HOW WILL STATE TAX SYSTEMS BE AFFECTED, AND CAN STATES ADEQUATELY COLLECT A FEDERAL SALES TAX?
No state would be required to repeal its income tax or piggyback its sales tax on the federal tax. All states will have the opportunity to conform their sales tax to the federal sales tax. Most states will probably choose to conform. It will make the administrative costs of businesses in that state much lower. The state will be paid a fee by the federal government to collect the tax. For states that already collect a sales tax, this fee will prove generous. A state can choose not to collect the federal sales tax, and either outsource the collection to another state, or opt to have the federal government collect it directly. If a state chooses to conform to the federal tax base, they will be able to raise the same amount of state sales tax with a lower rate since the FairTax tax base is broader than their current tax base. Finally, conforming states that are part of the FairTax system will, for the first time, be able to collect sales tax on out-of-state mail order sales into their stat
