# Should The USA Enact a National Sales Tax? **URL:** \ **Category:** Great Debates\ **Created:** [March 4, 2004, 1:40pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500 "2004-03-04T13:40:26Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [March 4, 2004, 1:40pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/1 "2004-03-04T13:40:26Z")
AS one who is struggling with my 2003 federal income tax return, I say YES! The Federal tax code is now so complicated that it takes up too many resources to evade…here are my reasons for a national sales tax: -it is cheap to administer -it forces segments of society that pay NOTHING now to contribute -it need not be onorous…a rate of 1.5-2.0% would be optimal -the government would realize a more constant revenue stream Finally, it would allow the social engineers in Washington MORE money to fund their idiotic schemes, without taxing wealth creation (which is the big problem with the income tax). WE could also move to a flat rate tax on income, which would make the IRS unnecessary. Expand the sales tax base by legalizing drugs, and we’ve solved the deficit problem! Anybody object to this? 😃 ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [March 4, 2004, 1:46pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/2 "2004-03-04T13:46:37Z")
Without going into the substance of your question I will say that there is no way to get rid of income tax. It ain’t gonna happen. And that Value Added Tax is vastly superior to sales tax. ---
**Author:** ![In\_Conceivable](https://avatars.discourse-cdn.com/v4/letter/i/4bbf92/32.png) [@In\_Conceivable](https://boards.straightdope.com/u/In_Conceivable)\ **Post date:** [March 4, 2004, 2:02pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/3 "2004-03-04T14:02:33Z")
> [@ralph124c](#): > > …here are my reasons for a national sales tax: > -it is cheap to administer > -it forces segments of society that pay NOTHING now to contribute > -it need not be onorous…a rate of 1.5-2.0% would be optimal > -the government would realize a more constant revenue stream Why do you think that a national sales tax would be cheaper to administer? You are still going to need a big organization to handle collections, reporting, evasion, laws, etc. Are you proposing eliminating corporate taxes and non-profit and trust filings too? If not you are still going to need the IRS. What segments of society pay nothing now? Only the very poor. I don’t think it is a good idea to tax the very poor more then a token amount anyway. What good would come to society by forcing them to contribute. Where did you get the 1.5-2.0%? The proposals I have seen for a national sales tax have a rate of closer to 20%. he government is already realizing a fairly constant revenue stream. It is called payroll withholding and estimated payments. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [March 4, 2004, 2:21pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/4 "2004-03-04T14:21:35Z")
The people who pay nothing today are the very poor, and those who live in the underground economy (cash businesses, drug dealers,prostitutes, etc.) However, there is a HUGE segment of society that gets away with paying very little-these are the real-estate millionaires (who avoid income taxes by taking advantage of depreciation-on appreciating assets!), there is also the “old-money” crowd (like the Kennedy family), who recive money from tax-free investments (municipal bonds, etc.), and shelter incomein off-shore partnerships. THES are the people that would at least pay SOMETHING with a national sales tax.In fact the old money people are those who OPPOSE income tax reform the most-they wouldlose if they were made to pay under a national sales tax. Think about it-Jow Kennedy purchase a $2 million dollar mansion-he pays 2% (or $40,000). This is far superior to him paying nothing. 🆒 ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [March 4, 2004, 2:27pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/5 "2004-03-04T14:27:13Z")
It won’t work. Avoiding a sales tax on individuals is just too easy. A corporation buys the stuff for you. ---
**Author:** ![Eveready](https://avatars.discourse-cdn.com/v4/letter/e/87869e/32.png) [@Eveready](https://boards.straightdope.com/u/Eveready)\ **Post date:** [March 4, 2004, 2:31pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/6 "2004-03-04T14:31:48Z")
according to [this](http://a255.g.akamaitech.net/7/255/2422/02feb20041242/www.gpoaccess.gov/usbudget/fy05/pdf/budget/tables.pdf) the amount of outlays in the federal buget is about 20.2% of GDP for 2004. I don’t think 1.5%-2% is going to work. A 20% increse on the prices of everything will have a determental effect on the economy. You might also want to check out [This](http://www.straightdope.com/classics/a5_139.html) ---
**Author:** ![In\_Conceivable](https://avatars.discourse-cdn.com/v4/letter/i/4bbf92/32.png) [@In\_Conceivable](https://boards.straightdope.com/u/In_Conceivable)\ **Post date:** [March 4, 2004, 2:33pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/7 "2004-03-04T14:33:14Z")
> [@ralph124c](#): > > However, there is a HUGE segment of society that gets away with paying very little-these are the real-estate millionaires (who avoid income taxes by taking advantage of depreciation-on appreciating assets!), there is also the “old-money” crowd (like the Kennedy family), who recive money from tax-free investments (municipal bonds, etc.), and shelter incomein off-shore partnerships. THES are the people that would at least pay SOMETHING with a national sales tax.In fact the old money people are those who OPPOSE income tax reform the most-they wouldlose if they were made to pay under a national sales tax. Think about it-Jow Kennedy purchase a $2 million dollar mansion-he pays 2% (or $40,000). This is far superior to him paying nothing. 🆒 I don’t think that real-estate millionaires can be called a HUGE segment of the society that pays little in taxes. The depreciation deductions they get to take aren’t as wonderful as you seem to think they are. Plus, they still have to pay capital gains tax when they sell those appreciating assets. When Jow (?) Kennedy purchases a $2 million dollar mansion he pays property taxes on it. Now, I know that doesn’t go to the federal government but it isn’t like he isn’t paying any taxes. As far as the tax free investments, under your plan all investments would be tax free. What is to stop the millionaires to keep living in their old $1.5 million mansion and still avoid paying taxes? Besides, do you really think that a home purchase will wind up being taxed under national sales tax laws? I doubt it. Real estate sales aren’t taxed under any state sales tax laws that I know of. Where did you come up with the 2% anyway? There is no way that is going to be enough. ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [March 4, 2004, 4:08pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/8 "2004-03-04T16:08:13Z")
> **[Eliminate corporate taxes?](https://boards.straightdope.com/sdmb/showthread.php?t=237589)** > > About six months ago, my boss and I got into a discussion about corporate taxes. Now, for some background, my boss comes from old Europe. He self-identifies as a communist, but this is only in the McCarthy sense of the word, he’s just a liberal... Thread about eliminating or drastically reducing corporate taxes and instituting a broad-based consumption tax, ie VAT. There’s a good link **kabbes** gives to a PDF file outlining empirical data that contrasts with some existing theory about consumption taxes. ---
**Author:** ![KarmaComa](https://avatars.discourse-cdn.com/v4/letter/k/e36b37/32.png) [@KarmaComa](https://boards.straightdope.com/u/KarmaComa)\ **Post date:** [March 4, 2004, 4:32pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/9 "2004-03-04T16:32:45Z")
> [@sailor](#): > > It won’t work. Avoiding a sales tax on individuals is just too easy. A corporation buys the stuff for you. Uh… why would the corporation necessarily be exempt from the tax? When I read the thread subject, I thought, “Sales tax?! That benefits the wealthy and punishes the poor. It’s the same kind of tripe the flat tax morons are into.” And lo, I was right. 🆒 ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [March 4, 2004, 4:48pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/10 "2004-03-04T16:48:52Z")
> [@KarmaComa](#): > > Uh… why would the corporation necessarily be exempt from the tax? Uh, you realize corporations _are_ now, in fact, exempt from sales taxes? And you know there is a reason? If every sale along the manufacturing process is taxed then you end up with a terrible system. Suppose you buy a car. How much of what you paid is taxes? No way to know as all along the chain taxes were paid. Not only that, it favors huge corporations which can integrate operations. If the car manufacturer buys the radio from a supplier he pays tax. The radio manufacturer pays tax when he buys the parts. The manufacturer of the parts pays tax when he buys materials, etc. If the car manufacturer does all that himself he avoids paying tons of tax so the tax is not neutral but favors integration into huge corporations as a way of not paying taxes. There are many reasons why a sales tax is a terrible idea. VAT was invented for a reason and even VAT has only replaced sales taxes, NOT income taxes. ---
