New penalties for businesses that use illegal electronic sales suppression software
This guest blog post is provided by the Canada Revenue Agency (CRA). The CRA administers tax laws for the Government of Canada and for most provinces and territories, and administers various social and economic benefit and incentive programs delivered through the tax system.
Although electronic sales suppression (ESS) software (commonly known as zapper software) is illegal in Canada, some Canadian businesses are buying it. They use the software with their point-of-sale systems and electronic cash registers to deliberately delete part of their sales from their computer records so they can reduce their GST/HST and income tax obligations. Sidestepping Canada's tax laws in this way unfairly gives them a competitive edge over businesses that follow the rules.
The CRA is taking action to address this problem as part of its effort to combat the underground economy. New measures took effect on January 1, 2014 that allow the CRA to impose civil penalties for designing, using, possessing, acquiring, manufacturing, developing, selling, possessing for sale, offering for sale, or otherwise making ESS software available.
Businesses that use, possess, or acquire ESS software face an administrative monetary penalty of $5,000 on the first infraction and penalties of $50,000 on each subsequent infraction. Anyone who manufactures, develops, sells, possesses for sale, offers for sale or otherwise makes ESS software available faces a penalty of $10,000 on the first infraction and penalties of $100,000 on each subsequent infraction.
These measures also include new criminal offences for businesses or others that use, possess, acquire, manufacture, develop, sell, offer for sale, or otherwise make ESS software available. On summary conviction, businesses face a fine of not less than $10,000 and not more than $500,000, or imprisonment for a term of not more than two years, or both. On conviction by indictment, businesses face a fine of not less than $50,000 and not more than $1 million or imprisonment for a term of not more than five years, or both.