As tax evaders become increasingly advanced in their methods for skimming cash receipts, governments are challenged to keep pace. Skimming of cash transactions and underreporting of sales by merchants have been significant, ongoing problems since the inception of the sales tax. Since sales suppression software, also referred to as zapper software, became available in the 1990’s, it has become increasingly easy to erase or modify transactions from electronic cash registers (ECR) or point of sales (POS) systems.
Sales suppression software allows cash transactions to be hidden, with two sets of books created: one, an accurate set for the business owner, and a second set that “zaps” a sizable percentage of the cash transactions. This allows business owners to more easily hide sales and avoid hundreds of thousands of dollars in taxes.
CGI helps public sector clients fight tax evasion in cash-based industries with a sophisticated approach – the Sales Reporting Management solution. First used in the Province of Québec, the Sales Reporting Management solution supports legislation that required the use of an electronic transaction lockbox that could not be altered by zapper software. This device captures all information entered into an ECR or POS and places a barcode on each receipt to demonstrate that the device is in use, thereby guarding against both traditional skimming and zapper software. Revenu Québec partnered with CGI as its principal provider to implement the Sales Reporting Management solution.
For states or provinces interested in pursuing a Sales Reporting Management approach, CGI encourages a pilot as an excellent first step. During a pilot, 500-1,000 taxpayers would use the Sales Reporting Management solution. A pilot would aid in estimating the rate of non-compliance and the estimated benefits from a full rollout. A pilot also provides a strong business case for expanded implementation.