BILL NUMBER: S3204
SPONSOR: KRUEGER
 
TITLE OF BILL:
An act to amend the penal law, in relation to creating the offense of
defrauding the government in the first degree and expanding the defi-
nition of conspiracy in the fourth degree; and to amend the tax law and
the administrative code of the city of New York, in relation to expand-
ing the definition of tax fraud acts
 
PURPOSE:
1. Creates the offense of defrauding the government in the first degree.
2. Expands the definition of conspiracy in the fourth degree; relates to
expanding the definition of tax fraud acts.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 adds section 195.22 to the penal law, creating a first degree
offense for defrauding the government through an automated sales
suppression device, defining automated sales suppression devices, and
extending defrauding government in the first degree as a class D felony;
Section 2 adds subdivision 4 to section 105.10 of the penal law, expand-
ing the definition of conspiracy in the fourth degree to include felony
of defrauding government in the first degree;
Section 3 amends subparagraphs 7 and 8 of paragraph (a) in section 1801
of tax law and adds subparagraph 9, expanding the definition of tax
fraud acts to include the use of automatic sales suppression devices.
Section 4 amends subparagraphs 7 and 8 of paragraph (a) of section
11-4002 of the administrative codes of the city of New York and adds
subparagraph 9, expanding the definition of tax fraud acts to include
the use of automatic sales suppression devices.
Section 5 states the effective date.
 
LEGISLATIVE HISTORY:
2023-24: S.2266 - Passed Senate
2021-22: S.1331 - Passed Senate
2019-20: S.2647/A.7408 Lentol -Codes
2017-18: S.4377 - Codes
 
EXISTING LAW:
None.
 
JUSTIFICATION:
For years, foreign countries with national sales taxes have struggled to
combat technology that enables retailers to skim sales taxes and under
report other tax liabilities (e.g. personal income tax, corporate income
tax) by concealing from auditors their actual sales data. This technolo-
gy, which includes automatic sales suppression devices, such as
"zappers" and "phantom-ware," automatically suppresses digital sales
figures recorded at electronic cash registers and Point of Sale systems.
It is difficult for auditors to detect the use of automated sales
suppression devices through the traditional process of cross checking
transaction documents because the technology conceals almost all traces
of the digital manipulation. Countries such as Germany and Greece have
required retailers to install technological countermeasures that make it
easier for auditors to detect the use of automated sales suppression
devices. In September 2010, the Canadian province of Quebec began
requiring all restaurants to install in their electronic cash registers
anti-sales suppression devices. This cost Quebec an estimated $425
million ($410 million U.S.) in 2007-2008. Richard T. Ainsworth, a Boston
University school of Law tax professor and a leading expert on zappers
and other automated sales suppression devices, estimates that New York
has faced a loss of $1.7 billion annually due to these devices.
Because the United States lacks a national sales tax, there is no feder-
al initiative to combat this tax fraud and most states are ill-prepared
to deal with this issue. Nationwide, only a handful of people have been
caught using this technology, including two in Michigan and one in
Connecticut. Over 20 states have already enacted legislation to prohibit
and criminalize automated sales suppression devices. Ainsworth has
published several papers documenting the spread of zappers and phantom-
ware in Quebec, Greece, Germany, the Netherlands and other European
nations. Given that the first zappers were made in the United States and
that this technology is widely used in the Canadian province just above
of New York's northern border, it is imperative for the State to address
this issue.
The legislation would establish prohibitions and penalties related to
the manufacture, sale, purchase, or use of automated sales suppression
technology, creation of conspiracy for those who defraud the government,
and the liability of those who perpetrate tax fraud. Additionally, this
legislation would increase tax revenue by over $1 billion annually.
 
FISCAL IMPACTS:
Estimates increased tax revenue as high as $1 billion annually.
 
EFFECTIVE DATE:
This act shall take effect on the first November next succeeding the
date upon which it shall have become a law.

Statutes affected:
S3204: 105.10 penal law