Milford Chinese Restaurant Owner Accused of Using ‘Zapper' to Underreport Sales Taxes

A Milford restaurant owner accused of using “zapper” software to avoid paying more than $80,000 in state sales tax and has been arrested, officials from the state Department of Revenue Services said.

Zappers are a type of commercial “phantom-ware” used to create fraudulent point-of-sale records that deliberately understate taxes actually collected, according to state officials.

Special Agents from the Criminal Investigations Unit arrested Xiaoning Fan, 64 of New Haven, at her restaurant, Lao Sze Chaun, in Milford.

Between 2008 to 2016, she is accused of evading more than $80,000 in state taxes, as well as $60,000 in penalty and interest charges.

This is the first arrest by the Connecticut Department of Revenue Services has made for the use of a “zapper.”

Fan was charged with possession of tax suppression software, first-degree larceny and willful delivery of a false return. 

“This arrest is a big breakthrough for DRS,” Commissioner Kevin B. Sullivan said in a statement. “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.”

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