Tax Fraud in the Sales Tax: Zappers -- What are They? How Can Puerto Rico Block Them?

22 Pages Posted: 14 May 2009 Last revised: 21 May 2009

See all articles by Richard Thompson Ainsworth

Richard Thompson Ainsworth

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

Date Written: May 11, 2009


The Sales and Use Tax is an essential part of Puerto Rico’s revenue profile. Effective only recently (November 15, 2006) the Impuesto a las Ventas y Uso (IVU) was expected to raise between $2.3 and $1.05 billion annually, and has already become the Commonwealth’s fourth largest revenue source. Actual revenue results for 2007-2008 came in at $1.1 billion, which admittedly is closer to the low end than the high end of what is possible, but now that the tax is in place the next pressing question is how can its performance be improved?

This paper generally proposes that Puerto Rico look to technology for improvements. It suggests that Puerto Rico consider adopting one or more of the software certification efforts underway globally to boost revenue results. The specific focus of this paper is on stopping cash skimming frauds (the use of Zappers), but it is important to see this as part of a wider movement to utilize certified technology to improve compliance and enhance revenue.

Two IVU issues should be at the top Puerto Rico’s tax policy agenda: (1) should the Commonwealth adopt the Streamlined Sales and Use Tax Agreement (SSUTA) and (2) how can Puerto Rico stem revenue losses from automated sales suppression software (Zappers). The first initiative would yield additional revenue of $200 million; the second effort would likely yield an additional $170 million.

Because joining the SSUTA is as much a political as it is a tax question, this paper has focused on preventing automated sales suppression as a way of enhancing revenue. This is a global problem that will only grow in significance. It is difficult to believe that the Zappers that are rampant throughout the world and not also very common in Puerto Rico. It seems that wherever ECRs are used to record sales, Zappers have been found removing cash sales and allowing businesses to siphon off revenue.

With Puerto Rican revenue losses possibly in the hundreds of millions of dollars this paper has made an effort to point to cost-effective remedies within the Streamlined Sales Tax, notably, the certified service provider (CSP) option. Puerto Rico has not become a full member of SSUTA, but that does not prevent it from taking an arrow from the SSUTA’s quiver and directing it at the Zapper.

Zappers are a documented problem in Quebec, Germany, the Netherlands, Australia, Brazil, Sweden, Austria, France, the UK and the US. This is the reason that representatives of the German, Quebec and Dutch revenue authorities will be sharing both their technology solutions and their auditing techniques with other government officials at the Federation of Tax Administrators Annual Conference in Denver Colorado, June 2, 2009.

Keywords: Puerto Rico, Impuesto a las Ventas y Uso, IVU, Tax fraud, MEV, Module d'enregistrement des ventes, Zapper, Phantom-ware, Smart card, Sales and Use Tax, SSUTA, CSP, ECR, POS system, Skimming

JEL Classification: H00, H20, H70, K34, O23, O33

Suggested Citation

Ainsworth, Richard Thompson, Tax Fraud in the Sales Tax: Zappers -- What are They? How Can Puerto Rico Block Them? (May 11, 2009). Boston University School of Law Working Paper No. 09-24. Available at SSRN: or

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics