What is Automated Sales Suppression?

Automated sales suppression refers to the use of technology to facilitate cash skimming — fraud. Under the umbrella of “automated sales suppression” there is phantomware, zappers, and sales suppression as a service (“SSaaS”). Automated sales suppression devices are typically used in conjunction with a point of sale (“POS”) or electronic cash register (“ECR”) to alter business records, permitting owners to skim receipts. An old fraud dressed up in new technology garb.

Phantomware is programming written within a modern ECR or POS system that can be (mis)used to hide the skimming of sales. The phantom in phantomware refers to the hidden nature of the software or feature set. The feature can be designed for genuine business purposes and it being hidden from view can be to prevent misuse by employees. For example, a manager may want to have the ability to void and clear all of the sales that were not picked up or delivered in a day, but may not want to empower every employee with the same ability.

If a piece of software is intended to be used for fraud, however, the fraudsters may have concerns with leaving the software on the ECR or POS — hidden as it may be. The next level up in sophistication, then, is the zapper: not embedded in the operating system or programs within the ECR or POS, but stored on an external USB drive. This permits a zapper to be physically hidden from prying eyes during an audit.

Sales suppression as a service, as the name implies, takes the software further offsite and turns hard code on a system or USB drive, waiting to be discovered by an auditor, in to a subscription model service. SSaaS salespersons, often the same folks selling the ECR or POS, offered to provide a service erasing, deleting, purging, crashing or physically destroying a client’s hard drive and replacing it. This subscription could easily be couched as a maintenance of support fee, paid by the client-merchant to the ECR or POS installer.

Zappers, Phantomware and Sales Suppression as a Service

State and federal tax authorities are increasingly pursuing civil and criminal penalties against individuals using electronic sales suppression software — be those zappers, phantomware, or the use of sales suppression as a service. Our expert, Richard T. Ainsworth, opining to the National Conference on State Legislatures estimated in 2016 that the problem of automated sales suppression was likely causing states billions of dollars in lost revenue every year. In response, more than thirty states have now passed legislation prohibiting the use of zappers.