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A Prelude to a National Sales Tax?

March.23.2010

Squeezed into the Democrat’s health care reform bill was a little noticed provision for a 10% “excise” tax on tanning services.  Under the bill’s Section 5000B, the tanning tax “shall be paid by the individual” receiving the services.  The tanning business must “collect” the tax and “remit” the amounts paid, otherwise the company is responsible for the amounts it failed to collect and remit.  Does this concept sound familiar?  Welcome to what could be the beachhead for a national sales tax.

While the federal government has several excise taxes, this is the first time one truly deserves the title of a retail sales tax.  Importantly, this is the first time a major excise tax ventured away from companies like airlines and oil refiners and into the strip mall.

To implement this tax, the IRS will need to create specific forms suited for mom and pop retail operations.  And, since the number of “excise” tax returns the IRS receives will substantially increase with approximately 200,000 tanning tax returns per year, the IRS may need to greatly expand its excise tax collections operations.  With forms, software, and personnel in place, it will be quite simple to add “soft drinks”, “flat screens”, and “tires” and notify Walmart of its new filing obligation.

I would like to think this was not designed to push a larger national sales tax (cosmetic surgeons lobbied for this tax to move the target away from themselves), but it did allow the feds to expand into a whole new area of taxation that was formerly an exclusive territory of states and local governments.

Sorry state treasurers, you have one more thing to worry about.

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