Businesses must pay sales tax correctly

On Behalf of | Aug 3, 2017 | Tax Crimes

Most Connecticut residents pay all of the taxes that they owe in a timely manner. However, some evade taxes by finding ways to pay less than they are supposed to. Those individuals may be accused of tax crimes and face corresponding penalties.

One case involves the owner of a Chinese restaurant in Milford. The owner, 64, was arrested by special agents of the Criminal Investigations Unit while she was at the restaurant. She was accused of using Zapper software to avoid paying over $30,000 in state sales taxes.

Zapper software is a commercially available product known as phantom-ware. It is used to create fake point-of-sale records. In creating those fake records, people misrepresent the amount of state sales taxes collected by the business and thus the amount of state sales taxes that are owed to the government. Since doing that is the purpose of the software, simply owning it can be viewed as potentially incriminating.

The $30,000 in state sales taxes that the restaurant owner is accused of evading were incurred between 2008 and 2016. In the same period, she also accrued $60,000 in interest and penalty charges. Combined, if found guilty, she will owe at least $90,000 and may find that she owes additional amounts as well depending on the judgment of the court.

Cases like this show that when businesses collect and pay sales taxes, the first thing they need to do is ensure that everything they are doing is legal and accurate. If there is any doubt about the legality or the accuracy of how they are collecting and paying sales taxes, they should immediately consult with an attorney and an accountant. Paying the right way from the start will cost less than paying having to pay the extra amount owed, penalties, and interest later would.

Source: NBC Connecticut, “Milford Chinese Restaurant Owner Accused of Using ‘Zapper’ to Underreport Sales Taxes,” July 26, 2017

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