Sorry, but I must respectfully disagree. Of course tax audits would still exist for the entities collecting those taxes. I went thru a state tax audit myself and it was hell.* But this would not open every individual to an audit. Once the tax is paid by the purchaser...it's over for them. That narrows the field. That, imho, would reduce the size of the IRS.
*If you've never taken a gander at the Tx sales tax laws...it will make your head spin. I would be absolutely against the feds doing some crazy like that.
Actually, it's not. States have what is called the compensating use tax, and that is a tax that is imposed directly on the consumer - the buyer - and not collected by the retailer. Without an income tax, use tax assessments will become a much bigger issue.
Secondly, if you as the purchaser do not pay the sales tax that was supposed to be collected, you are still on the hook for the tax. Most states simply go after the retailer because that's much easier than going after the consumer, but the consumer is supposed to be paying the tax. If the sales tax is the only primary revenue source, you can bet bottom dollar audits of consumers will increase.
Thirdly, with the tax rate set at about 40% or so, every retailer will be subject to almost constant audit because of the inventive to evade payment of the tax.
Fourth, most states tax a number of services as well as retail goods, and that can be expected to increase. All service providers of any sort will be required to collect sales tax.
Fifth, it will actually make it easier for auditors to take advantage of sellers and gouge them for taxes. This happens already under state sales tax systems for the simple reason that most tax authorities are allowed to assess tax for multiple years based on a "statistical" sampling of the businesses' activities that, in practice, usually amounts to putting an auditor at the cash register for a few days to record all taxable sales, and then extrapolating the recorded sales to every day in the audit period, which is usually two to three years long.
I have personally seen this happen to some small retailers, and if they do not have massive amounts of totally accurate records to refute the tax department's extrapolations, the courts will uniformly support the tax departments and uphold the assessments.
There is a classic case in New York where the Tax Department put an auditor at the cash register for a little bodega that operated near one of the LIRR stations. They put him there on a Thursday, which was his biggest sales day for cigarettes because everyone was coming off the trains and buying cigarettes on their way to the bar. Thursday sales were actually about four or five times bigger than sales on any other day. But that was irrelevant to the tax department and to the courts because the retailer had not kept complete and accurate records. So he was taxed as if he had been making the same level of sales seven days a week, even though the sales the other six days were a small percentage of the Thursday sales.
And that doesn't just happen in New York. The use of that sort of invalid statistical analysis is sanctioned in many states. Furthermore, auditors have an incentive to overassess when they can get away with it, even in the vaunted State of Texas, as this article points out:
https://texastaxgroup.com/2023/02/03/inside-the-mind-of-a-texas-comptroller-sales-tax-auditor/WADR, only a naive idiot thinks that a national retail sales tax is going to be a panacea.
