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Restaurant Owners Use Zapper To Cook the Books
Posted by
kdawson
on Mon Sep 01, 2008 06:36 PM
from the new-twist-on-an-old-scam dept.
from the new-twist-on-an-old-scam dept.
Hugh Pickens passes along a NYTimes report on software programs called "zappers," which allow even technologically illiterate restaurant and store owners to siphon cash from computer cash registers to cheat tax officials. In the old days, restaurant owners who wanted to cheat kept two sets of books. But because cash registers make automated records, hiding the theft requires getting into the machine's memory and changing that record. "...the Canadian province of Quebec may be the world leader in prosecuting zapper cases. Since 1997, zappers have figured in more than 230 investigations, according to the tax collecting body Revenu Québec... In making 713 searches of merchants, Revenu Québec found 31 zapper programs that worked on 13 cash register systems. Only two known zapper cases have been prosecuted in the United States... The cash register security industry is focused on protecting patrons and owners from theft by employees, which may be one reason so few zappers are uncovered in the United States. No one hires security experts to protect the government from devious businesses... As hard as zapper software is to detect, it is easy to make, said Jeff Moss, organizer of the annual hacker convention Def Con. 'If it runs on a Windows system and you are a competent Windows administrator, you can do it,' he said."
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Physical access = carte blanche (Score:5, Insightful)
Re:Physical access = carte blanche (Score:5, Funny)
The government must act quickly to stop this reprehensive tax evasion. I see only one solution: federally-mandated DRM on all cash-registers. We'll use TPM to lock these things right down to the hardware! Of course, there must be no paper backup, otherwise corrupt storekeepers would "accidentally" break their machines so that they can supply the hard-working patriots at the IRS with doctored false receipts.
To implement this, we'll need someone reliable, someone with a proven track record in securing embedded systems... Someone send a briefing paper to Diebold immediately!
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Re:Physical access = carte blanche (Score:4, Insightful)
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Re:Physical access = carte blanche (Score:4, Interesting)
You don't even need a TPM to prevent this. Only the ability to securely destroy keys will suffice to prevent changing the books afterwards.
Every, oh, say 15 minutes you generate a new public-private keypair. You add a log message to the last 15 minutes of log containing the newly generated public key, then sign those last 15 minutes using the previous private key, after which you thorougly erase it from memory.
Any alterations to the logfile will have to break the chain of keys. If in addition to this security, the public key is transmitted to a trusted third party every 15 minutes, including the hash of the previous data block (e.g. the bank that processes credit card payments), it will be utterly impossible to change logfiles after the fact.
So you'd have to actually keep 2 sets of books on 2 separate cash registers, and you'd have no ability to use electronic payment methods for the "cooked" part of the books. Of course these limitations make that this isn't 100% secure either, but it's as secure as any TPM is going to make it.
Btw if you'd intercept a single private key, that would not help you cook the books afterward. You'd have to do it before any hash or public key is transmitted to the third party.
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Re:Physical access = carte blanche (Score:5, Informative)
Don't laugh: it's already been done [lavalnews.ca]:
And the alteration of the computer records is also prohibited [gouv.qc.ca].
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Re:Physical access = carte blanche (Score:5, Funny)
There was a case a few years ago, where the most widely used accounting/cash register software for hairdressers in France actually had a standard option to hide some cash from the tax authorities.
Couldn't find any links, sorry.
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Warren Buffet pay 25%, his gardener pays 35% (Score:3, Interesting)
Since the first term of Ronald Reagan, the rich and super-rich have used the Republican party and the religious right to constantly lower their tax rate. Now they pay a significantly less percentage than working people. And that is before all the specialized tax breaks hidden in the 1000-page appropriations bills that no congressman ever reads.
This is never going to change, regardless of who wins what election.
The only way that ordinary people are going to get tax fairness, i.
