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What CPAs and Clients Should Know About Tax Zapper Software

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CPAs who assist clients with sales tax obligations can build credibility by educating themselves about the increasingly well-known phenomenon of tax zapper software.

Jan 20th 2020
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Tax zapper software – also referred to as “sales suppression software” – is a technology which can enable businesses to deliberately underreport their sales in order to underpay their true sales tax burden.

As we know, most states collect sales tax on standard business transactions. Typically, no sales tax is imposed on produce, but it is imposed on most other items. If you buy a cup of coffee or a magazine, sales tax will likely be collected, unless you happen to live in a state without sales tax.

Many business owners have already been caught, charged and sentenced for using zapper software to commit sales tax fraud. Cash businesses are at a higher risk for zapper software tax fraud, and so CPAs can counsel clients who run cash businesses (such as restaurants) accordingly. In any event, it’s a wise policy to discuss this issue with clients so you can prevent tax fraud in the future.

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Tax Zapper Software Can Create Two Sets of Books

Zapper software is installed on a “point-of-sale” (POS) system, or directly onto a cash register. This software can then delete certain transactions after they’ve been made, and thereby create a second set of books on top of the original set. This second set of books can then be used as the “official” or “original” set of books because, without any special investigation, it can easily pass off as such.

This second set of books can therefore be used to deliberately underreport sales and commit sales tax fraud. The software user simply pockets the unremitted sales tax which was leftover. The thing that can make this operation very tough to discover is the occurrence of cash-based transactions.

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