Small Business Remote Sales Tax Collection

Finance FREG: Providing Small Business Relief from Remote Sales Tax Collection, September 25, 2024

A Reform Agenda

Currently, firms and individuals who charge sales taxes deduct these tax payments from income. These deductions should be credits instead, as the current regime is simply a subsidy to states who collect sales tax.  This small TAX CUT will remove the resistance to enacting a VAT - and the customer at the end of the supply chain pays the same amount of tax as they would for a retail sales tax. There is no tax on top of tax paid.

Sellers on such platforms as Amazon benefit from tools provided by the platform - which collects the money on their behalf. Comprehensive reform which includes credit invoice value added taxes will feature automation, including modules to deal with remote sales. 

Such reforms are a good deal for small businesses, as exempting such firms from VAT filing deprives them of the rebate of taxes paid to vendors. Again, the current income tax deduction for sole proprietors only provides a deduction of sales tax paid - rather than a credit.

Please see the following excerpt from our larger tax reform attachment:

Credit Invoice Value-Added Tax (CI-VAT). Border adjustable taxes will appear on purchase invoices. The rate varies according to what is being financed. If Medicare for All does not contain offsets for employers who fund their own medical personnel or for personal retirement accounts, both of which would otherwise be funded by an S-VAT, then they would be funded by the I-VAT to take advantage of border adjustability. 

CI-VAT forces everyone, from the working poor to the beneficiaries of inherited wealth, to pay taxes and share in the cost of government. As part of enactment, gross wages will be reduced to take into account the shift to S-VAT and CI-VAT, however net income will be increased by the same percentage as the CI-VAT. Inherited assets will be taxed under A-VAT when sold. Any inherited cash, or funds borrowed against the value of shares, will face the CI-VAT when sold or the A-VAT if invested.

Background on Consumption Taxes

Eventually, the United States needs to join the rest of the developed world and enact consumption taxes on consumer goods and services, net business receipts and an innovative tax on asset sales - which would replace capital gains taxation and would require negotiation of an international rate to prevent rate arbitrage. 

The first two would make it easier to pay taxes in general because the simplicity of the first and the fact that the second would replace the business income tax while becoming a conduit for employee health and family support benefits - and would entirely replace the need for most families to pay personal income taxes (if not all) - which would greatly cut down on paperwork requirements businesses currently face. 

The reality is that business collects the revenue and submits it to the Treasury, along with a mountain of information to subsidize the tax preparation industry - who are consistent donors to both Chambers - especially the revenue committees. 

The proposed Fair Tax’s use of a retail sales tax, rather than use of a value added tax at each purchase (but note - the tax is only paid on the base markup  - not the taxes owed because of the markup) will lead to fraud as retail purchase are credited as wholesale - which under the FT is not taxed. This is a huge potential loss. This schema is proposed by Fair Tax sponsors because they misunderstand who VAT works. For the Fair Tax to ever pass, rather than being a talking point for fundraising, it must work like a VAT.

When VAT is paid by a merchant or manufacturer, the VAT that they paid for that good or service supplied is refunded to them.