Re:Warren Buffet pay 25%, his gardener pays 35% (Score:5, Informative)
"That's probably the most ridiculous thing I've ever read on slashdot"
GP is perhaps less crazy than you think. Warren Buffet (the 2nd wealthiest man in the world, in case you didn't know) has frequently claimed that he pays, if not a lower dollar amount, a significantly lower percentage of his income in taxes than his secretary and other employees because of a major discrepancy between capital gains and income taxes; to his credit, he believes this to be wrong and advocates serious tax law reforms to at least fix glaring holes like that one.
By and large, tax fraud is a crime of wealth because the poor simply don't have enough money to either accomplish it or seriously gain from it.
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Re:Warren Buffet pay 25%, his gardener pays 35% (Score:5, Insightful)
Minimum wage laws generally only result in layoffs and law-breaking. They also make it much more difficult for students and youth to find part-time and summer jobs, which not only deprives them of spending money and experience, but also seems to correlate with increased youth crime and delinquency.
And this experience is based on which time when there was a high minimum wage in the US? This is theory based on a complete lack of research and encourage by big companies crying poor.
Most sensible countries (i.e.: any "western" country apart from the US) have tiered minimum wages. So when you need a school kid to fill in on the weekend and cover vacation leave of your full timers, you can pay a low wage. But when you need reliable adults to work full-time jobs, you are going to have to pay adult wages.
Did I mention those countries all have lower youth delinquency rates than the US too? An I certainly never had any trouble finding work for spending money and experience as a kid! In fact, I don't know any kid who wanted a saturday or summer job that was unable to get one.
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Re:Warren Buffet pay 25%, his gardener pays 35% (Score:5, Insightful)
Yeah and most "sensible" countries also have a 50-60% tax rate
You are quoting the top bracket, most people are not in that and actual tax rate is much lower. The interesting number is tax as percentage of GDP and the US is quite low, but not *that* much lower.
The evidence is in the fact that standards of living for the majority of people in those countries is higher and with fewer people below the poverty line.
It also pays for things like university education, health care, pensions and such that most people in the US have to shell out for themselves.
So there is a lot more to it that just saying that the taxes are too high - governments generally do use these to pay for things that benefit the tax payers. One could argue that as percentage of revenue the US is a lot more squandering than most other countries - in things like defense spending, especially the past few years!
Plus there is the issue of economies of scale - 300 million is a hell of a lot of tax payers!
It's not how much tax you pay - it's about how much value you get out of it. And on that count most high-tax european countries are doing quite well.
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Re:Warren Buffet pay 25%, his gardener pays 35% (Score:5, Insightful)
In Germany, the minimum wage for most people is unemployment benefits! There is no point in trying to pay someone less then what they would get for sitting at home. I have met people there that had been unemployed for years because they could not find work in their chosen profession. ("Wildlife manager" - talk about a niche!)
Read the parent, he made the comment that high minimum wage in the US would lead to higher youth unemployment and higher delinquency. I was merely debunking that claim.
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Re:Warren Buffet pay 25%, his gardener pays 35% (Score:5, Informative)
The rich pay for over 80% of our taxes.
Yes, that's a consequence of the distribution of wealth following a Pareto distribution.
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Re:Warren Buffet pay 25%, his gardener pays 35% (Score:4, Insightful)
For one, most taxes aren't based upon "wealth." They're usually event based. Which is why lowering the capital gains tax increases revenue, often dramatically. It reduces the disincentive to hold onto investments, and creates more taxable exchanges.
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The dirty little secret (Score:3, Insightful)
Ah, yes, the dirty little secret of small business in America - everybody skims. Everybody. As my dad used to tell me, "If I didn't take cash off the top, I couldn't afford to stay in business. Nobody could. The taxes are too high." It wasn't a matter of wanting to cheat the tax man. It was a matter of survival for him.
I always make a point of paying in cash at local family-owned businesses whenever I can. Times are tough for those folks, and I can assure you that they appreciate a cash transaction.
Re:The dirty little secret (Score:5, Insightful)
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Re:The dirty little secret (Score:4, Insightful)
"I don't cheat on my taxes, and I have to pay more because of the people who do."
