, THE USE OF ZAPPERS AND PHANTOM-WARE AT RESTAURANTS, MOVIE THEATERS, HAIRDRESSERS, AMUSEMENT PARKS, GROCERY STORES, CONVENIENCE STORES OR ANY OTHER RETAIL ESTABLISHMENT WHERE THERE IS A HIGH VOLUME OF CASH TRANSACTIONS. (A) SUCH STUDY SHALL ALSO PROVIDE AN ESTIMATE ON THE TOTAL FISCAL IMPACT THAT ZAPPERS AND PHANTOM-WARE HAVE ON THE STATE, FOCUSING ON, BUT NOT LIMITED TO, THE ESTIMATED TOTAL REDUCTION IN GROSS RETAIL SALES, AS WELL AS THE ESTIMATED TOTAL AMOUNT OF TAX REVENUES THE STATE DOES NOT COLLECT BECAUSE OF THE FALSIFIED TRANSACTION DATA PRODUCED BY ZAPPERS AND PHANTOM-WARE. (B) SUCH STUDY SHALL CONSIDER TECHNOLOGICAL COUNTERMEASURES THE STATE COULD EMPLOY OR REQUIRE BUSINESSES TO USE TO ENHANCE THE DETECTION OF ZAPPERS OR PHANTOM-WARE USED IN OR INSTALLED IN ELECTRONIC CASH REGIS- TERS. THE DEPARTMENT IS AUTHORIZED AND DIRECTED TO INCLUDE IN THIS STUDY ITS RECOMMENDATION OF WHICH TECHNOLOGICAL COUNTERMEASURE WOULD BE THE MOST EFFECTIVE AND COST-EFFICIENT. 3. THE DEPARTMENT SHALL SUBMIT THE FINDINGS OF SUCH STUDY IN A REPORT TO THE DIRECTOR OF THE DIVISION OF THE BUDGET, THE TEMPORARY PRESIDENT OF THE SENATE, THE SENATE MINORITY LEADER, THE SPEAKER OF THE ASSEMBLY AND THE ASSEMBLY MINORITY LEADER NO MORE THAN FIVE HUNDRED FORTY DAYS AFTER THE ENACTMENT OF THIS SECTION. 4. NOTHING IN THIS SECTION SHALL PERMIT OR REQUIRE THE DEPARTMENT TO INCLUDE IN THE REPORT DESCRIBED IN SUBDIVISION TWO OF THIS SECTION ANY LISTING OF ANY INDIVIDUAL BUSINESSES' TAX LIABILITY, PROFITS, SALES OR LOSSES OR ANY INFORMATION PERTAINING TO ANY ON-GOING ADMINISTRATIVE OR CRIMINAL INVESTIGATION BY THE DEPARTMENT, U.S. INTERNAL REVENUE SERVICE OR ANY LAW ENFORCEMENT ENTITY INTO THE USE, INSTALLATION, MANUFACTURING, OR LEASING OF ZAPPERS OR PHANTOM-WARE. S 2. This act shall take effect on the ninetieth day after it shall have become a law.