One thing that bothers me is that many will be able to circumvent it. I'm thinking of the many self employed types. It almost seems as though every working man and woman who works for themselves will have to secure a resale permit/number to report sales and collect taxes. Every garage cabinet shop etc could easily circumvent the taxes. Am I overlooking something?
IMO the primary thing you are overlooking, is the fact that for any business to sustain a substantive longterm profit and stay in business, requires many customers for it product.
The more folks aware of said small/self-employment businesses how are evading the collection of taxes from their customers, or worse collecting them and not remitting them to the state tax administration, the greater the risk of discovery of their operations and getting hit with audit and discovery by the sales tax authority charged to look for such activity.
Furthermore, since such businesses make up much less than 20% of the dollar volume in sales with the other more than 80% portion centered in large incorporated businesses, it is highly unlikely that evasion as measured in dollars impact on government revenus will be any worse than it is under the current system even if every single small business were to operate in the mode that you describe.
Realize that off-the-books businesses such as you describe, would also avoid the certification required to purchase supplies tax free. Their profit margins would be much narrower as a result compared to legitimate businesses that purchase their supplies taxfree. The actual incentives to evade in terms of profit is lower balanced against a high risk of discovery, I don't see the problem to be any greater than it is today under the income/payroll tax scheme when would be replaced by a National retail sales tax and may actually improve over what exists now.
[Realize that off-the-books businesses such as you describe, would also avoid the certification required to purchase supplies tax free. Their profit margins would be much narrower as a result compared to legitimate businesses that purchase their supplies taxfree.]
This is a key point, and one that is really only possible because of the information age we live in. To buy a raw material or component and not pay the FairTax will require a database entry with the item and the BTB reseller certificate#. That certificate# should match later entries in the database where it collected taxes from consumers and remitted them -- or a link to another certificate# if it sold items tax-free to another business.
Crunching that database will be child's play. A certificate# used to avoid taxes in one place had better show remittances in a later entry.
Where the trail stops is where the audit begins.
The alternative, as you mentioned, is for this garage operation to buy all their supplies at retail and pay the FairTax then. This would obviously disadvantage them in comparison to their competitors.