**Author:** ![In\_Conceivable](https://avatars.discourse-cdn.com/v4/letter/i/4bbf92/32.png) [@In\_Conceivable](https://boards.straightdope.com/u/In_Conceivable)\ **Post date:** [March 4, 2004, 4:59pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/11 "2004-03-04T16:59:59Z")
> [@sailor](#): > > Uh, you realize corporations _are_ now, in fact, exempt from sales taxes? Corporations are not exempt from all sales tax. They do not pay sales tax on items from resale but they do pay sales tax on items they use. In general, a radio manufactor wouldn’t pay sales tax on speakers it puts into the radio but it does pay sales tax on the machinery it uses to build the radio. Walmart doesn’t pay sales tax on the radios they buy to sell to consumers but they do pay sales tax on the radio they buy to put in the employee’s break room. ---
**Author:** ![KarmaComa](https://avatars.discourse-cdn.com/v4/letter/k/e36b37/32.png) [@KarmaComa](https://boards.straightdope.com/u/KarmaComa)\ **Post date:** [March 4, 2004, 5:01pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/12 "2004-03-04T17:01:39Z")
> [@sailor](#): > > Uh, you realize corporations _are_ now, in fact, exempt from sales taxes? And you know there is a reason? If every sale along the manufacturing process is taxed then you end up with a terrible system. Suppose you buy a car. How much of what you paid is taxes? No way to know as all along the chain taxes were paid. Not only that, it favors huge corporations which can integrate operations. If the car manufacturer buys the radio from a supplier he pays tax. The radio manufacturer pays tax when he buys the parts. The manufacturer of the parts pays tax when he buys materials, etc. If the car manufacturer does all that himself he avoids paying tons of tax so the tax is not neutral but favors integration into huge corporations as a way of not paying taxes. There are many reasons why a sales tax is a terrible idea. VAT was invented for a reason and even VAT has only replaced sales taxes, NOT income taxes. Uh, no! 🙂 I didn’t realize that. But you raise a good justification for it… I find it hard to believe that all corporations are completely exempt from sales taxes in Canada. Does anyone know whether or not this is true? Admittedly, I know \>\< that much about corporate tax. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [March 4, 2004, 5:28pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/13 "2004-03-04T17:28:55Z")
> [@In Conceivable](#): > > Corporations are not exempt from all sales tax. They do not pay sales tax on items from resale but they do pay sales tax on items they use. > > In general, a radio manufactor wouldn’t pay sales tax on speakers it puts into the radio but it does pay sales tax on the machinery it uses to build the radio. Walmart doesn’t pay sales tax on the radios they buy to sell to consumers but they do pay sales tax on the radio they buy to put in the employee’s break room. I am going to ask for some evidence of that. What state? Sales tax is a state and local tax. I find this extremely hard to believe. Where do you get your information? So, you are saying that a corporation pays sales tax on the plant and machinery they buy? Also on the consumables they use which are not incorporated into the final product? But not on the materials incorporated into the product they sell? So if they buy paint to paint the building they pay sales tax? But if they buy paint to paint the product they sell then they dont pay sales tax? really? So a corporation which sells services pays sales tax on everything as they sell no material products? really? Where is this again? I find it extremely hard to believe any state would have such a backwards and irrational and complicated system but I suppose it is possible. What states are we talking about? ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [March 4, 2004, 5:50pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/14 "2004-03-04T17:50:25Z")
