Zappers and phantomware—software programs that are added-on (zappers) or factory installed (phantomware) to electronic cash register systems and other point-of-sale devices—have been around since the mid-point of the last decade and have been on the minds of state sales tax authorities since about the same time.

Of the two programs, zappers (traditionally) appear to have no legitimate purpose beyond potentially skimming a bit of cash out of each transaction as it is processed.  Phantomware, on the other hand, may have some legitimacy in the sense that these programs create an electronic “second” record, if you will, of a cash register’s till, however, the software is more often connected with point-of-sales manipulations to potentially alter sales tax ramifications.  Another reason that phantomware programs are particularly troubling to the states is that these programs are often embeds in the operating system and their presence is usually not detectable were the state to ask for a system’s user manual or make-and-model information during a sales tax audit.

Cognizant of the evasive effects that both zappers and phantomware may have on sales tax receipts, several states have introduced or enacted legislation in the last few years prohibiting the sale of any device or software that might “falsify the electronic records of point-of-sale systems for the purpose of tax evasion.”  (That language is straight out of one of those bills—S2611-2011—legislation passed last year by New York.)

Now, Utah has become the latest state to prohibit the sale of zappers and phantomware.  The state recently enacted legislation that would make it illegal to anyone to “willfully or knowingly [sell, purchase, or install] an automated sales suppression device or phantomware with the intent to defraud.”  This, of course, would suggest that phantomware purchased or installed for “legitimate” reasons would not be a crime.

Penalties include fines up to double the amount of state that would have been due.  The law is slated to go into effect on July 1, 2012.