Word of the Month for October 2026: National Sales Tax

There are some words that sound almost comforting:  Freedom. Fairness. Simplicity.

And then there are three other words that make the hairs on the back of a taxpayer's neck stand up: "Federal Sales Tax."

Imagine, for a moment, that Congress comes along and tells you that the income tax is going away. No more Form 1040. No more withholding from your paycheck. No more payroll tax. No more federal estate and gift tax. And, perhaps most tantalizing of all, no more Internal Revenue Service.

Sounds pretty good, doesn't it?

Now imagine that Congress hands the job of collecting the replacement tax to the states.

Wait.  Hold up.  The ugly step sisters?  The bumbling in-laws?  Those are "the states" of which you speak?

Yep.  The very state governments that already have their own sales-tax statutes, tax commissions, regulations, auditors, filing requirements, exemptions, definitions, enforcement procedures and (depending upon where you live) some rather creative ideas about what constitutes a taxable "service"?

Now the plot thickens.

That is essentially what the FairTax Act of 2025, H.R. 25, 119th Cong., 1st Sess. (2025) proposes.

And before we go any further, let's clear up one piece of political housekeeping: H.R. 25 was NOT introduced by President Donald Trump. It was introduced by Representative Earl "Buddy" Carter of Georgia on January 3, 2025, and referred to the House Committee on Ways and Means. As of October 2026, it remains a bill not a law.

So why discuss it now?

Because H.R. 25 proposes one of the most radical changes to the federal tax system in modern American history.  And once you get past the seductive phrase "abolish the IRS," there is considerably more going on.

Before we get all into this, let's define what we're talking about here.  NATIONAL SALES TAX (noun): A national sales tax is a tax imposed by the federal government upon the consumption of taxable goods and services, generally collected at the point of retail sale rather than through taxation of income.

Under H.R. 25, the tax would be imposed on the 

use or consumption in the United States of taxable property or services. 

The bill calls for a 23-percent tax-inclusive rate beginning in 2027, with the rate thereafter tied to the revenue needed for general federal spending, Social Security and Medicare. H.R. 25 § 201, 119th Cong. (2025).

An important word hidden in plain sight is "inclusive."  

See, a 23-percent tax-inclusive rate is not the same thing as adding 23 percent to a $100 purchase.

For example, if the pre-tax price is $100, a 23-percent tax-inclusive rate produces a total price of approximately $129.87. In ordinary sales-tax language, that is roughly a 29.87-percent tax-exclusive rate.

So when somebody says, "It's only 23 percent," the reasonable response is:  "Twenty-three percent of what?" 

So, What Exactly Does H.R. 25 Do?

H.R. 25 is not simply a bill creating another sales tax.  It attempts to rebuild the federal tax system from the ground up in essentially 4 steps.

Step 1. The federal income tax goes out the window.

Section 101 repeals Subtitle A of the Internal Revenue Code, which contains the federal income and self-employment tax provisions.

Step 2. Federal payroll taxes go.

Section 102 repeals Subtitle C, including the federal payroll-tax machinery used for Social Security and Medicare.  But (and this is an important BUT) Social Security and Medicare do not disappear.

The bill instead directs federal sales-tax revenue into the Social Security and Medicare trust funds (under H.R. 25 § 102, § 904) which has been so "perfectly administered" by the federal government for lo these many years.

Step 3. Estate and gift taxes are gone.

Section 103 repeals Subtitle B of the Internal Revenue Code.

Step 4. The IRS is phased out.

This is where the headline gets interesting.  H.R. 25 provides for the phase-out of IRS funding and administration of the repealed federal taxes. It also creates a Sales Tax Bureau within the Department of the Treasury.

So "abolish the IRS" does not mean "abolish federal tax administration."

It means something closer to:  Abolish the IRS as we know it and replace its remaining federal tax functions with other Treasury machinery.

The bill specifically creates a Sales Tax Bureau to administer the national sales tax in states where federal administration becomes necessary and to perform other federal duties relating to the tax under H.R. 25 § 302.

That's our first little plot twist. 

The States Get the Collection Job

This may be the most interesting part of the entire bill.

H.R. 25 says that the national sales tax is to be "administered, collected, and remitted to the United States Treasury" by a state if that state qualifies as an "administering State."

