Electronic suppression of sales
Electronic sales suppression (ESS) software (commonly known as “zapper” software) selectively deletes or modifies sales transactions in point-of-sale systems (for example, electronic cash registers) and business accounting systems, leaving no record of the original transaction. Tax on the income earned in those transactions is not reported or remitted to the CRA. This practice contributes to the underground economy and hurts businesses that follow the rules. The CRA has introduced measures to address this problem.
Penalties for ESS software use
Following changes that were passed into law in January 2014, businesses that use, possess, or acquire ESS software face the following fines:
- $5,000 on the first infraction; and
- $50,000 on any subsequent infraction.
Anyone who manufactures, develops, sells, possesses for sale, offers for sale, or otherwise makes available ESS software will face $10,000 on the first infraction, and $100,000 on any subsequent infraction.
Under the new legislation, businesses or others that use, possess, acquire, manufacture, develop, sell, offer for sale, or otherwise make available ESS software will now be subject to the following penalties:
- if you face a summary conviction, a fine of at least $10,000 and up to $500,000, or imprisonment for up to two years, or both; or
- if you are convicted of an indictable offence, a fine of at least $50,000 and up to $1 million, or imprisonment for up to five years, or both.
How can business owners make sure they comply?
Businesses are responsible for maintaining adequate books and records; this includes proper records of all point-of-sale and accounting transactions. If you currently use, or plan to purchase, a point-of-sale or accounting system, speak to the software provider to make sure it does not contain ESS programming. If you discover that your system has ESS software, you must delete it from your system or otherwise destroy the software. If the ESS software has been used, stop using the software and correct all records to undo previous deletions of sales.
If you have used ESS software—coming forward
If your business has been using ESS software and you want to come forward, you can do so through the CRA’s Voluntary Disclosures Program. If you make a valid disclosure before any compliance action or criminal investigation is started, you may only have to pay the taxes owing plus interest, and will not face penalties or prosecution in the courts. For more information, go to Voluntary Disclosures Program.
What should consumers do?
Although consumers may not notice if a business appears to be using ESS software, they can do their part to ensure tax compliance by always requesting a copy of their receipt. This may help discourage some businesses from deleting transactions. If customers suspect or become aware of any business using such software, they can report it by contacting the Informant Leads Centre at 1-866-809-6841. Their identity will not be disclosed. They may also provide information anonymously by going to Informant Leads Program.
For more information, please consult our Questions and answers.
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