"Why would Section 701 even apply to me?"
Sounds to me like it was written for people like you....sorry the barn door will be closed...cross checking...
try this old summary:
http://www.ntu.org/main/press.php?PressID=331&org_name=NTUF
Enforcement and Compliance
Tax evasion could be a challenge to the success of a NRST if enforcement is not handled properly. The risk of noncompliance grows as rates increase, sales information becomes scarce, and exemptions are created.40 Although the IRS will be dismantled, a Federal agency will be necessary to investigate tax evasion and maintain uniform, national collection of the tax. States will likely be compensated for their efforts, but there is not enough incentive for each State to investigate and audit cases of evasion.41 This agency will conduct regular audits of businesses to safeguard compliance. Existing federal tax collection budgets should be more than adequate for the task since there are significantly fewer collection points under a NRST than the current system.42
Some additional paperwork for businesses will be a part of the transition process. Some of the initial transition would be simple paperwork such as requiring retail vendor registration43 and creating new tax forms.44 Businesses will be required to maintain records of previous years' sales to allow for audits by the Federal agency,45 similar to the reporting system already in place in at least 45 States. Information reporting could be implemented similar to the current Form 1099 to facilitate cross-checking by government auditors. This form records the quantity of merchandise purchased by retailers. An auditor would be able to cross-reference the retailer's inventory and sales records to ensure accuracy.46 It would be the business's responsibility to provide documentation upon auditing, but the burden of persuasion in a court of law should rest with the government.47
The exemption of business purchases is a fundamental premise of a NRST, in order to avoid hidden taxes. The system is not meant to be like the value added tax (VAT) where a good is taxed at every stage in the production process.48 Manufacturers and wholesale distributors will not be taxed. Only consumers at retail will be taxed, and they will see the entire tax burden printed on their receipt.49
The differentiation of personal and business uses for goods and services must be strictly maintained. Enforcement efforts must insure that exempt purchases are for business uses only. The creation of a business as a front to purchase goods tax-free and use those goods for personal consumption is a serious concern to be dealt with.50 Also, with mixed-use property, it can be difficult to distinguish between personal and business uses.51 According to the Representative Billy Tauzin's and Representative Linder's proposals being considered in the House of Representatives, a business exemption could only be used on goods or services that are for business use more than 95 percent of the time.52 This rule or a similar one must be adopted upon the introduction of a NRST.
Small businesses and independent contractors pose enforcement and compliance difficulties as well. They are most likely to evade payment of taxes, underreport taxes collected, or to use the monies collected as working capital. These problems should be eliminated with properly scheduled collection of taxes, regular audits, and appropriate penalties for noncompliance.53 Additionally, merchants would be liable for taxes due upon sales. This would create an incentive for businesses to keep accurate records of sales and make the distinction of sales for business or personal use.54
A comparative point is in order here. Although these transition rules seem complex, they pale in comparison to the current mountain of paperwork that the income tax entails. Most business organizations report that their members would gladly assume NRST compliance burdens in place of those imposed by present law.