States are cracking down on software and devices that help businesses cheat on taxes at the cash register.
The so-called “tax zappers” allow businesses that do a lot of cash business, such as restaurants, to plug a program or a flash drive into the cash register and effectively keep a second set of accounts. So far, five states have passed laws outlawing the programs (Florida, Georgia, Maine, Utah and West Virginia), and about 12 other states are weighing such laws, according to Bloomberg BusinessWeek.
Even without new laws, cheating on sales taxes is still illegal around the country. And already prosecutions have begun against both the purveyors and buyers of such devices, with one man in Detroit recently sentenced to two years’ probation and a day in jail for selling software called Journal Sales Remover to strip clubs in the area. Large states like New York and California are estimated to lose billions of dollars in tax revenue every year due to the use of the software and devices.
States are only just starting to emerge from the depths of the recession, and some states and cities that had made deep cuts in their budgets and workforces in recent years are finally finding themselves in a position to hire again as tax revenues slowly rebound. Revenue from state and local taxes inched up 4.5 percent in 2011, the largest increase since 2006, while property taxes also increased for the past two quarters, according to U.S. Census and Commerce Department figures cited by Bloomberg.com. That’s allowing hard-hit cities like Mesa, Ariz., and Camden, N.J., to once again rehire some of the police officers who had been laid off in the wake of the recession.
Some cities are feeling like they have rebounded to the point where they can actually roll back some taxes in an effort to boost the larger economy. That’s what happened this past Sunday in New York State, where clothing and footwear items under $110 are now exempt from the 4 percent sales and use tax. New York City and several counties around the state are also exempting clothing and footwear sales of under $110 from the sales and use tax.
That’s already led to a rush of shoppers to the stores to take advantage of the bargains. The most recent tax exemption was only for items under $55 and expired at the end of March. Still, that program was successful and is estimated to add $210 million to the state’s coffers for the 2011-2012 fiscal year. The state hopes to make back even more money from the expanded sales tax exemption. The last time the $110 tax exemption was in place, the state got an extra $330 million in revenue, according to Washington Square News.
Much of the added tax revenue for New York comes at the expense of New Jersey, though, as bargain hunters decide it’s not worth the trip across the George Washington Bridge or the Lincoln Tunnel to save a few bucks on taxes.
Still, it seems like states are going to try a variety of approaches to cash in as the economy ever so slowly rebounds, whether it’s with tax breaks to spur economic activity or by zapping out those pesky tax zappers.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access