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BILL NUMBER:S7733

TITLE OF BILL: An act to amend the tax law, in relation to prohibiting the use of automated sales suppression devices, zappers or phantom-ware

PURPOSE: To make it illegal for a person to knowingly purchase, possess, install, update, maintain, upgrade, transfer or use any automated sales suppression device, zapper or phantom-ware.

SUMMARY OF PROVISIONS: Section 1: Adds a new section 1816 to the tax law to define Automated sales suppression device or zapper, electronic cash register, phantom-ware, transaction data and transaction data.

Prohibits and makes it an offense for a person to knowingly purchase, possess, install, update, transfer or use any automated sales suppression device, zapper or phantom-ware. It is also an offense to transmit data with the intent of data manipulation.

A violation violation is a class E felony punishable by a fine or not less than five thousand dollars but not more than twenty-five thousand dollars. For a second offense within five years, it is punishable by a fine of not less than twenty-five thousand dollars but not more than one hundred thousand dollars and for a third or subsequent offense within ten years, by a fine of not less than one hundred thousand dollars but not more than five hundred thousand dollars.

It is an offense for a person to knowingly sell any automated sales suppression device, zapper or phantom-ware. This violation is a class E felony punishable by a fine of twenty-five thousand dollars per incident,

Section 2: This act takes effect on January 1, 2013.

JUSTIFICATION: Automated sales suppression devices can be used to evade sales tax collection, including the so called tax-zapper software that lets businesses, especially those that deal mostly in cash, to underreport taxable sales and pocket money that should be given to the government.

During business hours, cashiers record the true sales and give customers accurate receipts. A software of real sales can also be stored electronically. After hours, a memory stick that contains the zapper is inserted to remove a given amount in the sales from the day's receipts. For each altered transaction, the zapper software will also re-total and recalculate the individuals receipts. This action alters the tax due and creates a second set of books.

The Internal Revenue Service finds more than half of all cash businesses under-report income from their sales. The IRS does not track the use of zapper software. As a result, New York State has increased their focus on cash businesses. It is estimated that New

 York State loses over $1 billion in tax revenue annually as a result of these devices.

It has been reported that New York State operated a series of stings operations in which cash register vendors were invited to pitch their equipment to phony restaurants. The results were shocking. In many cases, the vendors offered the phony restaurant opportunities to underpay their taxes using software.

The majority of the businesses in our State are complying with New York State sales tax laws and properly remitting the money collected. This legislation is focused on the small number of businesses which are illegally underreporting their tax collections.

LEGISLATIVE HISTORY: New Bill.

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: This act shall take effect on January 1, 2013.

Text

STATE OF NEW YORK
________________________________________________________________________

7733

IN SENATE

June 15, 2012
___________

Introduced by Sens. MARCELLINO, KRUEGER -- read twice and ordered print-
  ed, and when printed to be committed to the Committee on Rules

AN ACT to amend the tax law, in relation to prohibiting the use of auto-
  mated sales suppression devices, zappers or phantom-ware

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The tax law is amended by adding a new section 1816 to read
as follows:
  S 1816. AUTOMATED SALES SUPPRESSION. (A) DEFINITIONS. AS USED IN  THIS
SECTION:
  (1)  "AUTOMATED SALES SUPPRESSION DEVICE" OR "ZAPPER" MEANS A SOFTWARE
PROGRAM, CARRIED ON A MEMORY STICK OR REMOVABLE COMPACT  DISC,  ACCESSED
THROUGH  AN  INTERNET  LINK,  OR  ACCESSED THROUGH ANY OTHER MEANS, THAT
FALSIFIES THE ELECTRONIC RECORDS OF ELECTRONIC CASH REGISTERS AND  OTHER
POINT-OF-SALE  SYSTEMS,  INCLUDING, BUT NOT LIMITED TO, TRANSACTION DATA
AND TRANSACTION REPORTS.
  (2) "ELECTRONIC CASH REGISTER" MEANS A DEVICE THAT KEEPS A REGISTER 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 TRANSACTION DATA.
  (3) "PHANTOM-WARE" MEANS A HIDDEN, PREINSTALLED,  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  WITH  INTENT  OR  BY  SPECIFIC  DESIGN IS USED TO CREATE A VIRTUAL
SECOND TILL OR MAY ELIMINATE OR MANIPULATE TRANSACTION RECORDS THAT  MAY
OR  MAY  NOT  BE  PRESERVED  IN DIGITAL FORMATS TO REPRESENT THE TRUE OR
MANIPULATED RECORD OF TRANSACTIONS IN THE ELECTRONIC CASH REGISTER.
  (4) "TRANSACTION DATA" MEANS DATA ASSOCIATED WITH 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  IDEN-
TIFICATION  NUMBER  OF  THE VENDOR, AND THE RECEIPT, SEQUENCE OR INVOICE
NUMBER OF THE TRANSACTION.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD16268-02-2
S. 7733                             2

