Wyoming tax officials watching for 'zappers'

2012-06-02T23:45:00Z 2012-06-03T00:50:41Z Wyoming tax officials watching for 'zappers'By JOAN BARRON Casper Star-Tribune The Billings Gazette
June 02, 2012 11:45 pm  • 

CHEYENNE, Wyo. -- Wyoming tax officials are aware of the proliferation of "tax zappers," who skim sales tax money that should have gone to states.

The piracy involves a computer software program and a plug-in that drops a number of transactions and the sales tax paid on them from the system.

A state audit in Illinois last year found that 27 percent of gas station operators pocketed state and local taxes on gasoline over the previous four years. Some skimmed as much as $1 million a year, according to an article on Governing.com.

"This is high-tech stuff," said Ed Schmidt, director of the Wyoming Department of Revenue. "It's hard to detect.

"When it's an off-the-books-type of thing, it's hard to quantify," Schmidt added.

Dan Noble is director of the department's excise tax division. He said no one knows how much of this type of sophisticated skimming is going on.

The "zappers," also known as automated sales suppression devices, are set to drop every third transaction, for example, rather than create a big drop over one or two hours.

A selected portion of the transactions and the equivalent sales taxes collected are erased at the end of the day, leaving the business' sales records balanced, but less than what was actually taken in.

Auditors in Canada accidentally found out about zapping when they picked up a sample of transactions at a business, Noble said.

The auditors thought they misplaced the transactions, so they came back a couple of days later and got a different number than the first one, he said.

This is a problem for the states to handle, according to Richard Ainsworth, a Boston University professor who specializes in sales taxes and has written a new paper on the subject of zappers.

He said states could use a sting operation to nail zapper salesmen or installers.

Ainsworth noted that five states have passed laws prohibiting zappers and bills are pending in eight or nine other states, according to Governing.com.

To be effective, the bills must impose penalties on the installer, Ainsworth said.

The Wyoming Department of Audit is looking into the problem. Director Jeff Vogel said legislation may be needed in Wyoming as well.

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