As Jim VB has pointed out, the reporting requirement by Paypal does not change a taxpayer's obligation to properly file his or her income tax returns. As well, every state with a use tax requires taxpayers to self-assess out-of-state purchases. I have seen California use federal customs importing records to deal with unpaid California use tax.
A national value added tax (in which businesses get input credits on taxes they pay on their expenses) is the best taxing method in terms of fairness and cost of administration. As such, I expect there is somewhat less than a zero per cent chance of it ever being implemented.
In Canada, we have such a tax, and despite complaints from consumers, it levels the field of competition between sellers.
I act for many taxpayers with unreported revenue. And everyone of them has reported all their credit card sales, as they know that these amounts cannot escape detection of the tax authorities.
