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How
will the FairTax be collected and how will that affect the retail
industry?
Retail businesses will collect the tax from the consumer—45
states already have a sales tax system and the FairTax will simply
be an additional line on the current sales tax reporting form. In
rare cases, businesses that produce products or services that are
not currently taxed under state sales tax code will have to begin
collecting the FairTax for the first time. Businesses will simply
collect the tax and send it to the state taxing authority. All businesses
serving as collection agents will receive a fee for collection services,
and the states themselves will also be paid a collection fee. The
tax revenues from the states will then be sent to the U.S. Treasury.
State participation in the FairTax collection system is voluntary
and states can choose to outsource their collections to another
state.
The retail
industry will save a significant amount of money from reduced compliance
costs under the FairTax. Retail businesses, along with other businesses,
are tax collectors today. They withhold income and payroll taxes
from their employees. Moreover, the vast majority of retail businesses
currently operating in the 45 states with a sales tax are already
sales tax collectors. Under the FairTax, retailers would have the
responsibility to collect and submit the tax. Those five states
who do not have a sales tax will find the FairTax easier and much
less expensive than the current confusing and cumbersome tax code.
In addition, retailers would be paid a fee equal to one-quarter
of one percent of the federal sales taxes they collect and remit.
Retailers would no longer need to bear the cost of complying with
the income tax, including the uniform capitalization requirements,
the various depreciation schemes, and employee benefit and pension
rules.
The beneficial
effects of dramatically lower income tax compliance costs, no income
taxes, and a reasonable fee for collecting the FairTax will ensure
that retailers will do quite well.
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