 The FairTax is a national tax , but can be administered by the states rather than a federal agency , which may have a bearing on compliance as the states ' own agencies could monitor and audit businesses within that state . The 0 @.@ 25 % retained by the states amounts to $ 5 billion the states would have available for enforcement and administration . For example , California should receive over $ 500 million for enforcement and administration , which is more than the $ 327 million budget for the state 's sales and excise taxes . Because the federal money paid to the states would be a percentage of the total revenue collected , John Linder claims the states would have an incentive to maximize collections . Proponents believe that states that choose to conform to the federal tax base would have advantages in enforcement , information sharing , and clear interstate revenue allocation rules . A study by the Beacon Hill Institute concluded that , on average , states could more than halve their sales tax rates and that state economies would benefit greatly from adopting a state @-@ level FairTax . 