To qualify, a state must maintain a sales tax and enter into a cooperative agreement with the Secretary of the Treasury.

So, as per H.R. 25 § 401 the agreement covers such things as:

• transfer of federal tax money;
• information exchange;
• confidentiality;
• taxpayer rights;
• dispute resolution; and
• other administrative matters.

And the states get paid for doing it.  That's right - an administering state may retain an administration fee equal to one-quarter of one percent of the federal tax it collects.

So the federal government says:  "This is our tax."

The state says:  "Sure. We'll collect it."  

And the state gets to keep a piece of the money for doing so.  That's not exactly the abolition of government tax administration; it's outsourcing. 

And Here Comes Uncle Sam Again

Remember that word in the title, "Primarily?"  H.R. 25 says the national sales tax will be administered primarily by the states.

Not exclusively by the states but "primarily."

What this means is that if a state does not qualify as an administering state, the Secretary of the Treasury administers the federal sales tax there. A state can also have another state perform the job under certain circumstances (kinda like how states dump their trash in New Jersey instead of their own landfills) under H.R. 25 § 404.

Of course, the Secretary of the Treasury retains substantial authority.  In fact, The Treasury Secretary may:

• issue regulations;
• issue guidelines;
• assist states;
• provide for uniform administration;
• provide public guidance;
• facilitate interstate agreements;
• resolve certain disputes among states; and
• administer the tax directly in certain jurisdictions.

If a state regulation conflicts with a lawful federal regulation concerning the federal sales tax, the federal regulation controls as per H.R. 25 § 402 and § 406.

So the IRS may be going out the front door but the federal government appears to be leaving a Treasury Department-shaped footprint in the back door. 

The Catch: State Sales Taxes Don't Go Away

This is another point that could easily get lost in the sales tax pitch.  

H.R. 25 does not abolish state sales taxes.  Instead, it specifically contemplates a "conforming State sales tax" which is a state tax using the same definition of taxable property and services as the federal system.

And the bill expressly contemplates that both the federal sales tax and a conforming state sales tax may be paid together in a single payment as per H.R. 25 § 2(a)(2), § 501.

In other words:  Federal sales tax + state sales tax = still possible.  In practice, what we the people could be looking at is a true Socialist 100% tax rate (50% to the Feds and 50% to the states).

So, while the national sales tax replaces federal income and payroll taxation, it does not magically make state taxation disappear.

And this is where things get interesting. 

Fifty States, Fifty Tax Personalities

Today, state sales taxes are hardly uniform.  Utah, for example, taxes tangible personal property and certain services, including particular repair, renovation, cleaning and maintenance services.

Oregon, by contrast, has no general sales or use tax.

That means a national system administered through state tax machinery immediately encounters a basic question:  What exactly is a taxable "service"?  

and that question is not academic.

Utah's courts have spent decades wrestling with it.

In Hardy v. State Tax Commission, 561 P.2d 1064 (Utah 1977), the Utah Supreme Court examined whether materials used by dentists in providing professional services were subject to sales or use tax. The court had to distinguish between the taxable sale of tangible property and a service in which tangible property was merely incidental.

Likewise, in BJ-Titan Services v. State Tax Commission, 842 P.2d 822 (Utah 1992), the Utah Supreme Court dealt with the difficult boundary between taxable tangible property and nontaxable services and discussed the state's "essence of the transaction" and "ultimate user or consumer" approaches.

That is the sort of dispute H.R. 25 would have to address on a national scale.

What happens when the plumber says the customer bought a service?

What happens when the plumber says the customer bought materials plus labor?

What happens when the software company sells a subscription?

What happens when the doctor provides medicine as part of a treatment?

What happens when an attorney sells advice?

What happens when artificial intelligence provides a service?

What happens when a business buys something that is partly for business and partly for personal use?

The bill has answers to some of these questions but/and it does not eliminate the need to argue about them. 

The Supreme Court Has Already Been Down This Road

The good news is that there is a substantial body of sales-tax constitutional law.  The bad news is that it demonstrates just how complicated interstate taxation can become.

In National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753 (1967), the Supreme Court held that Illinois could not require an out-of-state mail-order company with no physical presence in Illinois to collect Illinois use tax.

The world, however, changed.

In Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the Court retained the Commerce Clause physical-presence rule for state sales-tax collection even though its Due Process analysis had evolved. The Court expressly noted that Congress possessed the power to resolve the interstate taxation problem.

Then came the internet.

In South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), the Court overruled the physical-presence rule of Quill and permitted states to require certain remote sellers to collect sales tax based upon economic connections to the state.

In Complete Auto Transit, Inc. v. Brady, the Supreme Court established a four-part test for determining whether a state tax involving interstate commerce violates the Commerce Clause. The tax must apply to an activity with a substantial nexus to the taxing state, be fairly apportioned, not discriminate against interstate commerce, and be fairly related to services provided by the state. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977).

H.R. 25 is not operating in a constitutional vacuum.  It is stepping into a constitutional minefield that the Supreme Court has spent decades mapping. 

The Really Interesting Part: Destination

H.R. 25 uses a destination principle.  For tangible personal property, the destination generally is where the property is first delivered to the purchaser. Real property is taxed according to where the property is located. Other property generally follows the purchaser's residence, while services have their own destination rules as per H.R. 25 § 405.

Why does that matter?

Because the question becomes: Which state gets the money?

Suppose a company in Utah sells something to a customer in New York.  Utah collects it.  New York claims it.  The seller ships it from Nevada and the customer uses it in Florida.

Welcome to the tax lawyer's version of Clue.

H.R. 25 therefore creates a federal Office of Revenue Allocation to resolve disputes among administering states concerning where taxable property or services are destined. Its decisions would be subject to judicial review in federal court under an abuse-of-discretion standard under H.R. 25 § 405(i).

So, yes, the IRS is being abolished but federal courts, federal regulations, the Treasury Department and a federal Office of Revenue Allocation remain part of the scenery. 

What About Regulations?

Here is an important distinction.  There are no H.R. 25 implementing regulations yet because H.R. 25 is not law.  But the bill anticipates a substantial regulatory structure if enacted.

The Treasury Secretary would have authority to promulgate regulations concerning administration, uniformity, interstate taxation, imported goods, definitions and other matters.

The bill even requires most federal regulations to be published in the Federal Register and generally delayed for 90 days before taking effect, subject to an emergency exception as per H.R. 25 § 406.

Oh, and state tax administrators would still have their own rules and procedures.

That creates an interesting legal question:  How much "national" sales tax can you have when somebody else is doing the administering?

H.R. 25 attempts to answer that by making federal rules controlling when federal and state rules conflict.  And while that all sounds uniform, it also means that the supposedly simple national sales tax could generate an entirely new body of federal regulations interpreting what "taxable," "consumer," "service," "business," "investment," "export," "intermediate sale" and dozens of other terms mean.

The tax code may get shorter but the regulations may not. 

Oh and Don't Forget About the Audits

This is another myth worth killing.  A national sales tax does not mean nobody gets audited.

H.R. 25 gives the sales-tax administering authority authority to issue administrative summonses and conduct examinations and audits of people who may be liable to collect and remit the tax.

Businesses must maintain specified records for six years as per H.R. 25 §§ 507–508.

Oh, and don't forget about the penalties.

For example:

• knowingly or recklessly accepting a false intermediate or export certificate can trigger a penalty of 20 percent of the uncollected tax;
• late remittance can result in a penalty of 1 percent per month, up to 24 percent;
• false rebate claims can result in a civil penalty of at least $500 or 50 percent of the improperly claimed amount;
• certain false rebate claims can also carry criminal penalties of up to one year imprisonment.

as per H.R. 25 § 504.

So the IRS may disappear; auditors do not.  They just may be wearing state badges. 

The Family Consumption Allowance

H.R. 25 attempts to address one of the biggest criticisms of a consumption tax: poorer households generally spend a greater proportion of their income on necessities.  The bill therefore creates a monthly Family Consumption Allowance, commonly called the "prebate."

Under this "prebate," a qualifying family would receive a monthly amount calculated by multiplying the federal sales-tax rate by the applicable monthly poverty level.

But there is a catch here, too.  The family has to register.

Under H.R. 25 § 301–305, the registration requires information including the names and Social Security numbers of family members sharing the household.

