>>Oh yes it does. The sales tax has the exact same problem. Everyone will try to make all expenses business expenses and not be subject to sales tax.
I disagree. Most states already have a sales tax and know how to implement and enforce it. If the tax is low enough, then it would be more effort than it was worth to try and circumvent the tax.
The federal sales tax alone will be 30%. No one in history has every successfully implimented a 30% broad sales tax on goods and services. Avoidance will be huge. Studies in Europe suggest anything over 10% causes a significant amount of avoidance.