Of course, this will require every business to be completely honest and remit the "tax" to the Federal Reserve instead is sticking it their own personal accounts. Every business becomes a tax collector (yes, I know they alrady are - but more so).
There is still lots of room for "under the table" stuff here.
If a transaction took place and nobody saw it, did it really happen? You could undercut your competition by only "reporting" half of your sales, and setting lower prices. I can often get a much better "cash price" in certain neighborhoods around here. Since they aren't traceable, they almost always "knock off the tax".
Tons more auditing is going to be going on.
All that can (and does) happen under the income tax. Under a sales tax, the number of taxable entities drops by about 90% (retail business only). That makes enforcement much easier. There will be some evasion (there always is, regardless of the system), but not enough to destroy the system.
You are right. The amount of fraud in reporting sales-tax used to be very high, and I haven't heard that they've cleaned it up.
If a transaction took place and nobody saw it, did it really happen?
That's a modus operandi of politicians and bureaucrats. If people don't see how much they're really paying for taxes and the big drain imposed on people, the economy and society because of the massive number of laws and regulations passed into law then the parasitical elites in government are secure in their jobs. They usurp power and garner unearned paychecks at everybody else's expense. Hidden taxes are a prime example.
Tons more auditing is going to be going on.
In case you don't already know, businessmen and businesswomen have greater integrity and abide honesty more often than politicians and bureaucrats. Fraud is rampant in government. The primary purpose and responsibility of government is to protect individual life and property rights and private contracts.
Politicians and bureaucrats -- parasitical elites in government -- use threat of fines, jail and potential bankruptcy if a person doesn't comply. Gun to the head.
A business owner says... you pay the price or you're not getting the product. If you steal the product you're no better than the government.
In fact, government needs to be run like a business by business-minded, cost-efficiency experts like the ones that are common in the business community. Parasitical elites in government must be rooted out.
The business owners will rally next to the citizens for government to reduce the sales tax rate by reducing spending. They're already in the beginning stage of doing that.