That assumes tax rates have a direct relationship to anything other than what those imposing the taxes decide upon.
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Remote systems (Score:3, Interesting)
We use remote systems in our franchise stores (Django-based). Things run in Firefox. Even the touch screen PCs run Firefox full screen mode (and soon to be tablets). Makes deploying new versions a breeze.
My Favorite Way of Stealimg From Myself (Score:5, Interesting)
Many vendors would issue rebate checks in teh business name if you purchased certain quantities of food and supplies. These rebates never appeared on the invoices.
I would substitute the checks for cash in the daily deposit. Everything balanced and essentially undetectable.
I also would void large guest checks as if I was giving a refund and "refund" the cash to my pocket..
I would "comp" meals to complete strangers and pocket the money.
And I always ate well and never reimbursed my business for it.
If I sold inventory to another restaurant, the money went into my pocket.
So nothing to see here. Move along. Plenty of ways to steal without some damn "zapper". The secret is to never be greedy; greedy people get caught.
To cut fraud, cut taxes. (Score:5, Insightful)
Re:To cut fraud, cut taxes. (Score:4, Informative)
Currently the retailer does need to pay sales taxes to any state where they have a physical presence, or "nexus." [nysscpa.org]
Use tax is paid at the rate of the purchaser's home state. [wikipedia.org]
If you have a "nexus" in the customer's state, you pay the rate in the customer's state [nysscpa.org].
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I've had requests to do this (Score:5, Informative)
I've been asked by two retailers to reduce the amount reported by the point of sale software I was writing. One of them tried to tell me that because he owned the business it wasn't illegal. I told him that I'd just finished writing an enforcement system for Customs and Excise and would he like me to have them contact him to explain the situation?
Re: (Score:3, Insightful)
Darned right. I don't much care if retailers evade some sales taxes. But they can do their own cheating; if they want me to do it they better have some way of serving my time for me if and when they get caught.
Some insights why Québec is the "leader"... (Score:5, Informative)
Until about 20 years ago, Québec had no sales tax on restaurant meals under a given amount (something on the order of $3.50 -- often, waitresses made two invoices below the cuttoff amount so the client would not be charged taxes). So, light lunches eaten by little worker bees would not be taxed but heavy business lunches eaten by fat executives would be.
Eventually, some very senior bureaucrat very high up in the revenue department became pissed that his premium restaurant food would be taxed and not the lowlives below him in the civil service food chain, so he rescinded the tax exemption for cheaper proletarian meals, which actually failed to bring significant additional revenue, given the extra administrative costs.
This put a bigger burden on smaller restaurants, effectively throwing some out of business, and the non-touristic restauration industry has yet to recover from that downset. So the zapper software came into existence.
Those programs would simply slog through the transactions of the day, discarding most who were paid cash, and had no alcohol (because alcohol sales also have to be tallied precisely).
This is news in the US? Really? (Score:5, Interesting)
In my old country - Brazil - the cash register vendor had, as part of their pitch, the section about how at the end of the day you would flip a switch in the machine and it would invent a whole new day of sales for you up to a specified amount.
I worked on a restaurant that, when closing, would have the manager moving the register to some back room and generating a new day of sales.
This came from the manufacturer. It was not an add-on. And it was easy to do, the manager only had to flip the switch, punch in the amount for the day, and let it rip.
This manufacturer was one big american company that was purchased by a bigger company and then spun off with the same name.
The registers, BTW, were pre-audited by the government team - which clearly wasn't savvy enough to find the switch or had been properly compensated for their blindness.
I'm surprised that anyone is surprised... Though I agree that it is wrong.
Purchases (Score:5, Interesting)
And since purchases must go through only the very small handful of licensed distributors, there's no hiding it.
And as for the people who are saying "If you don't skim you can't stay in business," well, maybe you're right. I went broke.
Tamper-Proof Cash Registers (Score:3, Interesting)
Obvious comment... (Score:4, Funny)
Spahs zappin' my cash registah!
Sorry, just got off playing about 2 hours of TF2.
