FairTax Overview
Why retailers should support the FairTax
Retailers are more profitable under the FairTax.
· Like other firms, retailers enjoy a zero corporate tax rate and their shareholders are not taxed on
dividends or capital gains on their investments.
· Administering the FairTax is less costly than what retailers must be today. It provides a net
reduction in paperwork and overhead by the elimination of federal income tax withholding and
payroll tax deductions for employees, corporate taxes and associated corporate tax planning,
record keeping, compliance, and litigation; though such burdens for their ongoing collection of
sales taxes may increase slightly. Only four states do not currently require sales tax collection. 16
· Administering the FairTax is less costly than what retailers must do today. The record keeping
and reporting requirements for retail businesses are simpler for a sales tax, compared to the
current federal income/payroll tax system.
· The FairTax provides that retailers receive ¼ of one percent of gross collections as compensation
for administrative expenses, including point-of-purchase software upgrades (Total payments to
retailers are estimated to be in excess of $5 billion based on 2007 consumption).17
· Business compliance costs estimated to be $161.7 billion18 are lowered by a 95 percent.19
16
New Hampshire, Oregon, Delaware and New Mexico. Alaska has 89 municipalities that impose a sales tax; whereas,
Delaware and New Mexico impose gross receipts taxes on businesses which resemble sales taxes since the tax is generally
passed on to consumers.
17
Bachman, Paul, Jonathan Haughton, Laurence J. Kotlikoff, Alfonso Sanchez-Penalver, and David G. Tuerck, “Taxing
Sales under the FairTax: What Rate Works?” published in Tax Notes, November 13,