So the system that says:  "You don't have to deal with the IRS anymore" still requires Americans who want their monthly federal consumption allowance to register with the sales-tax administering authority.

Again: Different tax system. Different paperwork. 

So, What Could Possibly Go Wrong?

Now we get to the part every reasonable taxpayer should be asking about.  Not because H.R. 25 is necessarily evil.  Not because the current tax system is wonderful.  But because every complicated government system eventually encounters the law of unintended consequences.

1. The "23 percent" problem

The 23-percent rate is tax-inclusive.  On a conventional tax-exclusive basis, it is approximately 30 percent.  That distinction could become a political and consumer-relations headache.

2. The state bureaucracy problem

Instead of one primary federal tax administrator, taxpayers could be dealing with state agencies administering a federal tax under federal regulations.  That could produce substantial differences in administration, enforcement culture and taxpayer experience.  The Tax Foundation has specifically identified this concern, noting that taxpayers could effectively encounter as many as 51 administering agencies rather than one IRS.

3. The "what is a service?" problem

The more the economy moves toward services, subscriptions, digital products, artificial intelligence and hybrid transactions, the harder it becomes to draw a bright line around taxable consumption.  State courts already struggle with this problem.  A national system will not make the question disappear.

4. The state-tax stacking problem

Nothing in H.R. 25 abolishes state and local taxation.  As I noted above, a federal consumption tax could very well coexist with state and local sales taxes.  The cash register could become a rather crowded neighborhood.

5. The evasion problem

A very high retail tax creates a substantial incentive to avoid the tax.  

• Buy used instead of new.
• Buy from someone who does not collect.
• Buy across borders.
• Pay cash.
• Barter.
• Call a taxable sale a "service."
• Call a service a "business input."

The higher the tax, the more valuable avoidance becomes.  The bill therefore contains substantial enforcement provisions which brings us right back to audits, records, penalties and government enforcement; none of which address the obvious black market this bill would create.  

6. The "Congress can change its mind" problem

Perhaps the most interesting constitutional wrinkle is the Sixteenth Amendment.  H.R. 25 states that Congress finds that the Sixteenth Amendment should be repealed.  

Wait, what?!  Why get rid of the 16th Amendment?

There is nothing defective about the 16th Amendment that requires repeal.  H.R. 25's sponsors simply want it repealed for a strategic reason: to prevent a future Congress from bringing back a federal income tax after the Fair Tax has replaced it.

Confused?  Let me break this down for you.

The Sixteenth Amendment says:

“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States…”

The Supreme Court has repeatedly explained that the Amendment removed the constitutional obstacle that Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), 158 U.S. 601 (1895), had created for federal income taxation. In Brushaber v. Union Pacific Railroad Co., 240 U.S. 1 (1916), the Court explained that the Amendment confirmed Congress's ability to impose income taxes without apportionment.

So why does H.R. 25 want it gone?  Because repealing the Internal Revenue Code is not the same thing as repealing the constitutional power to tax income.  H.R. 25 would repeal the federal income-tax statutes, but the Sixteenth Amendment would remain sitting in the Constitution.

That means a future Congress could theoretically say:  "Well, we tried this national sales-tax thing and it didn't work.  Let's enact an income tax again."  And Congress wouldn't first have to amend the Constitution to obtain the power to tax income. The constitutional authority would already be there.

That is precisely why H.R. 25 contains its rather extraordinary seven-year sunset provision.  Section 401 provides that if the Sixteenth Amendment isn't repealed within seven years after enactment, the Fair Tax provisions eventually terminate.

Basically, H.R. 25 sponsors want to remove the safety net under their high wire act. 

The Bottom Line

There is nothing inherently unconstitutional about Congress replacing one method of federal taxation with another. The Constitution gives Congress broad taxing authority, subject to constitutional limitations.

Nor is there anything inherently sinister about allowing states to administer a federal tax. Congress has used federal-state cooperative arrangements in numerous areas of government.

The interesting question is whether the proposed system would actually be simpler for Americans.  And it might be.

It might also turn the United States into a nationwide sales-tax laboratory in which 50 states, federal regulators, federal courts, state courts, businesses and taxpayers spend the next decade litigating what exactly constitutes taxable consumption.

And that is the part worth watching.

