Business & Real Estate

California tax board on lookout for illegal sales suppression

Asking for a receipt discourages dishonest business operators from removing or changing sales totals in their electronic records, the Board of Equalization says, and it can help identify businesses that are underreporting sales.
Asking for a receipt discourages dishonest business operators from removing or changing sales totals in their electronic records, the Board of Equalization says, and it can help identify businesses that are underreporting sales. The Associated Press

Still pondering New Year’s resolutions? Here’s a suggestion: Always ask for a receipt whenever you purchase food, beverages or other merchandise in 2015.

You might help prevent a crime.

In California, it’s called illegal sales suppression, and it’s a major concern to the state Board of Equalization, which is charged with administering various taxes, on everything from general retail to fuel, alcohol and tobacco sales.

The BOE is on the lookout for Golden State businesses that falsify their electronic sales transaction records to evade paying their fair share of taxes.

And it’s no small amount. In 2010, the board estimated that illegal sales suppression was costing the state roughly $214 million in lost tax revenues, according to BOE spokeswoman Venus Stromberg. But even that might be a conservative estimate.

Because it’s tax income that’s being evaded, “You never really know just how much is involved as it pertains to California’s underground economy,” Stromberg said.

The evasion is most commonly done via sales suppression software, known as “zappers.” The software enables businesses to remove or change electronic point-of-sale transactions.

By underreporting taxable sales, businesses are illegally paying less tax than they would if all transactions were accurately recorded.

Stromberg said the BOE found that sales suppression was most common in the beverage/dining industry, but it also was found in numerous other business sectors. And it occurs statewide. “It is not unique to one particular area of the state,” she said.

Starting last January, a BOE-sponsored bill, AB 781, made it a crime to buy, sell, install or use “zappers.” Anyone caught using illegal sales suppression software can be sentenced up to three years in jail, fined up to $10,000 and be required to pay all illegally withheld taxes owed, including penalties and interest.

For its part, the BOE fights illegal sales suppression in various ways, including undercover purchases at restaurants, retailers or other businesses to determine if a business is illegally suppressing sales totals.

If the BOE detects the use of suppression software, it audits the actual sales totals over a prolonged period. BOE said techniques to calculate that total include cash-to-credit card payment ratios, purchase information obtained from suppliers and determination of a daily sales average.

The general public can help thwart underreporting simply by asking for a receipt, especially when payment is made in cash.

Asking for a receipt discourages dishonest business operators from removing or changing sales totals in their electronic records, the BOE said, and it can help identify businesses that are underreporting sales.

Those who suspect a business of practicing illegal sales suppression are asked to save their receipts and call BOE’s Tax Evasion Hotline at (888) 334-3300, or submit a complaint at www.boe.ca.gov/info/complaint.htm.

Call The Bee’s Mark Glover, (916) 321-1184.

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