The Texas Comptroller of Public Accounts publishes an interesting and informative monthly Tax Policy News. The March 2012 issue includes an article - "Spring is in the Air." It explains how Texas sales tax applies (or does not apply) to seeds, bulbs, trees, landscaping, stepping stones, pool cleaning and more. The article is almost 2,500 words long. There are a variety of special rules depending on who is selling, the income derived, etc.
Here is an excerpt from the article:
Special rules, rules that are not intuitive (such as washed, dried and sorted gravel is not considered processed), and the need for long explanations of the rules, indicates a complex tax system. Special rules usually often create inequities where similarly situation taxpayers (or items) are not taxed similarly. Also, the exemptions do not seem to be aimed to serve the only two good purposes - a sale to a business or a necessity of life. (Note - as I've often noted in this blog, a problem with exempting necessities of life, such as food, is that it provides a tremendous savings to higher income individuals who spend more on necessities. Taxing them with some type of relief to low-income taxpayers, such as a refundable income tax credit or monthly subsidy would be better.)
How could these rules be simplified? How about this for a statute:
Texas sales tax is imposed on all items sold to non-business customers. Such tax is to be collected and remitted by the seller. Sellers must register with the state and will receive a tax identification number. Such number must be provided to sellers in order to receive a sales tax exemption. The only sales transactions not subject to sales tax are non-elective medical care and school tuition. Sellers with less than $10,000 of sales in the prior year may elect to remit sales tax on an annual basis either on a special sales tax reporting form or with their business income tax return.
With a broad base (although all business purchases would be exempt), the sales tax rate could be lowered. The above language could apply to any state, not just Texas.
What do you think?