Sales Suppression as a Service (SSaaS) & the Apple Store Solution

21 Pages Posted: 6 Jun 2014

See all articles by Richard Thompson Ainsworth

Richard Thompson Ainsworth

NYU - Graduate Tax Program; Boston University - School of Law

Date Written: June 4, 2014

Abstract

The problem of sales suppression fraud is estimated to cost state and local governments $20 billion annually ($2 billion in New York restaurants alone). Modern sales suppression (skimming) is carried out with technology (Zappers and Phantom-ware). Nine undercover sting operations in and around Manhattan and the Bronx by investigators working for New York’s Department of Taxation and Finance (NY-DT&F) have identified the SSaaS variant of modern skimming.

A striking example of SSaaS may be unfolding in the $1 million sales suppression case against Congressman Michael Grimm (R-NY). It is alleged that Grimm skimmed sales from his Healthalicious restaurant in Manhattan, and it appears at this early stage that SSaaS was the skimming method used.

Starting in Buffalo, NY in March 2009, and ending in the Bronx by September of that year, approximately 23 stings were set up by the NY-DT&F looking for Zappers and Phantom-ware. Sting locations were in Buffalo, Schenectady, Albany, Dutchess County, and the Bronx. False restaurants, manned by undercover agents, invited point of sale (POS) system salesmen. Almost all offered to show owners how to suppress sales. The preferred suppression technique was SSaaS.

This paper recaps the author’s keynote address at the California Board of Equalization’s Sales Suppression & Detection Techniques Symposium in Pasadena California, April 28-29, 2014.

The paper draws five observations from the NY stings, finds a disturbing conclusion about the extent of this fraud in the NY retail sector, and presents the technological solution that has been adopted in VAT jurisdictions. The solution essentially treats all businesses as an Apple Store.

The key to preventing sales suppression fraud is to obtain secure, encrypted transactional sales data from the moment of a sale. The most advanced solution on the market today for accomplishing this was demonstrated at the California Sales Suppression & Detection Techniques Symposium – the Avatar-DTI system. It is explained here.

Keywords: Zapper, Phantom-ware, Sales suppression, Sales suppression as a service, Apple Store solution, Avatar-DTI, NY stings, Undercover, Sales Tax fraud, Skimming

JEL Classification: H26, K34

Suggested Citation

Ainsworth, Richard Thompson, Sales Suppression as a Service (SSaaS) & the Apple Store Solution (June 4, 2014). Boston Univ. School of Law, Law and Economics Research Paper No. 14-24, Available at SSRN: https://ssrn.com/abstract=2445991 or http://dx.doi.org/10.2139/ssrn.2445991

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

Bobst Library, E-resource Acquisitions
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New York, NY 10003-711
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Boston University - School of Law ( email )

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Boston, MA 02215
United States

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