So, while the IRS may be leaving the stage, the Treasury, state tax agencies, auditors, federal regulations, state regulations, federal courts, state courts, record keeping requirements, penalties and a brand-new Sales Tax Bureau are just waiting in the wings to snatch up your disposable income.

Essentially, same government, new cash register.  And if that sounds suspiciously like the plot twist at the end of a tax-law thriller, well...welcome to the National Sales Tax!

 

 

Legal Myth Monday: Can the Law Catch the AI Machine?

Artificial intelligence has been around considerably longer than the current panic over it. What has changed is that AI has moved from something largely confined to laboratories, universities, and specialized industries into something an ordinary person can carry around in a pocket.

And that creates a rather interesting legal problem.

Legislatures are discovering that AI can write, draw, imitate voices, make decisions, generate evidence, screen job applicants, analyze medical information, produce legal briefs, create convincing fake images, and sometimes confidently announce things that are completely untrue.

Kinda like how CNN does business. 

Naturally, governments have begun doing what governments traditionally do when technology outruns the law:  They are writing laws and creating legislation.  Whether those laws actually solve the problems they are intended to solve is another question entirely.

So, this week's Legal Myths Monday takes a look at fifteen common assumptions about AI and fifteen jurisdictions already attempting to answer them.

1. UTAH

Myth: “If I am talking to an AI, the law doesn't care whether I know it is a machine.”

Reality: Not necessarily.

Explanation

Utah was one of the earliest states to impose a specific disclosure requirement on certain uses of generative AI.

The Utah Artificial Intelligence Policy Act requires disclosure in certain regulated-occupation and consumer-protection contexts. A person using generative AI in connection with regulated services must disclose that the person is interacting with AI, including disclosure at the beginning of an oral exchange and before a written exchange.

The law does not mean every conversation with ChatGPT requires a flashing neon sign announcing, “THIS IS A ROBOT.” The obligation depends upon the statutory circumstances.

Related Authority:  

Utah Artificial Intelligence Policy Act, Utah Code Ann. tit. 13, ch. 72 (2024).

What this authority is about:  

Utah created an Office of Artificial Intelligence Policy and established a regulatory framework dealing with AI, including consumer protection, disclosure, regulatory mitigation, and an AI regulatory-learning laboratory.

How this authority is being applied:  Utah's approach is notable because it attempts to regulate AI without simply banning it. The state created a regulatory-mitigation system through which qualifying AI developers can test systems under specified conditions while obtaining temporary relief from certain regulatory requirements.

Potential problem:   

Disclosure rules sound simple until someone has to determine when disclosure is legally required, what counts as sufficient disclosure, and how much disclosure becomes so ubiquitous that consumers simply stop noticing it.

At some point, “You are interacting with AI” could become the digital equivalent of the 47-page terms-of-service agreement nobody reads.

Cheeky Reality Check:  

Utah didn't outlaw the robot. It simply told the robot to introduce itself. 

2. COLORADO

Myth: “If an AI system discriminates, the computer, not the company, is responsible.”

Reality: No. Colorado's law looks to the developer and deployer.

Explanation

Colorado's AI law addresses what happens when a high-risk AI system produces discriminatory outcomes.

The statute places duties on both developers and deployers and requires reasonable care concerning known or reasonably foreseeable risks of algorithmic discrimination.

Related Authority

Colo. Rev. Stat. §§ 6-1-1701 to -1707 (2024), as enacted by S.B. 24-205, Consumer Protections for Artificial Intelligence.

What this authority is about

Colorado's framework focuses particularly on high-risk AI systems used in consequential areas such as employment, financial services, housing, education, insurance, and other decisions affecting individuals.

Among other things, developers must provide information and documentation allowing deployers to conduct impact assessments, and developers must disclose certain known or reasonably foreseeable discriminatory risks.

How this authority is being applied

The principal operative provisions began taking effect in 2026. The law attempts to create a compliance structure rather than waiting for a discriminatory AI system to cause harm and then trying to determine who should have known what.

Potential problem

The difficult question is not necessarily whether discrimination is bad. Everyone agrees on that.

The difficult question is how much responsibility can realistically be assigned to a developer for an AI system after a third party deploys it in circumstances the developer did not anticipate?

The more expansive the liability standard becomes, the more developers may respond by restricting what their systems can do rather than making them more useful.

