CRA Cracks Down on Electronic Sales Suppression Software

CRA is cracking down on the use of electronic suppression of sales (ESS) software.

Those selling and using ESS systems have been on Revenue Canada’s radar for quite a while now; the Knowledge Bureau Report has covered some of the larger convictions in the previous year.

The last federal budget proposed measures to combat the software, which suppresses or alters evidence from electronic transactions such as cash registers or credit/debit machines thereby providing its users with an unfair business advantage.

Businesses that use or even possess ESS software will face a $5,000 penalty for a first infraction, and a $50,000 penalty for any subsequent infractions. Manufacturers of the devices, or those who sell or distribute them will face penalties of $10,000 for a first infraction, and $100,000 on subsequent infractions.

But there will be more than monetary fines for those found guilty for manufacturing, selling, or using an ESS system. The new proposals create what is called a “hybrid” criminal offence. It is referred to as hybrid because it can either be brought as a summary offence, with a prison term of not more than two years and a fine of not more than $500,000, or an indictable offence, with a prison term of not more than five years and a fine of no more than $1 million.

CRA Minister Findlay, in Edmonton last week, gave fair warning on the substantive penalties: “Businesses that use ESS software to underreport their revenues and avoid paying taxes are on notice.”