New Podcast: Rep. Seth Berry on “Tax Zappers” and Sales Tax Fraud

January 13, 2012

This week on the Tax Policy Podcast, we have a conversation with Maine state Rep. Seth Berry (D-Bowdoinham) about the use of “tax zappers” – programs used by some retailers to evade sales tax obligations – and his pending bill to combat the problem.

The issue of business owners using software to falsify their sales tax bill reached a larger audience of state lawmakers this summer at the National Council of State Legislatures conference, when it was the subject of one of the discussion sessions. Past NCSL President Sen. Don Balfour (R-Snellville) of Georgia and Richard Ainsworth of Boston University’s School of Law discussed the history of the issue and made recommendations on how to combat it.

Ainsworth’s previous research found that the use of zappers was already widespread North of the border:

Boston University law professor Richard Ainsworth has written extensively about the use of zappers. He suggests some five per cent of the restaurant industry’s sales are “zapped” from financial records. Using estimates prepared by the Canadian Restaurant and Foodservices Association, those “phantom” cash sales could add up to nearly $2.4 billion for 2009 alone—or 60 times what the [Canada Revenue Agency] has found over the first 18 months of its investigation. While the federal agency wouldn’t speculate just how much in cash sales is being pocketed by unscrupulous restaurant owners and managers, CRA spokesperson Caitlin Workman says she “wouldn’t be surprised” if it climbed into the billions.

The Maine bill is modeled on one passed last year by the Georgia legislature, sponsored by Sen. Balfour.

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