 Businesses would be required to submit monthly or quarterly reports ( depending on sales volume ) of taxable sales and sales tax collected on their monthly sales tax return . During audits , the business would have to produce invoices for the " business purchases " that they did not pay sales tax on , and would have to be able to show that they were genuine business expenses . Advocates state the significant 86 % reduction in collection points would greatly increase the likelihood of business audits , making tax evasion behavior much more risky . Additionally , the FairTax legislation has several fines and penalties for non @-@ compliance , and authorizes a mechanism for reporting tax cheats to obtain a reward . To prevent businesses from purchasing everything for their employees , in a family business for example , goods and services bought by the business for the employees that are not strictly for business use would be taxable . Health insurance or medical expenses would be an example where the business would have to pay the FairTax on these purchases . Taxable property and services purchased by a qualified non @-@ profit or religious organization " for business purposes " would not be taxable . 
