Monthly Archives: August 2014

New Penalties for Using Technology to Hide Sales Revenue

In January of 2014, the Federal government introduced new legislation to fight the use of Electronic Sales Suppression (ESS) Devices that unscrupulous business operators are using to falsify sales records.

Misrepresentation of income when filing taxes is certainly nothing new.  Shady business operators have been “open tilling” and running multiple cash register tapes for years.  And many of them got caught.  The CRA has developed sophisticated techniques for pinpointing fraudulent submissions, and has been quick to prosecute cheats.  New technology has brought new ways for criminals to try and defraud the government.

What is ESS?

ESS uses electronic devices (“zappers”) or software (“phantomware”) to amend sales records on the fly.  When a business makes a submission of their revenue to the government, the numbers make sense, because the computer has been able to accurately compensate for the missing revenue.

The ease with which ESS creates fraudulent records that look genuine means that a lot more business owners have been tempted by it.  Taxation authorities worldwide are citing ESS as a major threat to government revenue streams.  Many jurisdictions are working hard to counter ESS technology with POS system inspections, and in Quebec business operators are required to plug an independent record-keeping device into their sales systems.

Penalties

Under the new legislation, business operators caught with ESS hardware or software on their systems will be fined $5,000 on their first offence, and $50,000 for any subsequent infractions (even if not using it).  Individuals offering the software for sale are subject to much higher fines.

The best way to ensure that you and your business aren’t subject to problems with zappers or phantomware is to ensure that you aren’t using it.  Make sure the people you entrust with installation and maintenance of your POS systems are reputable. When it comes time to report your income, consult a professional.  The accountants at Five Star Accounting provide knowledgeable service, and can help you unsnarl even the most complicated revenue reporting situations.