Closing the US State Sales Tax Gap: Lessons from Overseas Digital Invoicing Systems

• Adopting uniform digital invoicing could help mitigate the state sales tax gap in the US.
• Fiji has introduced an effective digital invoicing system that could serve as a model for US state tax authorities.
• The sales tax gap in the US is difficult to ascertain due to asymmetry in information between parties to a transaction and the taxing authority.
• Businesses have an incentive to make cash transactions disappear, leading to sales suppression techniques.
• Fiji’s digital invoicing system requires businesses to issue digital receipts for taxable sales, which are shared with the parties and the tax authority in real time.
• Implementing a similar system in the US would create a paper trail for all taxable transactions and allow for real-time auditing by the tax authority.
• There is a need for uniformity in any transition to digital invoicing to avoid placing an administrative burden on some merchants.
• State tax authorities should look at successful international models to close the sales tax gap.

Source: news.bloombergtax.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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