The Fair Tax Act, Part XXXIII
Continuing on with more penalties:
`(e) Reckless or Willful Failure To Pay Tax- Each person who is required to and recklessly or willfully fails to pay taxes imposed by this subtitle shall be liable for a penalty equal to the greater of $500 or 20 percent of the tax not paid.
`(f) Penalty for Late Filing-
`(1) IN GENERAL- In the case of a failure by any person who is required to and fails to file a report required by section 501 on or before the due date (determined with regard to any extension) for such report, such person shall pay a penalty for each month or fraction thereof that said report is late equal to the greater of–
`(A) $50, or
`(B) 0.5 percent of the gross payments required to be shown on the report.
`(2) INCREASED PENALTY ON RETURNS FILED AFTER WRITTEN INQUIRY- The amount of the penalty under paragraph (1) shall be doubled with respect to any report filed after a written inquiry with respect to such report is received by the taxpayer from the sales tax administering authority.
`(3) LIMITATION- The penalty imposed under this subsection shall not exceed 12 percent.
`(4) EXCEPTIONS-
`(A) REASONABLE CAUSE- No penalty shall be imposed under this subsection with respect to any failure if it is shown that such failure is due to reasonable cause.
`(B) OTHER WAIVER AUTHORITY- In addition to penalties not imposed by reason of subparagraph (A), the sales tax administering authority, on application, shall waive the penalty imposed by paragraph (1) once per registered person per 24-month period. The preceding sentence shall not apply to a penalty determined under paragraph (2).
`(g) Penalty for Willfully or Recklessly Accepting a False Intermediate or Export Sales Certificate- A person who willingly or recklessly accepts a false intermediate or export sales certificate shall pay a penalty equal to 20 percent of the tax not collected by reason of said acceptance.
This could stack up to be a large amount of money if you continued to do business with someone known to have a false certificate.
`(h) Penalty for Late Remittance of Taxes-
`(1) IN GENERAL- A person who is required to timely remit taxes imposed by this subtitle and remits taxes more than 1 month after such taxes are due shall pay a penalty equal to 1 percent per month (or fraction thereof) from the due date.
`(2) LIMITATION- The penalty imposed under this subsection shall not exceed 24 percent.
`(3) EXCEPTIONS FOR REASONABLE CAUSE- No penalty shall be imposed under paragraph (1) with respect to any late remittance if it is shown that such late remittance is due to reasonable cause.
`(i) Penalty for Filing False Rebate Claim-
`(1) CIVIL PENALTY; FRAUD- A person who willingly or recklessly files a false claim for a family consumption allowance rebate (within the meaning of chapter 3) shall–
`(A) pay a penalty equal to the greater of $500 or 50 percent of the claimed annual rebate amount not actually due, and
`(B) repay any rebates received as a result of the false rebate claim (together with interest).
`(2) CRIMINAL PENALTY- A person who willingly files a false claim for a family consumption allowance rebate (within the meaning of chapter 3) may be fined an amount up to the amount determined in accordance with paragraph (1) or imprisoned for a period not more than 1 year or both.
Seems like these penalties are fairly consistent across the board: minimum $500 penalty, maximum (generally) 20% penalty, maximum jail time 1 year for pretty much any tax evasion crime so far.
This whole section on penalties gives me severe gas pains. My overarching concern is the federal/ state and local relationships that HR25 seems to establish. As I’ve written earlier, I believe that certain aspects of HR25 may be unconstitutional under the doctrine of intergovernmental tax immunity. Here is my concern with the penalty section as it might relate to the relationships between two sovereign powers–federal and state.
In the first place, those states that raise revenue through sales taxes already have penalty clauses established by state law. And they differ from state to state. Here comes the federal government with a “one size fits all” penalty definition, and I just don’t believe that’s necessarily good. Or constitutional.
Next (and this might be a stretch), HR25 defines a “person” as, among other things, a government or government agency. Try reading this penalty section by replacing “person” with “state government” or “sales tax administrator” and see how it sounds.
Frankly, I think the authors of HR25 got a little carried away with the penalty section, and in the process may have set up an unnecessary confrontation with the states. Stay tuned!
As I have mentioned to you before, these rules ONLY apply to the FairTax itself, not to any state taxes or laws. These rules do not replace or trump any state rules or regulations concerning state taxes.
And secondly, these penalties (at least so far as I have read) are similar to those used for Federal income taxes today, but altered to take into account the new rules of the game. So I don’t believe anyone is getting ‘carried away.’ All tax reform legislation comes with enforcement and penalties. Otherwise they aren’t laws. They’d only be ‘guidelines.’
Finally, most state government issues were explicitly taken care of in an earlier section (Chapter 4), at least at the sales tax authority level. However, this section is for individuals. If a state government employee, acting in his official position, breaks tax law, that agency would still have to make good, but the person in question alone would bear most of the liability. No official or bureaucrat would be immune, nor are they today, but that does not affect a government as a whole. You can’t imprison a government, for example.
Hank, I can think of at least a dozen areas right off the top of my head where state and federal laws provide several ways to get at a criminal. The presence of civil and criminal sanctions specific to the collection and remittance of the FairTax strikes me as a very mild bit of overlap. Keep in mind that any time a person uses mail, telephone lines, the internet or any courier service who does business in more than one state in order to further some “scheme” of fraud, that person has committed a federal crime regardless of what state crimes he’s committed. And he can be prosecuted and convicted for both.
Theft or embezzlement from an ERISA plan or from a union fund would both be regular theft/embezzlement/conversion violations under state law as well as violations of more specific federal statutes. 18 USC 664 makes it a crime to embezzle, steal or unlawfully abstract or convert to one’s own use or to the use of another, any assets of an ERISA benefit plan. Each count is a 5 yr felony under federal law. The same crime could just as easily be prosecuted in state court under whatever the various state laws are that prohibit theft, embezzlement or unlawful conversion.
Anyway... long-winded way of saying that the crimes listed here are absolutely nothing new or innovative. In fact, James hit the nail on the head when he reiterates that these have nothing to do with the collection of state taxes. The states will have to have their own laws to deal with that just like they do now. And just like it does now, the federal gov’t will have a set of crimes for dealing with people who try to cheat the federal tax system.