Zappers: tools that let restaurateurs adjust the totals on their tills to cheat on taxes

The New York Times reports on "zappers" -- tools that let restaurateurs tamper with the totals on their tills in order to create untaxable income: I'm surprised (but shouldn't be) that tills that are left on the restaurateurs' premises are presumed to tamper-proof and to yield accurate counts even when the owner is unscrupulous:

Thanks to a software program called a zapper, even technologically illiterate restaurant and store owners can siphon cash from computer cash registers and cheat tax officials.
While zappers are most likely to be used by medium and small businesses, the take is anything but small change. A 12-store restaurant chain in Detroit used a zapper to skim more than $20 million over four years, federal prosecutors say.
Zappers – also known as automated sales suppression devices – are a new twist on an old fraud. “The technology is new and getting newer, but the concept is as old as having two sets of books,” said Verenda Smith of the Federation of Tax Administrators, the association of state tax administrators.

With Software, Till Tampering Is Hard to Find (via /.)

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Jack

@#4 POSTED BY SWEZOID

This is why I always pay with my credit card in restaurants etc. Then it is much harder for the restaurant to get away with fraud – there’s always a correct money trail.

Others have pointed out the flaws in this, but here’s another example. In Brooklyn there was a local mini-chain of upscale restaurants whose manager would take credit card numbers from one place, and run them again in another location. Full details here.
“Based on evidence collected by employees and investigators from American Express and Citibank, he was accused of using the credit card numbers of 19 customers to steal nearly $25,000 during the past six months, and attempting to steal an additional $46,000 from five other patrons, according to court papers.”

Banning one form of tech or another doesn’t get rid of corruption. All you need is a will and a way. And sometimes that “will” is a drug addiction.
Jerril

#16 “The profit margin in a restaurant normally just 10% ( I have wanted to open my own restaurant for years, and that is scary)”

If you think that’s scary, don’t ever consider a job in retail. The markup on most items in your corner store is between 3% and 5%, I understand most retail outlets are looking at a similar range, and consumer electronics are even worse.

10% is a damn good profit margin – the problem restaurants have is not the profit margin, it’s the instability of the customer base.
codesuidae

This kind of thing will really throw off your food costing if you don’t keep a good record of what you are doing.
demidan

@18 and where do you find that mark up? In retail shops such as jewelry shops in malls and mall stores in general the mark up is around 100% and up. You find a 3-5% only in grocery stores, and only because the ratio of sales to help is so low.
demidan

Normally you try to keep food cost around 30% or less, including known theft and loss,(loss through over portions, rot, burned etc,,,). I have had friends who kept their food cost at around 17% but that was a mostly Breakfast joint, not fine dining.

So, food cost 30%, employee cost 15-17%, utilities 10%, rent/lease 20-30%(if you are lucky),,,not much left over
frenchienick

I own a restaurant in Paris, France, where the sales tax is pretty steep,(19.6%), and in general all taxes are pretty harsh. The first thing the register salesmen tell you during their sales pitch is how well their machines can hide your true takes. It’s like a game here, where everyone cheats, (you wouldn’t be able to stay open if you didn’t) the government knows that everyone cheats, and they also know that they can’t shut everyone down, so they look the other way most of the time. When they do want to get you they will, though. I’ve heard of tax agents counting the amount of napkins used to calculate covers and estimate takes, as well as how much table bread you go through. The french have made a real art out of tax evasion.
Avram

Demidan @21: So, food cost 30%, employee cost 15-17%

Really? I was always under the impression that labor was a larger expense than the material cost of the food. But I’ve never worked at a restaurant.

I suppose it depends on the food. I know that fountain soft drinks are nearly all profit, for example.
demidan

So sorry to keep posting.

To head off the Oh noes from 18 I will break my claims down logically.

3-5% mark up,,let’s split the middle at 4%.

If you own a store who employs one person at $75 a day and you pay $25-50 on power and $2500 a month on rent and every item you sell sells for $100. how many items do you have to sell a day to break even?

19 to pay employee +
6 to pay for power +
84 to pay for rent =
109 items a day to break even.(Which is over $10000 a day in sales) Rounded up that is 14 sales an hour.

How many stores to see that are that busy? And why would they work that hard to break even?
frenchienick

#7-Tax evasion and money laundering inevitably go hand in hand. You can’t really hide money from the government and then go put it in the bank, can you?
Takuan

you can spend it
Takuan

http://www.nationalpriorities.org/costofwar_home
twps

In cash we trust. Cash can’t be traced, which is why the feds have thought about adding RFID chips to money. Scary idea.
Takuan

do that and I’ll switch to gold
asuffield

I’ll wager that one reason why taxes are high is because of the amount of tax cheating that occurs and is expected in the system. If everyone were to pay their fair share the cynic in me says that the government would not lower taxes.

Actual research into real-world economies indicates that the causality is the other way around. If you increase taxes, more people evade them, and if you decrease taxes, less people evade them. In practice, changing the rate of taxation has little or no effect on the revenue received by the government, as people just vary their rate of disobedience to compensate.