  (5) "TRANSACTION REPORT" MEANS A REPORT DOCUMENTING  DATA,  INCLUDING,
BUT  NOT  LIMITED TO, DATA ASSOCIATED WITH SALES, TAXES COLLECTED, MEDIA
TOTALS, AND DISCOUNT VOIDS AT AN ELECTRONIC CASH REGISTER THAT IS PRINT-
ED ON CASH REGISTER TAPE AT THE END OF A DAY OR SHIFT, OR A REPORT DOCU-
MENTING EVERY ACTION AT AN ELECTRONIC CASH REGISTER THAT IS STORED ELEC-
TRONICALLY.
  (6)  "PERSON"  SHALL HAVE THE SAME DEFINITION AS IN SUBDIVISION (A) OF
SECTION ELEVEN HUNDRED ONE OF THIS CHAPTER.
  (B) PROHIBITIONS. (1) IT IS AN  OFFENSE  FOR  A  PERSON  TO  KNOWINGLY
PURCHASE,  POSSESS,  INSTALL, UPDATE, MAINTAIN, UPGRADE, TRANSFER OR USE
ANY AUTOMATED SALES SUPPRESSION DEVICE, ZAPPER OR PHANTOM-WARE.   IT  IS
ALSO AN OFFENSE TO TRANSMIT DATA WITH THE INTENT OF DATA MANIPULATION.
  (2)  A  VIOLATION  OF  PARAGRAPH  ONE OF THIS SUBDIVISION IS A CLASS E
FELONY PUNISHABLE BY A FINE OF NOT LESS THAN FIVE THOUSAND  DOLLARS  BUT
NOT  MORE  THAN  TWENTY-FIVE  THOUSAND DOLLARS AND, FOR A SECOND OFFENSE
WITHIN FIVE YEARS, BY A FINE  OF  NOT  LESS  THAN  TWENTY-FIVE  THOUSAND
DOLLARS  BUT NOT MORE THAN ONE HUNDRED THOUSAND DOLLARS AND, FOR A THIRD
OR SUBSEQUENT OFFENSE WITHIN TEN YEARS, BY A FINE OF NOT LESS  THAN  ONE
HUNDRED  THOUSAND  DOLLARS  BUT  NOT  MORE  THAN  FIVE  HUNDRED THOUSAND
DOLLARS.
  (3) IT IS AN OFFENSE FOR A PERSON  TO  KNOWINGLY  SELL  ANY  AUTOMATED
SALES SUPPRESSION DEVICE, ZAPPER OR PHANTOM-WARE.
  (4)  A  VIOLATION  OF PARAGRAPH THREE OF THIS SUBDIVISION IS A CLASS E
FELONY PUNISHABLE BY A FINE OF TWENTY-FIVE THOUSAND  DOLLARS  PER  INCI-
DENT.
  (5)  THE  OFFENSES CREATED BY THIS SECTION SHALL BE IN ADDITION TO AND
CONSIDERED A SEPARATE OFFENSE  FROM  ANY  OFFENSE  OF  SECTION  EIGHTEEN
HUNDRED SEVENTEEN OF THIS PART.
  S 2. This act shall take effect January 1, 2013.