Amateurs... (Score:4, Interesting)
In the old days, restaurant owners who wanted to cheat kept two sets of books.
Anybody who is halfway decent at book cooking knows you keep three sets of books, not two.
Book 1: Shows you are loosing money, so you don't pay taxes.
Book 2: Shows you are making a lot of money, so the bank will give you a loan, or investors will invest in your company.
Book 3: Shows how much money you are really making.
Re:Windows? (Score:4, Informative)
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Re:Windows? (Score:5, Funny)
POS can be interpreted in two ways here, and both of them are accurate.
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Re: (Score:3, Informative)
Re:Windows? (Score:5, Funny)
There are cash registers that run Windows?
The cash registers have to run Wintendo [catb.org]. Otherwise, they can't use Nintendo peripherals such as the Zapper [wikipedia.org].
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Windows in the supermarket (Score:5, Interesting)
Here in Portland, Oregon, one of the major grocery store chains (Fred Meyer, Inc.) has an automated check-out line that has each station running on Windows. I don't know which version but I suspect that it is Win2000. Each station has a laser bar-code scanner for most items. After scanning the item, the user places it in a bag that is on a scale. The weight of each individual grocery item is in the store's data base. When the weight on the scale matches the bar-code, the system prompts the user to scan the next item. There is a touch screen for entering the type of produce by pre-assigned number. For payment there is a credit/debit card reader, a paper-currency scanner, and a coin-weighing unit.
There is a stand-alone PC running Windows for each station and they are connected to a store LAN. Embedded systems like this running Windows on standard PCs is very common. It's easy to develop for this platform. And when it crashes, and it does more than the robust real-time operating systems used on 32-bit microcontroller embedded designs, then the attendant simply opens the cabinet and reboots the PC.
The automatic bottle return machines that read the bar-codes on empties all use Windows. They are constantly crashing.
You don't find Windows running nuclear powerplants, wafer fabs, international bank transfers, or jet airliners. But you find it nearly everywhere else in embedded-systems. Grocery stores find that it's cheaper to throw together a hack job in Visual BASIC and then run it on a few $250 PCs with $50 Windows licenses than it is to pay a programmer $25/hr to write robust code that runs on $8 microcontrollers.
I'm a microcontroller-systems designer and I run into this situation all the time.
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Re:Everyone cheats on income tax (Score:4, Informative)
While an income tax was created during the Civil War, and various income taxes were created after the Civil War, this stopped after 1895, when income taxes were essentially ruled unconstitutional.
The constitutional amendment allowing income taxes was the 16th amendment, ratified in 1913. So, it's technically Taft's fault.
Note: Basically all information in this post comes from Wikipedia.
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Re:An idea for business owners (Score:5, Insightful)
Read the summary again. The OWNER install the zapper to hide revenues to save on taxes.
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Re: (Score:3, Insightful)
Yes, but the point the parent was making is that an unscrupulous EMPLOYEE could install a zapper to steal from the owner; it works both ways.
Re:Yeah, and we should be surprised of this becaus (Score:5, Insightful)
I don't know why you were modded insightful. This ought to have been modded -1 what the hell were you thinking.
The reason why the taxmen are greedy is because they know that a lot of people and businesses cook the books or otherwise defraud the government of taxes. The government spends a certain amount and in order to cover that there needs to be income. Ideally it comes from taxes but particularly in recent years there's a lot which is borrowed via bonds.
Now the problem is that restaurants and businesses which cheat on their taxes, not to mention individuals, get the same benefits that those that pay their share without having to pay all of the money due.
I'm not sure what the exact amount is, but the figure I've seen some fairly large numbers thrown around. I'm not sure what the real number is, I suspect that nobody really does, but it is a significant amount of money due to people like your former employers cheating the other taxpayers.
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Re: (Score:3, Insightful)
In a perfect world, all would pay their taxes fairly and the taxes paid would benefit the people as a whole.
In this world, it's not happening. How to fix that? mmmm, simple answer, start all over. Bring the entire political and economic system down and reboot so to speak.
