SB505 By Senators Melson and Orr RFD Finance and Taxation General Fund Rd 1 26-MAY-15

SYNOPSIS: Under existing law, it is not specifically illegal to possess or use an automated sales suppression device or phantom-ware, which are devices used to delete records of sales transactions from cash register records, so that sales taxes are under-reported to the state, county, and municipal tax collecting authorities.

This bill would make the possession or use of an automated sales suppression device, or phantom-ware a felony, punished by a fine of not more than $100,000, or $500,000 in the case of a corporation, or imprisonment for not more than three years, or both, and the person would be liable for all lost revenue.

Amendment 621 of the Constitution of Alabama of 1901, now appearing as Section 111.05 of the Official Recompilation of the Constitution of Alabama of 1901, as amended, prohibits a general law whose purpose or effect would be to require a new or increased expenditure of local funds from becoming effective with regard to local governmental entity without enactment by a 2/3 vote unless: it comes within one of a number of specified exceptions; it is approved by the affected entity; or the Legislature appropriates funds, or provides a local source of revenue, to the entity for the purpose.

The purpose or effect of this bill would be to require a new or increased expenditure of local funds within the meaning of the amendment. However, the bill does not require approval of a local governmental entity or enactment by a 2/3 vote to become effective because it comes within one of the specified exceptions contained in the amendment.

A BILL TO BE ENTITLED AN ACT

Relating to crimes and offenses; to amend Section 40-29-119, Code of Alabama 1975, to provide for the limitation period on the offense; to add Section 40-29-121, Code of Alabama 1975, to make it unlawful to knowingly sell, purchase, install, transfer, or possess in this state any automated sales suppression device or phantom-ware; to provide for definitions; to provide for criminal penalties; to provide that the devices and software are contraband; and in connection therewith would have as its purpose or effect the requirement of a new or increased expenditure of local funds within the meaning of Amendment 621 of the Constitution of Alabama of 1901, now appearing as Section 111.05 of the Official Recompilation of the Constitution of Alabama of 1901, as amended.

BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:Section 1. Section 40-29-119, Code of Alabama 1975, is amended to read as follows:

§40-29-119.

"(a) No person shall be prosecuted, tried, or punished for any of the various offenses arising under the revenue laws unless the indictment is found or the prosecution instituted within three years next after the commission of the offense, except that the period of limitation shall be six years: "(1) For offenses involving the defrauding or attempting to defraud the State of Alabama or any agency thereof, whether by conspiracy or not, and in any manner; "(2) For the offense of willfully attempting in any manner to evade or defeat any tax or the payment thereof; "(3) For the offense of willfully aiding or assisting in, or procuring, counseling, or advising, the preparation or presentation under, or in connection with any matter arising under, the statute revenue laws, of a false or fraudulent return, affidavit, claim or document (whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document); "(4) For the offense of willfully failing to pay any tax, or make any return at the time or times required by law or regulations; "(5) For offenses described in Sections 40-29-115 and 40-29-116 (relating to false statements and fraudulent documents); "(6) For the offense described in Section 40-29-118 (relating to intimidation of officers and employees of the State of Alabama).; or "(7) For the offense described in Section 40-29-121 (relating to the possession or use of an automated sales suppression device or phantom-ware).

"(b) The time during which the person committing any of the various offenses arising under the revenue laws is outside the State of Alabama or is a fugitive from justice within the meaning of the Code of Alabama, shall not be taken as any part of the time limited by law for the commencement of such proceedings.

Section 2. Section 40-29-121 is added to Chapter 29, Title 40, Code of Alabama 1975, as follows:

"§40-29-121.

"(a) For purposes of this section, the following words have the following meanings:

"(1) AUTOMATED SALES SUPPRESSION DEVICE. A software program carried on a memory stick or removable compact disc, accessed through an Internet link, or by any other means, that falsifies the electronic records of electronic cash registers and other point-of-sale systems, including, but not limited to, transaction data and transaction reports.

"(2) ELECTRONIC CASH REGISTER. A device that keeps a register or supporting documents through the use of an electronic device or computer system designed to record transaction data for the purpose of computing, compiling, or processing retail sales and other transaction data.

"(3) PHANTOM-WARE. Any hidden or concealed programming option embedded in the operating system of an electronic cash register or hardwired into the electronic cash register that can be used to create a second set or records or to eliminate or manipulate transaction records that may or may not be preserved in digital formats in order to represent the true or manipulated record of a transaction in the electronic cash register.

"(4) TRANSACTION DATA. Data relating to a transaction which includes, but is not limited to, data identifying each item purchased by a customer, the price for each item, a taxability determination for each item, a segregated tax amount for each of the taxed items, the amount of cash or credit tendered, the net amount returned to the customer in change, the date and time of the purchase, the name, address, and identification number of the vendor, and the receipt or invoice number of the transaction.

"(5) TRANSACTION REPORTS. Either of the following or any variation thereof:

"a. A report that contains, but is not limited to, documentation of sales, taxes, or fees collected; media totals; and discount voids at an electronic cash register, and that is printed on a cash register tape at the end of a day or shift, or

"b. A report that documents every action at an electronic cash register and that is stored electronically.

"(b). It is unlawful to knowingly sell, purchase, install, transfer, use, or possess in this state any automated sales suppression device or phantom-ware.

"(c). Any person convicted of a violation of this section is guilty of a felony and upon conviction, shall be fined not more than one hundred thousand dollars ($100,000), or in the case of a corporation, not more than five hundred thousand dollars ($500,000), or may be imprisoned for not more than three years, or both fine and imprisonment. In addition, the person shall be liable for all taxes, fees, penalties, and interest due the state as the result of the fraudulent use of an automated sales suppression device or phantom-ware and shall forfeit to the state, as an additional penalty, all profits associated with the sale or use of an automated sales suppression device or phantom-ware.

"(d). An automated sales suppression device or phantom-ware and any device containing such device or software shall be contraband and shall be forfeited to the state.

Section 3. All laws or parts of laws which conflict with this act are repealed.

Section 4. Although this bill would have as its purpose or effect the requirement of a new or increased expenditure of local funds, the bill is excluded from further requirements and application under Amendment 621, now appearing as Section 111.05 of the Official Recompilation of the Constitution of Alabama of 1901, as amended, because the bill defines a new crime or amends the definition of an existing crime.

Section 5. This act shall become effective immediately following its passage and approval by the Governor, or its otherwise becoming law.

Taxation

Sales and Use Tax

Crimes and Offenses

Criminal Law and Procedure

Phantom-Ware

Automated Sales Suppression Devices

Code Added

Code Amended