California: Tax Evasion by Electronic Sales Suppression

It is also a crime for anyone to knowingly sell, purchase, install, transfer or possess sales suppression software programs or other electronic devices that are used to hide or remove sales and to falsify records for commercial gain. Violators can be sentenced up to three years in county jail, fined up to $10,000, and required to pay all illegally-withheld taxes, including interest and penalties.

The BOE is working collaboratively with other state and federal law enforcement agencies, exchanging information and investigating underground operations. We are taking an assertive approach to identify and prosecute all cases of tax evasion, including those based on falsified POS data.

Businesses are required to maintain records as provided in Regulation 1698, Records, so BOE representatives may:

• Verify the accuracy of sales and use tax returns; and
• Determine if the tax due has been correctly paid on sales and purchases.

The BOE is using its resources in the most effective manner possible to stop this high-tech tax evasion. If you are audited, the BOE has the ability and technology to detect unlawful sales suppression. Our auditors are making undercover merchandise purchases to determine if businesses are using sales suppression software. If the auditor detects the use of sales suppression software, the auditor may disregard your reported sales amounts and establish your actual sales using some or all of the follow­ ing methods:

• Establishing sales based on credit card sales
• Accessing third party electronic sales information
• On-site observation of salesTo assist us with identifying tax evasion, please visit our website under “Report Suspected Tax Fraud Activity,” where you can provide us with information on possible tax violation.