Will that happen? Maybe, maybe not, and certainly not in my lifetime anyways.
But it is what would be required. A clean slate for all, a true bill of rights for human, clearly defined laws which are above any religious practices and a ne
Re:Yeah, and we should be surprised of this becaus (Score:5, Insightful)
money as we know it would cease to exist
Money will never cease to exist as long as there is any kind of scarce goods/resource/property or skill that is needed by others. Sure, you can dream of a time when that isn't true, but it will remain a dream.
Still, there are many ways that economy could change in the future. A society can be run where everyone gets paid the same or based on effort put in. It may also be possible to remove common house hold items from the equation, and only require payment for "luxury items". Also, having a society where loans/borrowing is illegal is also possible, although that requires all expensive products (cars, houses) to be leased/rented instead of owned.
Sounds utopian? Why Not!!
Anything is possible to those who wish it.
Yes, too utopian. And no, anything isn't possible.
There is nothing wrong with utopian visions, but aiming towards them and thinking you will reach them with just wishes is the act of a fool.
A good visionaire needs three worlds. One is the utopian world that he wishes for. The second is the nightmare world where everything he implements fails. And the third is the real world where he tries to make progress towards the utopia while avoiding the nightmare scenarios.
Communists as well as libertarians both aim for the utopia while ignoring the nightmares, and that is a recipe for disaster.
Also, make sure that the utopia is actually an utopia that everyone wants. The communist utopia is far to restrained to be called an utopia. It is way too much about individual sacrifice, which is a very non utopian thing in my and many others meaning. I much prefer the social liberalism utopia.
How could this be possible? when we (humanity) realize that we are all the same deep down and we all want peace and prosperity, regardless or politics and religious beliefs.
Yup.
What's the biggest hurdle?
Us the people, which is part being lazy and part resisting and fearing change, and
those who right now, are in power and truly benefit from this unfair world as it is.
I definitly don't agree on laziness. Being lazy is a virtue. It is the lazy people who try to do more with less effort that make the world go forward.
It is the working ants that are satisfied working 40+ hours a week in stressful hierarcical systems, doing unproductive work (bueraucracy, marketing) spending borrowed money on shiny toys (that they only buy because other working marketing ants convince them to do so), while their bosses takes the big profits that are the real problem.
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Re:Yeah, and we should be surprised of this becaus (Score:5, Interesting)
It's not that small business owners are natural crooks. They're just doing what they have to do to survive. If every small business owner paid all his taxes, the tax rate would be low. But if you cheat, and skim part of your income, the chances of being caught are practically zero as long as you're halfway careful. So of course, lots of people cheat, which gives them an advantage over their honest competition.
Consequently, the government raises its tax rates to compensate for the reduced revenue because of the cheaters. This puts the honest businesspeople at an even greater disadvantage. They have to start cheating, too, or they'd go out of business. So now we arrive at the present-day situation where every small business owner cheats, the tax rates are ridiculously high, and everyone plays a guessing game trying to figure out the minimum amount of revenue they can get away with reporting to the government.
It's certainly not a desirable situation, but that's how the game has to be played if you want to stay in business. I suspect the amount of revenue collected is roughly equivalent to what would be collected with lower tax rates and a completely honest citizenry. So the net effect is about the same to the government, but the game is fixed from the start.
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Re:Yeah, and we should be surprised of this becaus (Score:5, Insightful)
The fact you suggested printing money to cover debts proves you wouldn't be one of those "best and brightest". Can you say rampant inflation? Study economics and history, particularly Weimar Germany. Beyond which, even if it wasn't bad economics it would be a poor idea- using taxes caps government spending by providing a maximum dollar amount, and makes the citizens aware of what it truly costs. These are good things.
