New penalties for businesses that use illegal electronic sales suppression software
Are you using Electronic Sales Suppression Software (ESS) to conceal your sales? CRA can slap you a severe penalties and prosecution leading to jail term upto 5 years!
What is ESS?
ESS software (commonly known as zapper software) is illegal and is designed to work with point‑of‑sale systems and electronic cash registers. Businesses use them to knowingly delete or conceal part of their sales from their computer records to reduce their GST/HST and income tax obligations which is nothing but unethical and illegal avoidance of tax and is a punishable offense. Using ESS software offers an unfair advantage to those who use it to circumvent Canada’s tax laws, which in turn undermines the competitiveness of businesses that follow the rules.
The CRA is working rigorously to identify such businesses that use ESS software to reduce their tax burden and also working hard to detect those who are behind the development of such software. CRA’s efforts are aimed at combating the underground economy by taking necessary measures to stop the illegal practice.
New measures took effect on January 1, 2014, that allow the CRA to impose civil and criminal penalties for designing, using, possessing, acquiring, manufacturing, developing, selling, possessing for sale, offering for sale, or otherwise making available ESS software.
Individuals and businesses who possess or use Electronic Sales Suppression software now face monetary penalties, court fines, and possibly even jail time. The penalties for using ESS software can be up to $50,000 and jail time up to two years. Anyone who manufactures, develops, sells, possesses for sale, offers for sale or otherwise makes available ESS software faces up to $100,000 in penalties and up to five years in jail.
Voluntary Disclosure Program (VDP):
If you are using such Electronic Sales Suppression software to report reduced and inaccurate sales and in turn to avoid your tax liabilities, immediately make your disclosure under the Voluntary Disclosure Program (VDP) of the CRA to rectify the inaccurate particulars you filed in your previous tax returns and pay necessary tax along with interest due. By making such disclosure under VDP, you can save yourself from penal consequences. Click here to learn more about the Voluntary Disclosure Program of the CRA.
Get it right immediately! Visit About the underground economy to learn more about what the CRA is doing to address the underground economy.
You may click here for the full text of new penalties. For more information on the new measures to combat the use of ESS software, read the questions and answers or visit Electronic suppression of Sales.