Duluth restaurant used 'zapper' software to evade taxes

The conviction of the restaurant owners is a first for Minnesota.
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A Duluth restaurant and its two owners have been convicted of tax evasion while using "sales suppression software" to underreport their earnings.

The Minnesota Department of Revenue says that the Osaka Sushi Hibachi Steak House, at Burning Tree Plaza, evaded more than $290,000 in sales taxes through the scam.

Owners Dan Xu and Zhong Wei Lin did this by using "zapper" technology, which creates a second set of books that removes certain transactions after the fact, allowing the business to underreport its monthly sales.


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"These are first-of-their-kind convictions in Minnesota and highlight our investigators’ efforts to combat the growing use of sales suppression software,” said Revenue Commissioner Cynthia Bauerly in the press release. 

"These convictions demonstrate our determination to level the playing field so that businesses who report and pay their fair share of tax don’t have to compete with those who break the law."

Both Xu and Wei Lin will avoid jail time, after agreeing to pay back the $290,000 they defrauded in taxes in exchange for guilty pleas.

"Deliberately failing to turn over sales taxes collected increases the tax burden on all residents," said St Louis County Attorney Mark Rubin. "We hope this case sends a message to others engaging in this kind of behavior that it will not be tolerated, and you will be prosecuted when caught."

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