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Franks bill targeting tax-fraud software signed into law

State Rep. Jack Franks, D-Marengo, issued the following news release Friday:

Sale and use of ‘tax-zappers’ now illegal in Illinois

WOODSTOCK, Ill. – Legislation introduced by state Rep. Jack Franks, D-Marengo, cracking down on high-tech sales tax avoidance will be signed into law this afternoon. Franks’ measure takes aim at curtailing the falsification of electronic cash register records to lower a business’ tax liability.

“The notion that billions in sales tax revenue is being lost due to businesses cooking their books is unconscionable,” Franks said. “Even though it was already illegal to cheat on taxes, ‘tax-zappers’ created an easy way for an unscrupulous few to cheat that is very hard to track.”

House Bill 49 bans the possession or sale of computer software, known as a ‘tax-zapper,’ that allows a business to underreport taxable income by doctoring transaction records. By inserting a flash drive into an electronic register, the zapper alters receipts, thereby artificially lowering the business’ tax liability.

According to the Associated Press, in 2009 tax receipt losses from zapper software were estimated at $2.8 billion in the California restaurant industry and $1.7 billion in New York. Seven states including Michigan, Connecticut, Florida, Georgia, Maine, Utah and West Virginia have already passed laws banning the sale and use of tax-evasion software. Richard Ainsworth, a Boston University professor and expert on this issue, estimates that 30 percent of businesses that rely primarily on cash transactions are using this type of software.

“The vast majority of Illinois businesses play by the rules and are put at a severe disadvantage by anyone using these devices,” Franks continued. “This law will help stop those perpetrating tax fraud from placing the costs of their criminality onto the backs of honest taxpayers in Illinois.”

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