Earlier this week, New Jersey Governor Philip Murphy announced his proposed budget for fiscal year 2021. Buried in the dense text of the 94-page document (at page 37) were several tax enforcement provisions of note. The budget reveals that the state’s Division of Taxation is implementing new auditing and enforcement measures estimated to yield $40.0 million in addition revenue. In particular, the state plans to implement enforcement measures to stop “revenue suppression software schemes.”
Commonly called “zappers,” revenue suppression programs run on a point-of-sale computer or cash register and are used to secretly delete some or all cash transactions and then reconcile the books of the business. The result is that the company’s books appear to be complete and accurate, but are in fact false because they reflect fewer sales than were actually made. Zappers are most commonly used by restaurants and bars. Business owners using zapper programs often maintain two sets of books, in order track the business’ real revenue. A recent article published by BNA estimates that tax-zapping software costs states $21 billion in taxes annually and that 30 percent of the electronic cash registers, or point-of-sale systems, in the United States have a zapper installed.
We have previously written (see here, here, and here) about the growing number of states that are cracking down on zappers, and New Jersey appears to be the latest to join that list. Governor Murphy’s budget also called for legislation to be enacted making the possession and use of certain sales suppression software subject to criminal liability and immediate seizure.
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