Cheeky Reality Check

The computer may make the decision but Colorado still knows where the developer lives. 

3. CALIFORNIA

Myth: “California tried to regulate AI, so AI companies now have to get government permission before releasing a model.”

Reality: Not under California's enacted frontier-AI law.

Explanation

California's earlier attempt at sweeping frontier-model regulation became nationally controversial. But the law that ultimately took effect was SB 53, the Transparency in Frontier Artificial Intelligence Act.

It focuses heavily on transparency, safety frameworks, reporting, and whistleblower protections rather than requiring the government to approve every AI model before release.

Related Authority

Cal. Bus. & Prof. Code §§ 22757.10–22757.14 (2025).

What this authority is about

SB 53 requires qualifying frontier AI developers to establish and publish AI safety frameworks. Large frontier developers must address catastrophic-risk thresholds, mitigation measures, incident response, and other safety considerations.

The statute also creates reporting mechanisms and protections for covered employees who disclose qualifying safety concerns.

How this authority is being applied

The statute became effective January 1, 2026. Large frontier developers are required to publish their frameworks, and frontier developers have transparency-report obligations concerning new or substantially modified frontier models.

Potential problem

Transparency is useful only to the extent that the information disclosed is meaningful.

A 200-page safety document can technically provide transparency while still leaving an ordinary member of the public with absolutely no idea what the AI actually does.

Cheeky Reality Check

California didn't put a leash on the robot.  It made the robot file paperwork explaining why it thinks it needs one. 

4. ILLINOIS

Myth: “An employer can use AI to hire, fire, or promote people without telling them.”

Reality: Illinois says AI-assisted employment decisions remain subject to civil-rights law—and notice may be required.

Explanation

Illinois amended its Human Rights Act to specifically address AI in employment.

The statute prohibits employers from using AI in employment-related decisions when the use has the effect of subjecting employees to discrimination based upon protected classifications. It also requires notice to employees when AI is used for specified employment purposes.

Related Authority

775 Ill. Comp. Stat. 5/2-102(L) (2026); 775 Ill. Comp. Stat. 5/2-101(N)–(O).

What this authority is about

The Illinois law expressly defines artificial intelligence and generative AI and applies existing employment-discrimination principles to AI-assisted employment decisions.

How this authority is being applied

The provisions became effective January 1, 2026. The Illinois Department of Human Rights is responsible for adopting implementation rules concerning when notice is required and how that notice must be given.

Potential problem

AI can reproduce discrimination found in the data used to train or operate it. But the reverse problem also exists: a system designed to eliminate human subjectivity can itself become so complicated that an employer may have difficulty explaining exactly why a candidate was rejected.

That creates a familiar legal problem in a new technological costume:  Who has to explain the decision when nobody (not even the employer) fully understands the model's reasoning?

Cheeky Reality Check

Illinois has effectively told employers: If the robot is going to reject the applicant, somebody better know why. 

5. TENNESSEE

Myth: “Your voice cannot be stolen because a voice isn't your name or image.”

Reality: Tennessee says your voice can be legally protected as part of your identity.

Explanation

Traditional right-of-publicity laws generally focused on a person's name, image, likeness, or similar identifiers.

Generative AI changed the equation because a system can reproduce a person's voice without recording that person saying the new words.

Tennessee responded directly.

Related Authority

Tenn. Code Ann. §§ 47-25-1101 to -1108 (2024), Ensuring Likeness, Voice, and Image Security Act (ELVIS Act).

What this authority is about

The ELVIS Act expanded Tennessee's right-of-publicity protections to include a person's voice and specifically addresses AI-generated replicas.

How this authority is being applied

The statute provides remedies for unauthorized use of protected identity attributes, including AI-generated voice replicas.

Potential problem

The difficult line is between identity theft and artistic expression.

What happens when someone creates an obvious parody of a famous singer? What about commentary, satire, imitation, or an AI-generated character that merely sounds remarkably similar?

The statute contains exceptions and defenses, but the collision between publicity rights and free expression is likely to generate litigation.

Cheeky Reality Check

Apparently, in Tennessee, your voice now has a lawyer. 

6. VIRGINIA

Myth: “If AI recommends a criminal sentence, the judge can simply rubber-stamp the recommendation.”