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Re:Yeah, and we should be surprised of this becaus (Score:5, Interesting)
"Study economics and current events, particularly Zimbabwe"
fixed that for you, weimar germany only printed massive amounts of money to repay war repartitions. modern Zimbabwe is printing massive amounts of 100 billion dollar bills to fund and supply their army which is in a protracted civil war with 2 large militia groups as a result of the African war in the Congo.
what happened in germany is minor compared to what Zimbabwe is doing, which is printing money, buying foreign currency and funding their entire army with foreign currencies. that would be like america going out printing 300 trillion dollars, buying euros, yen, etc from banks around the world and then 'using' that foreign non hyper inflated currency to repay the national debt. (yes i realize the national debt is only 9.65 trillion, but to get enough foreign currencies from foreign banks, at least 300 trillion us dollars would have to be printed, if not a few hundred quadrillion, it would be hard to sucker over banks, after the first few large cash transfers they'd start devaluing the dollar in proportion to the reported sizes of unexpected cash purchases)
eventually, if national debt out strips the pace at which our economy grows, the government is going to start using kooky plans to raise the available funds, however, it's pretty clear that we're in no immediate threat of the government pulling any tricks to try and repay debt. a couple lean decades of economic a serious recession, and continued tax cut and spend politics, and America might be in serious trouble finding enough people to buy their debt. for right now though, things aren't critical. although i find the amount of debt, and deficit growth sickening.
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Re:Yeah, and we should be surprised of this becaus (Score:5, Insightful)
do you want to pay 100 billion dollars for 3 eggs?
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Re: (Score:3, Insightful)
Re:It's illegal, but is it immoral? (Score:4, Insightful)
Really the only thing businesses owe goverment for is the use of their currency
And the roads to get suppliers and customers in and out of the place of business. And police to investigate shoplifting, burglary, vandalism, and other crimes that might happen.
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Re:It's illegal, but is it immoral? (Score:5, Insightful)
Educated work force, power, phone, a military to avoid invasions, and a government to support free trade.
Yes these are very expensive and roads cost A TON of money. The government pays verizon to put in your phone lines and subsidizes them to a certain extent.
It costs $7,000 per year on average for each school aged child to stay in school. Multiple that by 12?
Without electricity, roads, and a workforce that can read and write you are screwed if you own a business.
Yes taxes are a necessary evil and anyone who uses governmental services needs to pay and corporations need to. I am conservative myself on this issue but realize its unrealistic to have businesses have a free ride when they use government the most.
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Re:Public goods (Score:5, Interesting)
This is a bizarre argument (which gives me nostalgic memories of my college freshman all-night bull sessions). But it's important because it gets to the heart of the social contract that we (almost) all agree to, which we recently understand much better because of studies in the evolution of cooperation and in economic experiments in cooperation, like Prisoner's Dilemma. (I recently read a few good articles by Samuel Bowles http://en.wikipedia.org/wiki/Samuel_Bowles_(economist) [wikipedia.org] which is why I'm so interested.
If taxes were voluntary, they wouldn't be taxes.
If contributions were voluntary, then freeloaders wouldn't contribute, and would benefit from the contributions of those who do. Cooperation would collapse, and we wouldn't have the advantages of cooperation. We wouldn't have roads, or electricity, or water, or cities.
I know you believe that they could all be produced by entrepreneurs, but if you look at the history of industrialization, you'd see that governments play a major role. Try to find a country with electricity that wasn't promoted by the government or the colonial power.
In fact, try to find a country run by free-market libertarian principles. Afghanistan is the closest I can think of right now, but their GNP is nothing to brag about.
That's because you're a selfish freeloader. That's why we need tax laws that are enforced.
I see no moral problem with robbing from the rich to give to the poor. I think we'd have a more productive economy if we did (look at Finland).
In fact, I see no moral problem with robbing from the rich to give to me.
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Re: (Score:3, Insightful)
Yes it's immoral, it's also destructive, and that's why it can sometimes warrant imprisonment.
Re: (Score:3, Insightful)
Trying to equate taxes with being mugged is pure idiocy.
Re: (Score:3, Insightful)
If you don't like it, do something about it, evading taxes is not a valid form of protest unless you are doing so openly.