**sailor** , companies don’t have an immediate free pass from sales taxes. You have to have reasons to be exempt from paying taxes. In most cases, this is because you intend to resell the good, but additional reasons (non-profits, for example) vary from state to state. If your company moves from one location to another, do you pay sales tax on the cost of the moving service? South Dakota says so. If you google terms like ‘exempt’ and ‘state sales tax’ you’ll find more information than you could possibly ever know. The laws are simply not consistent since they are a state and local matter. ---
**Author:** ![In\_Conceivable](https://avatars.discourse-cdn.com/v4/letter/i/4bbf92/32.png) [@In\_Conceivable](https://boards.straightdope.com/u/In_Conceivable)\ **Post date:** [March 4, 2004, 6:13pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/15 "2004-03-04T18:13:00Z")
What a lot of questions! My answers are in bold. > [@sailor](#): > > I am going to ask for some evidence of that. What state? \*\*I am most familiar with the Carolinas but most states are at least similiar \*\*Sales tax is a state and local tax. I find this extremely hard to believe. Where do you get your information? **I am in the business so to speak** So, you are saying that a corporation pays sales tax on the plant and machinery they buy? **Yes** Also on the consumables they use which are not incorporated into the final product? **Yes** But not on the materials incorporated into the product they sell? **Yes** So if they buy paint to paint the building they pay sales tax? **Yes** But if they buy paint to paint the product they sell then they dont pay sales tax? **Yes** really? **Yes** So a corporation which sells services pays sales tax on everything as they sell no material products? **Yes** really? **Yes** Where is this again? **The United States** I find it extremely hard to believe any state would have such a backwards and irrational and complicated system but I suppose it is possible. **Anything is possible when we are talking about government** What states are we talking about? **I am mostly familiar with the Carolinas** I just gave you the simple rules. The rules are pretty complicated with machinery because all kinds of industries get special treatment or deals on their machinery. In the Carolina there is also a sales tax on equipment leases. And, if a company buys something for inventory and then decides to use it rather then sell it they have to submit the sales tax themselves. It is called “use” tax when that happens. Use tax also comes into effect when a corporation buys equipment from out of state. What proof do you have that corporations don’t have to pay sales tax? That is the odd claim that needs to be backed up. Can you show me something in any state tax code that says corporations are exempt from all sales tax? I don’t know the specific rules for any state but I doubt that any state with a sales tax completely exempts all corporations. ---
**Author:** ![In\_Conceivable](https://avatars.discourse-cdn.com/v4/letter/i/4bbf92/32.png) [@In\_Conceivable](https://boards.straightdope.com/u/In_Conceivable)\ **Post date:** [March 4, 2004, 6:17pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/16 "2004-03-04T18:17:27Z")
> [@In Conceivable](#): > > I don’t know the specific rules for any state but I doubt that any state with a sales tax completely exempts all corporations. Drat - that should say "I don’t know the specific rules for **all** states. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [March 4, 2004, 6:43pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/17 "2004-03-04T18:43:21Z")
If that is so it is the most ridiculous tax system I have ever seen in my life and it is a _huge_ burden on business in more ways than one. Suppose I am making cars. The fact that I would pay sales tax on the tools and consumables used to make the car but not on the materials incorporated in the final product would make no sense as they both are expenses directly incurred in the manufacture of the product. Tha paint on the car pays no tax because it goes out the door with the car but the masking tape pays tax because it is left behind. It must be an accounting nightmare. Furthermore, it just makes _no_ sense. It makes it impossible to account for the amount of taxes paid in the manufacture of any particular product. When a manufacturer buys widgets he has no way of knowing how much of the price is taxes already paid along the way. this information is essential when you export to other countries because governments are allowed to reimburse for taxes paid but anything else is considered a subsidy. How do American exporters manage this? How can they calculate the amount of taxes which went into a product? Furthermore, what _is_ the accumulated sales tax paid by the final consumer? Suppose you buy a car. The accumulated sales taxes paid along the way have to be staggering. i find it hard to believe. It favors integration into big manufacturing