NY Times: Zappers Cook the Tax Books

New York Times:  With Software, Till Tampering Is Hard to Find, by Roy Furchgott:

For mom and pop shops, cooking the books is becoming a high-tech business. Thanks to a software program called a zapper, even technologically illiterate restaurant and store owners can siphon cash from computer cash registers and cheat tax officials. ...

Zappers — also known as automated sales suppression devices — are a new twist on an old fraud. ...  Zappers alter the electronic sales records in a cash register. To satisfy tax collectors, the tally of food orders, for example, must match the register’s final cash total. To hide the removal of cash from the till, a crooked business owner has to erase the record of food orders equal to the amount of cash taken; otherwise, the imbalance is obvious to any auditor. ...

Zappers are a worldwide phenomenon. ...  Only two known zapper cases have been prosecuted in the United States, which leads Richard T. Ainsworth, a Boston University law professor specializing in taxes, to ask, “Why aren’t cases being identified in the United States?” Mr. Ainsworth, who has published several academic papers on zappers [Zappers: Tax Fraud, Technology and Terrorist Funding; Zappers & Phantom-Ware: A Global Demand for Tax Fraud Technology; Zappers and Phantom-Ware at the FTA: Are They Listening Now?], said, “We should be finding more here.”

In older cash registers, adjustments left tracks for those who knew where to look. The latest zappers cover their tracks more efficiently. Thieves put a zapping program onto a portable flash drive so it can be run and then removed from the machine, leaving no trace. “If someone comes in and audits your books, it all looks O.K.,” said Ms. Smith of the tax collectors association.

The more sophisticated zappers are easy to use, according to several experts. A dialogue box, which shows the day’s tally, pops up on the register’s screen. In a second dialogue box, the thief chooses to take a dollar amount or percentage of the till. The program then calculates which orders to erase to get close to the amount of cash the person wants to remove. Then it suggests how much cash to take, and it erases the entries from the books and a corresponding amount in orders, so the register balances.

The cash register security industry is focused on protecting patrons and owners from theft by employees, which may be one reason so few zappers are uncovered in the United States. No one hires security experts to protect the government from devious businesses.

The use of zappers may also be less publicized here, tax collectors say, because if a business is caught using one to avoid taxes but pays its back taxes and penalties, the case will not become public. ...

Mr. Ainsworth said the United States should at least take up a study of the problem. “The later you get into this game, the more likely criminals have moved on to the next technology,” he said. “This is my tax money. It makes me mad.”