Enforcement is impossible because in almost every case, the cost of recovering taxes by force is higher than the amount of money recovered. Merely putting somebody in court costs the state upwards of $10k, and few people are holding back that much money (and under normal circumstances, even a convicted criminal does not have to pay court costs, unlike in a civil suit); if they actually mount a defence rather than pleading guilty, you can tack on another zero. Taxation in capitalist nations relies on the cooperation of the citizens, or it is simply not economically viable. Tax offices are aware of this and concentrate on encouraging cooperation through intimidation, rather than actual enforcement.

This makes a lot of politicians look very silly, so they are all very careful not to talk about it.
drew3ooo

I wish I had one that worked on my W-2 form.
PeterNBiddle

I remember going to a bar in the valley called, erm, I can’t remember. It was in San Jose proper, and it was upstairs in a converted brick loft. It was crazy.

Anyway, the bartenders used to toss about 1 in 5 cash drink payments into the tip jar and just didn’t ring that one up.

It was a pretty full tip jar.

Cash will need to be banned, of course.
Rider

#2
That’s just the bartender ripping of his boss. totally different then the owner ripping of the feds.
Anonymous

Current politics mantra: There’s nothing that can’t be fixed by forcing more surveillance unto people. (Well, except tip jars… But that’s, like, cheating. Really, what happened to the world? Can’t you even trust people to cheat honestly anymore? What would be the use of nice, shiny government-controlled tills if people don’t use them? Ah well, seems we have to make them install tip jar cameras, too. It’s not as if we have to pay for this stuff, anyway…

(article in German:) German finance minister calls for mandatory control chip in tills. [heise.de 2008-07-06]
quail

I’ll wager that one reason why taxes are high is because of the amount of tax cheating that occurs and is expected in the system. If everyone were to pay their fair share the cynic in me says that the government would not lower taxes.
swezoid

This is why I always pay with my credit card in restaurants etc. Then it is much harder for the restaurant to get away with fraud – there’s always a correct money trail.

An unexpected tactic against this kind of fraud was used in Sweden recently. Authorities cross-checked the registered income at a pizza takeaway place with the number of pizza cardboard containers they had ordered. The large mismatch was evidence of ongoing fraud.
flamingphonebook

Good for them. This is the kind of resistance to an oppressive government that I can get behind. Now I can only hope that it costs more than $20 million to make them pay.
PeterNBiddle

#3 – Not if the owner is in on it. It was extremely brazen.
frenchienick

Actually, one of President Sarkozi’s ways of trying to cut down fraud is proposing to lower the sales tax(TVA) to 5.5% for resturants, while increasing tax fraud investigations. We’ll see if it works. If I only had to pay 5.5% TVA, I’d cheat a lot less especially if my chances of getting busted were increased.
matt4077

#4: Stuff like that is pretty common here in Germany. They do it to catch both tax fraud as well as the opposite, money laundering.
trr

offtopic.
Shrdlu

Swezoid @ #4:

I never pay by credit card at restaurants. I recently got a call from MasterCard asking if I was in Miami buying gas. I was not. Narrowed down my purchases to a restaurant that used those old imprint machines. Simply too many people have access to credit card info in your typical dining establishment. What’s more in many jurisdictions they tax servers for tips based on a percentage of their sales. This is patently unfair, so if you do use a credit card, at least tip your server with cash.
minamisan

This is why I always pay with my credit card in restaurants etc. Then it is much harder for the restaurant to get away with fraud – there’s always a correct money trail.

@Swezoid: is it really that important to you?
spazzm

Cheating on tax is cheating on other taxpayers.
It’s the Tragedy of the Commons in a modern setting.

Anyone who does it deserves to get shafted.
Takuan

use cash, demand cash
jonathanpeterson

Who needs software, all you need to do is not close the register drawer between transactions every now and then and make the change in your head. Figure an EASY 10% untaxed at the end of the day for a deli or office park sandwich shop.
sonny p fontaine

oh noooos, however will my tax dollars pay off the federal reserve interest now? cheating other taxpayers, my ass!
Enochrewt

#12: It’s hard for the owner to do that. This isn’t about waitstaff skimming off the register, it’s about the owners sheltering money to avoid paying taxes.

And off course there’s a few “Down with Gubbimint!” comments here, to which I say take off your tin foil hats. Taxes are a necessity for a modern life, they pay for education, roads and sidewalks, waste management, public transportation and a whole other slew of very important things. If you don’t like how the money is used, hold the politicans accountable for it.
jbang

8 SHRDLU: In a day and age of electronic and anonymous transactions, the old imprint machines are just begging for fraud. Working in a small business that used them, I was astounded at how much information was retained in such an easy to duplicate format.

14 ENOCHREWT: I’m all for screwing the government, and when small businesses do it via tax loopholes, I reckon it’s great. Unfortunately there are often even greater loopholes for larger organisations that can afford to and should pay their taxes. The bottom line is that taxes are a necessity, and know examples of avoiding it should be punished.

Now tax law in general, especially as the scale of income increases – bloody bullshit.
demidan

Too bad they got caught. (not for the obvious reasons) The profit margin in a restaurant normally just 10% ( I have wanted to open my own restaurant for years, and that is scary). Even if you treat your employees well i.e. free food, insurance, 401k they will steal from you. I say this not as a cynic but as a realist I have seen this with own eyes. They steal food, booze, anything they can get their hands on, it is a sad fact of life. So if the owners can take a little back I say Good for them!