corportaions and hurts outsourcing to smaller, more specialized, manufacturers. For this reason alone I just find it extremely hard to believe. I am not familiar with this aspect of sales taxes in the USA but for the reasons I have posted I just find it _extremely_ hard to believe and I would like to see some confirmation. In Maryland it is not the case. > [@](#): > > The Maryland sales and use tax does not apply to sales of machinery and equipment used in production activities, sales of tangible personal property for consumption in production activities, or sales of tangible personal property for resale or incorporation as a material or part of other tangible personal property produced for sale. Can anyone direct me to specific information of specific states where it is so? i am very interested because it would be as backwards and archaic and anti-business as one can possibly imagine. ---
**Author:** ![sailor](https://avatars.discourse-cdn.com/v4/letter/s/a587f6/32.png) [@sailor](https://boards.straightdope.com/u/sailor)\ **Post date:** [March 4, 2004, 6:57pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/18 "2004-03-04T18:57:28Z")
Oops, forgot the link: [Maryland taxes](http://business.marylandtaxes.com/taxinfo/salesanduse/productionexemption/default.asp). The more I think about it the more I think the sales tax concept is a nightmare to administer and is plagued with problems, not the least of which is that you have no way of knowing how much you are taxing products. VAT is vastly superior and I do not understand why it has not been adopted by the several states instead of sales tax. ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [March 4, 2004, 7:33pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/19 "2004-03-04T19:33:48Z")
In Massachusetts, businesses have to pay sales tax on electricity or other power sources (gas, oil, etc) under certain conditions. [PDF here.](http://www.dor.state.ma.us/publ/pdfs/sls_use.pdf) > [@](#): > > Sales of utilities and heating fuel also are exempt when sold to businesses with five or fewer employees or to manufacturing facilities that use at least 75 percent of their energy in manufacturing or heating the manufacturing facility. Businesses with multiple locations employing fewer than five people at any one location must use the total number of employees from all locations. As far as capital goes, > [@](#): > > Sales of materials, tools, fuel, machinery and replacement parts that will be used directly and exclusively in the manufacture, processing or conversion of tangible personal property to be sold, including the publishing of a newspaper or the operation of commercial radio broadcasting or television transmission, are exempt in many cases. In addition, sales of materials, tools, fuel, machinery and replacement parts that are consumed and used directly and exclusively in research and development by a manufacturing corporation or a research and development corporation generally are exempt. The vendor must receive from the purchaser an Exempt Use Certificate (Form ST-12) and maintain proper records on such sales. They then go on to caution that the laws are complicated and this is only meant to be a guide. So for example, it is likely the case that a manufacturer of circuit boards wouldn’t pay sales tax on the raw materials, but would on something like an oscilloscope which wouldn’t fall under the above exemptions. It is unclear to me what, exactly, “manufacturing” is supposed to entail, but if it relates directly to tangible goods then it is quite possible that a multi-building company in Massachusetts like [Millennium](http://www.millennium.com/) might have an administrative building where no or little research and manufacturing is done, in which case they’d pay on the energy thing mentioned above. I agree VAT is vastly superior, from what I have read of it. ---
**Author:** ![In\_Conceivable](https://avatars.discourse-cdn.com/v4/letter/i/4bbf92/32.png) [@In\_Conceivable](https://boards.straightdope.com/u/In_Conceivable)\ **Post date:** [March 4, 2004, 8:08pm UTC](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500/20 "2004-03-04T20:08:01Z")
[http://www.dor.state.nc.us/practitioner/sales/bulletins/toc.html](http://www.dor.state.nc.us/practitioner/sales/bulletins/toc.html) Have fun! In NC it really depends on the industry and the type of equipment you are purchasing. Even your example **salior** isn’t the same thing as saying corporations pay no sales tax. [Next page](https://boards.straightdope.com/t/should-the-usa-enact-a-national-sales-tax/232500.md?page=2)