Everett Software Salesman Sentenced to Prison for Selling ‘Tax Zapper’ Software to Enable Cheating on State and Federal Taxes
Promoted and Sold Software to Restaurants Resulting in More Than $3.4 Million Tax Loss
An Everett, Washington man who worked for a Canadian company that sells point of sale computer software, was sentenced today in U.S. District Court in Seattle to 18 months in prison and three years of supervised release for his role in a scheme to sell ‘Tax Zapper’ software, announced U.S. Attorney Annette L. Hayes. JOHN YIN, 66, pleaded guilty in December 2016, to wire fraud and conspiracy to defraud the government admitting that he promoted and sold a revenue suppression software that allowed restaurants to underreport their sales and illegally lower their tax bills. The software – sometimes called a “Zapper” program - resulted in a loss amount of more than $3.4 million. At the sentencing hearing U.S. District Judge Richard A. Jones said YIN served as a facilitator for illegal operations. “This was illegal, this was criminal and you had to know you have to pay taxes… but you continued – motivated by greed.”
“This defendant sold businesses a high tech tool that had only one purpose – to give businesses a leg up by cheating the taxman,” said U. S. Attorney Annette L. Hayes. “In addition, by not paying their fair share of taxes, they cheated state and federal programs, and victimized workers whose employment and social security taxes went unpaid as well. Partnering with the Washington State Attorney General’s Office, we will ensure that those who are responsible for this conduct will be held to account.”
“Using illegal software to avoid tax obligations harms both taxpayers and businesses that compete fairly and play by the rules,” said Attorney General Bob Ferguson. “I’m proud to work with U.S. Attorney Hayes to stamp out this fraud.”
According to records in the case, YIN was a salesman for Profitek, a British Columbia, Canada company selling point of sale (POS) systems for hospitality and retail industries. In addition to its Canadian headquarters, the Company has offices in China and a growing dealership network across North America. The Company designed, or had designed, and marketed, sold and supported revenue suppression software (RSS) as an add-on to its Profitek point of sale software. This RSS functioned only with the Profitek POS software.
Point of Sale software creates a database of transactions that is used to calculate a business’s tax obligations. Revenue suppression software (RSS) is used to modify a business’s POS database for the purpose of tax evasion. When executed, the RSS program deletes all or some of the business’s cash transactions, and then reconciles the books of the business. The result is business records that appear to be complete and accurate but, in fact, are false and fraudulent in that they show less than total income earned.
JOHN YIN successfully sold the POS software, and assisted in the widespread distribution of the Zapper software, to dozens of customers over the course of several years. Prosecutors told the court that “through the defendant, a hundred restaurants created a hundred sets of false books.”
Between 2010 and 2013, eight different restaurants in the Seattle area used the software and underpaid their state and federal taxes by amounts ranging from a low of just over $145,000 to more than $910,000. When the restaurant owner who underpaid taxes by more than $900,000 was confronted about using the tax zapper software she admitted she used the unreported cash to pay some employees in cash. In addition, she did not withhold mandatory social security or Medicare taxes for these employees.
“The Revenue Suppression or ‘Zapper’ software peddled by Mr. Yin was sold with the intent to help restaurants and businesses dodge federal, state and local taxes. Today, Mr. Yin is being held responsible for his role in trying to magically zap away millions of dollars from the IRS and other taxing authorities,” stated Special Agent in Charge Darrell Waldon of IRS Criminal Investigation. “There is no magic formula to commit tax evasion. No matter how high tech the tools, or complex the scheme, IRS – Criminal Investigation will continue to work with our law enforcement partners to prosecute tax cheats and promote parity in our tax system.”
“Today's sentencing resulted from several years of investigation by state and federal agencies into Mr. Yin’s network, which sold tax evasion software to a long list of businesses in Washington and other states. But our work isn’t done, and we intend to keep working with the Attorney General and our federal partners to prosecute the use of sales suppression software,” said Vikki Smith, director of state Department of Revenue.
YIN has agreed to pay $3,445,589 in restitution to the United States and Washington State. The restitution obligation is shared by the eight restaurants detailed in the federal case that cheated on their taxes.
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI), and the Washington State Department of Revenue with special assistance from the Washington State Attorney General’s Office.
The case was prosecuted by Assistant United States Attorney Susan Roe.