Schuitmaker: Senate aims to zap out tax fraud devices

Residents found possessing, using or selling devices that are used at electronic cash registers to falsify records and evade taxes would face felony charges under legislation approved in the state Senate Thursday.

The devices, referred to as zappers, double tills, and phantom-ware, are housed on USB memory drives, compact discs and other forms of removable media and used to skim cash sales and evade taxes. Estimates indicate states are losing significant amounts of sales tax, business income tax, personal income tax, and wage tax revenues from their use.

“This form of modern-day tax evasion is a growing concern as technological advances make it easier to skim sales and transfer money overseas,” said state Sen. Tonya Schuitmaker, R-Lawton, who voted for the measures. “By making it a felony to own, operate or sell these zappers we hope to deter their continued fraudulent use.”

A 2007 case in Detroit found a restaurant operating two sets of digital books, skimming $20 million in sales over four years and failing to report the income on tax returns. One owner was convicted in federal court; the second owner fled the U.S. and remains at large.

Senate Bills 768 and 769 establish the felony charge that carries a 1-to 5-year prison sentence and a possible fine of up to $100,000. Convicts would be liable for all taxes and penalties due to the state resulting from use of the zapper or phantom-ware and shall give up all profits associated with sales. In addition, the device is contraband and may be seized without process by any police officer.

The measures now go to the state House for consideration.