SALT LAKE CITY — The Utah Legislature has passed a bill that criminalizes the use or sale of "zapping" software that hides sales in electronic cash registers, thereby reducing sales tax remitted to the state.
Under HB96, violators could be charged with a third-degree felony for a first offense and fined up to twice the amount of taxes due the state. Second offenses could be charged as second-degree felonies.
The bill, sponsored by Rep. Patrice Arent, D-Millcreek, is intended to halt the practice, which defrauds taxpayers of taxes owed the state.
The software "under-represents sales, which means it underreports sales tax to the state," said Sen. John Valentine, R-Orem, the Senate sponsor of the legislation.
A sting conducted in New York State revealed that 17 of 20 cash register vendors seeking to sell their wares to a fake restaurant offered to sell the "zapping" software, also referred to as phantomware.
A large-scale audit conducted in Canada revealed one-third of the restaurants investigated were using phantomware to hide sales to avoid remitting taxes.