The Münster Tax Court (FG Münster), in its ruling of 29 March 2017 (7 K 3675/13 E, G, U), classified a system based on Microsoft Access as susceptible to manipulation (no appeal admitted). In doing so, it issued a fundamental statement on the conditions under which a PC-based POS system may, by way of exception, be regarded as non-manipulable.
Facts of the case:
During the years in dispute, the plaintiff operated two hair salons and recorded his cash receipts using a PC-based POS software that also offered other functions such as a customer database and appointment management. In the course of a tax audit, the plaintiff failed to submit programming logs for the POS system. As a consequence, the tax office made substantial additional estimates of the plaintiff's turnover and profits for the years 2007 to 2009. These were based on a cash flow calculation and a calculation of "chemical product sales". The calculation was based on an analysis of part of the merchandise purchases for 2007.
Decision and reasoning of the FG Münster:
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An expert opinion concluded that the Microsoft Access system used by the plaintiff was difficult to manipulate due to the linking of various database files. However, subsequent manipulation was possible by trained persons with IT knowledge or by using corresponding programs, even after the fact and without any traceability.
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Since the plaintiff's cash management was not proper, the tax office was, in principle, entitled to make estimates. For cash-intensive businesses using programmable electronic POS systems, the absence of programming logs constitutes a significant formal deficiency.
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The plaintiff also cannot rely on the argument that his POS system exceptionally offers no possibilities for manipulation. Based on the results of the expert opinion, the Senate is, on the contrary, convinced that manipulations can be carried out within the system.
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It is irrelevant by whom or with what effort such manipulation is possible. The software used by the plaintiff — irrespective of whether it can already be manipulated by a "normal" user or whether the user must first engage an IT specialist — provides no assurance that all receipts are recorded in full.
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According to BFH case law, a prerequisite for a proper POS system is that it offers no possibilities for manipulation — regardless of whether the plaintiff actually carried out manipulations.
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However, the additional estimates due to the cash management deficiencies are to be limited in amount to safety surcharges of 7.5% of the declared turnover, since, in the view of the FG, the cash flow calculation cannot be used as a basis. In the present case, the tax office had determined neither opening nor closing balances; it had also failed to specify on the basis of which facts the cost of living had been determined. The calculation of the "chemical product sales" would likewise have led to an inconclusive result lying outside the official guideline rates. This could possibly be explained by the fact that the analyses were carried out only on a sample basis.
Source: FG Münster (online)
Frequently asked questions
Frequently asked questions
When is a PC-based cash register system considered vulnerable to manipulation?
A PC-based cash register system is already considered vulnerable to manipulation if subsequent changes can be made without traceability – regardless of whether only IT specialists or even ordinary users could carry out such manipulations. The Fiscal Court of Münster (judgment of 29.03.2017, Az. 7 K 3675/13) clarified that a system based on Microsoft Access does not meet this requirement either. The decisive factor is the abstract possibility of manipulation, not whether manipulation actually occurred.
What are the consequences of missing programming logs for electronic cash registers?
For cash-intensive businesses using programmable electronic cash register systems, the absence of programming logs constitutes a significant formal deficiency in cash management. This deficiency entitles the tax office to estimate taxable income under § 162 AO. Taxpayers should therefore retain all setup, programming, and modification logs of the cash register in full.
Is it sufficient if cash register software can only be manipulated by specialists?
No. According to the FG Münster, it is irrelevant by whom or with what effort manipulation is possible. Even if only a trained IT specialist using additional programs could alter data unnoticed, the software fails to meet the requirements for a proper cash register system. The decisive factor is that complete recording of all revenues must be technically ensured.
What level of additional assessments is permissible in cases of cash management deficiencies?
The Münster Tax Court limited the additional assessment in the case at hand to a safety surcharge of 7.5% of declared revenues, as the cash flow calculation and the calculation of individual revenue segments performed by the tax office were not conclusive. A cash flow calculation requires, in particular, the determination of opening and closing balances as well as plausible cost-of-living figures. Sample calculations outside of official guideline rates should be viewed critically.
Must actual manipulation be proven against the taxpayer?
No. Under BFH case law, it is sufficient for rejecting the cash register records that the system merely allows for manipulation. Specific proof of actual manipulation by the taxpayer is not required. Thus, the abstract technical vulnerability of the cash register system alone is enough to establish the tax office's authority to estimate.