A New Haven woman was arrested and charged with multiple counts relating to collecting but not remitting state sales tax as a result of using sales tax suppression software. This is the first arrest by the Connecticut Department of Revenue Services (DRS) for the use of a “zapper.” Zappers are a type of commercial “phantom-ware” used to create fraudulent point-of-sale records that deliberately understate taxes actually collected.
Ms. Xiaoning Fan, age 64 of New Haven, was arrested by DRS Special Agents from the Criminal Investigations Unit at her Lao Sze Chaun restaurant in Milford. Ms. Fan was charged with possession of tax suppression software, larceny in the 1st degree and willful delivery of a false return. She is charged with two Class D felonies subject to a fine of up to $100,000 and a sentence of one to five years or both, a Class B felony subject to a fine of up to $15,000 and a sentence of one to twenty years or both. Violators are also liable for all taxes, penalties, and interest due to the state as a result of the crime, forfeit all profits associated with the sale and confiscation of the zapper device as contraband.
Said DRS Commissioner Kevin B. Sullivan, “This arrest is a big breakthrough for DRS. We have been working with other states to develop our ability to detect and prosecute “zapper” fraud. What began as a routine tax audit became a DRS arrest when our specially trained auditors successfully detected illegal use of sales suppression software from 2008 to 2016 that resulted in over $80,000 of state tax evasion plus an additional $60,000 in penalty and interest charges. At DRS, we continue to step up our game in the fight to stop tax fraud.”