FairTax Overview
Uniform tax treatment of all retailers.
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The FairTax base is final consumption, i.e. retail sales to the end users of all new goods and
services. It levels the playing field between service-providing businesses and goods-producing
businesses, and treats all retailers the same regardless of their mode of distribution – in-store,
catalog, or online.
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All sales to end user consumers residing in the United States, by Main Street retailers and online
vendors, are taxable; thereby eliminating the economic distortion caused by differential treatment
under current law.
· Direct mail and e-commerce sales from out-of-state sources are, in practice, rendered tax-free
because state use taxes are poorly enforced. Under the FairTax, all retailers must collect the tax
on all sales to persons residing within the United States.24
· States that choose to conform to the FairTax federal tax base have the added advantage of
information sharing and clear interstate revenue allocation rules. The ability for the states to
collect these heretofore uncollected taxes is a major incentive for states to conform their sales tax
to the FairTax base. Retailers suffering from tax-free direct mail competition or internet sales by
out-of-state retailers see a major competitive disadvantage eliminated.
Complying with the federal tax system becomes much simpler.
· Instead of having to comply with the complexities of the income tax and payroll tax, there is one
national retail sales tax on all goods and services. The retailer simply calculates its total gross
payments (retail sales plus federal sales taxes) on a monthly basis.
· No more uniform inventory capitalization requirements.
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Although state