HOUSE OF REPRESENTATIVES	H.B. NO.	958
TWENTY-SEVENTH LEGISLATURE, 2013
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TAX FRAUD.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The purpose of this Act is to prohibit the use of zappers, or automated sales suppression devices, which bring new technologies to an old tax fraud - skimming cash sales. Technology has made it possible to skim large amounts of sales receipts while at the same time making it virtually undetectable in point of sale terminals. For example, one of the largest tax fraud cases in Connecticut involved the use of a zapper to hide $17,000,000 in receipts. Likewise, a taxpayer in Michigan skimmed $20,000,000 in cash sales through the use of a zapper. Zapper frauds originated in Europe but have spread to the United States, Canada, Brazil, Australia, and many other countries.

SECTION 2. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§231-A Possession or use of automated sales suppression devices. (a) As used in this section:

"Automated sales suppression device" or "zapper" means a software program, carried on a memory stick or removable compact disc, accessed through an Internet link or accessed through any other means, that falsifies the electronic records of electronic cash registers and other point-of-sale systems, including, but not limited to, transaction data and transaction reports.

"Electronic cash register" means a device that keeps a register or supporting documents through the means of an electronic device or computer system designed to record transaction data for the purpose of computing, compiling or processing retail sales transaction data in whatever manner.

"Person" includes one or more individuals, a company, corporation, a partnership, an association, or any other type of legal entity, and also includes an officer or employee of a corporation, a partner or employee of a partnership, a trustee of a trust, a fiduciary of an estate, or a member, employee, or principal of any other entity, who as such officer, employee, partner, trustee, fiduciary, member, or principal is under a duty to perform and is principally responsible for performing the act.

"Phantom-ware" means a hidden, preinstalled or installed at a later time, programming option embedded in the operating system of an electronic cash register or hardwired into the electronic cash register that may be used to create a virtual second till, or may eliminate or manipulate transaction records that may or may not be preserved in digital formats to represent the true or manipulated record of transactions in the electronic cash register.

"Transaction data" means information that includes items purchased by a customer, the price for each item, a taxability determination for each item, a segregated tax amount for each of the taxed items, the amount of cash or credit tendered, the net amount returned to the customer in change, the date and time of the purchase, the name, address and identification number of the retailer, and the receipt or invoice number of the transaction.

"Transaction report" means a report that includes, but need not be limited to, sales, taxes collected, media totals, and discount voids at an electronic cash register that is printed on cash register tape at the end of a day or shift, or a report that documents every action at an electronic cash register that is stored electronically.

(b) It is an offense for a person to knowingly purchase, possess, install, update, maintain, upgrade, transfer, use, or create any automated sales suppression device, zapper, or phantom-ware.

(c) Any person who wilfully and knowingly sells, purchases, installs, transfers or possesses any automated sales suppression device or phantom-ware shall:

(1) Be guilty of a Class B felony and be fined not more than $25,000 or imprisoned for not less than two or more than twenty years, or both;

(2) Be liable for all taxes, penalties, and interest due to the State as a result of such sale, purchase, installation, transfer, use, or possession; and

(3) Forfeit all profits resulting from the sale or use of such automated sales suppression device or phantom-ware.

(d) An automated sales suppression device or phantom-ware and any device containing such device or software shall be contraband, and shall be subject to confiscation by the department."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act, upon its approval, shall take effect on January 1, 2013.

INTRODUCED BY:

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BY REQUEST