If I run a small business, and I do $500,000 in business, my customers pay the FairtTax, and I remit that to the state, which remits some to the feds -- or something like that, right?
What if I tell the state that my business did -- **cough** -- $300,000 in business? Is there a mechanism whereby a tax collector can say, "hold on there, matey --!"
I don’t know which state you live in, but if you live in a state that has a state sales tax, in today’s environment, you are subject to audit by your state revenue department.
That will not change — you will collect the state and the federal sales tax and remit them to the state sales tax collection agency. And, you will be required to keep records of sales, returns, taxes collected, etc., etc. Pretty much the same records you are required to keep today for STATE SALES TAX PURPOSES.
I emphasized the state sales tax because keeping those records is one or two orders of magnitude less difficult than keeping all the records required to file Federal Income taxes.
And, in addition, businesses will be paid a small fee to offset their expense in collecting the tax, and will the states.
More information can be found at:
http://www.fairtax.org/PDF/TheImpactOfTheFairTaxOnSmallBusiness.pdf
PS Whoops! I expounded at length and never really answered your question:
Yes there is — it will pay for each business to keep good records and be able to prove that their records are complete and accurate.