(Release originally issued by the Washington State Attorney General's Office on Revenue case)
Sales suppression software hides cash transactions, allows users to steal sales tax
OLYMPIA — Feb. 5, 2016
Attorney General Bob Ferguson filed charges today against a Bellevue restaurant owner accused of using “sales suppression software” to hide cash transactions, pocketing nearly $395,000 in sales tax collected from her patrons.
Yu-Ling Wong, owner of the Facing East restaurant, is charged in King County Superior Court
with first-degree theft, “utilizing sales suppression software,” and 21 counts of filing a false tax return. In all, the standard sentencing range as charged is 43 to 57 months. If aggravating circumstances are proven, the judge could impose additional time up to 120 months.
“I will not tolerate businesses that line their pockets by stealing from taxpayers,” Ferguson said. “Using software to cheat on tax obligations is unfair to businesses that play by the rules and it robs Washington taxpayers of the money that is supposed to fund our schools, parks and roads.”
Run on a point-of-sale computer or cash register, sales suppression software surreptitiously deletes transactions. The software then re-balances the company financial records to show a lower sales figure, reducing the business’ tax obligation. Money that patrons paid sales tax is then pocketed, as these unscrupulous retailers keep “two sets of books.”
The AGO believes this to be the first criminal case targeting the use of sales suppression software in the nation.
“Sales suppression software is a new form of tax fraud,” said Vikki Smith, director of the Washington State Department of Revenue. “We’re learning how to detect its use and will be aggressive in going after businesses that we find are cheating the system. Washington citizens need assurance that the sales tax they pay goes to provide services such as funding education for our children.”
Sales suppression software allows the user to remove cash from the register while still reflecting balanced business records — thus the user is able to steal the sales tax collected on the eliminated transactions, shortchanging the state in the process.
In 2013, Washington passed a law making it a class C felony for anyone to “sell, purchase, install, transfer, manufacture, create, design, update, repair, use, possess, or otherwise make available” software or hardware that deletes transactions.
The charges contained in the complaint are only allegations. A person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
Overview of allegations
As described in the complaint, Facing East was selected for routine audit by the Department of Revenue to review the books from 2010 to 2013.
DOR auditors are trained in sales suppression software and how to spot it. DOR staff noted a sudden change in cash receipts, which could be caused by such software, and found the data provided by Wong could not be relied upon to calculate sales tax owed.
Based on the restaurant’s previous receipts, which were more in line with industry standards, DOR staff estimated Wong owed in excess of $394,835.
DOR referred the case to the Attorney General’s Office Criminal Justice Division, which is prosecuting the matter.
An arraignment in the case is expected Feb. 17 in King County Superior Court.