States Search for Software That Cheats on Taxes

Officials in five states are cracking down on computer programs that help businesses keep two sets of books.

April 05, 2012

AUGUSTA, Maine ?" State governments seeking for new revenue streams have found a new target: tax-cheating software, the Associated Press reports. Via a flash drive plugged into cash registers, businesses can use the computer programs to set up two separate books for underreporting sales and thus taxes.

Currently, five states?"West Virginia, Florida, Utah, Georgia and Maine?"have laws on the books that target the programs, while around 12 more states are discussing similar bills. "Maine, like all of the other states, has revenues that should be coming in but are not," said state Rep. Seth Berry, a sponsor of Maine??s proposal. "It??s our job to make sure that everyone??s pulling their weight."

While cheating on taxes has always been illegal, these laws specifically go after so-called tax zappers that alter electronic records of cash registers. Richard Ainsworth, a tax law professor with Boston University, said around 30% of cash businesses in the United States use such programs.

Businesses that run an honest ship strongly dislike cheating competitors, said Jeff Lenard of NACS. Convenience stores gather $162 billion annually in taxes. "It??s about illegal businesses getting a disadvantage over legal businesses," he said. "I don??t see many law-abiding retailers who would object" to tax-zapper legislation.

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