Reality: Virginia requires a human decision-maker.

Explanation

Virginia has specifically addressed AI-assisted criminal-justice decisions.

The law does not permit AI to become the judge, probation officer, or parole authority simply because a computer-generated recommendation looks mathematically impressive.

Related Authority

Va. Code Ann. § 19.2-11.14 (2025).

What this authority is about

The statute provides that decisions concerning pretrial detention or release, prosecution, adjudication, sentencing, probation, parole, correctional supervision, or rehabilitation must be made by the responsible human decision-maker.

AI may provide recommendations or predictions, but the ultimate decision must involve a human.

How this authority is being applied

The statute expressly permits AI-based recommendations while preserving the human decision-maker's authority and allowing challenges or objections permitted by law.

Potential problem

“Human in the loop” sounds reassuring.

But a human decision-maker who routinely accepts a computer's recommendation without meaningful independent consideration may produce little more than human-shaped rubber stamping.

The statute therefore solves the easy problem: keeping a human involved without necessarily answering the harder question: How much independent judgment must the human exercise?

Cheeky Reality Check

Virginia has made one thing clear:  The robot may advise the judge but the robot does not get the gavel. 

7. NEW JERSEY

Myth: “A deepfake is protected speech simply because nobody was physically impersonated.”

Reality: Not necessarily. New Jersey has criminalized specified deceptive AI-generated audio and visual media.

Explanation

New Jersey enacted legislation specifically addressing deceptive audio and visual media—commonly called deepfakes.

The statute distinguishes unlawful deceptive media from protected criticism, commentary, satire, parody, news reporting, teaching, scholarship, and research.

Related Authority

N.J. Stat. Ann. §§ 2C:21-17.7 to -17.8 (2025).

What this authority is about

The law establishes criminal and civil liability for specified production, solicitation, use, and dissemination of deceptive audio or visual media, particularly when connected to enumerated crimes or other unlawful purposes.

How this authority is being applied

The law became part of New Jersey's criminal and civil-law framework in 2025. It also expressly preserves protections for certain expressive uses and maintains federal § 230 protections for qualifying providers.

Potential problem

The statute must draw a line between a lie designed to deceive and a fake designed to communicate that it is fake.

That sounds easy until satire enters the room.

A realistic parody can be almost indistinguishable from a malicious deepfake, particularly when it is removed from its original context and reposted elsewhere.

Cheeky Reality Check

The law recognizes that a fake can be dangerous.  It also recognizes that sometimes the joke is supposed to be fake.

Apparently even New Jersey wants the jury to know the difference. 

8. TEXAS

Myth: “Texas has decided that regulating AI means regulating everything AI does.”

Reality: Texas took a more targeted approach.

Explanation

Texas's 2025 Responsible Artificial Intelligence Governance Act identifies specific prohibited uses rather than declaring AI itself unlawful.

Among other things, it addresses intentional manipulation of human behavior, government social scoring, certain biometric-data uses, unlawful discrimination, and certain political-viewpoint-related AI conduct.

Related Authority

Tex. Bus. & Com. Code ch. 551 (2025), Texas Responsible Artificial Intelligence Governance Act, enacted by H.B. 149.

What this authority is about

The legislation establishes substantive restrictions, creates an enforcement structure, establishes an AI council, and creates a regulatory sandbox allowing qualifying AI systems to be tested under controlled circumstances.

How this authority is being applied

The principal provisions took effect January 1, 2026.

The Texas approach is particularly interesting because the law combines restrictions with a regulatory sandbox intended to permit experimentation while temporarily reducing certain regulatory barriers.

Potential problem

Texas illustrates the problem with trying to regulate AI through a list of prohibited conduct:  AI changes faster than statutory definitions.

By the time legislators identify “the thing we are worried about,” the technology may have already moved several versions beyond it.

Cheeky Reality Check

Texas didn't tell AI to get off the ranch. It built a fence around certain things AI isn't supposed to do and created a sandbox for the things nobody has figured out yet. 

9. NEW YORK

Myth: “If a lawyer uses AI to prepare a legal filing, nobody has to know.”

Reality: New York has considered legislation that would require disclosure.

Explanation

New York Assembly Bill A9097 would require disclosure of generative-AI use to clients, criminal defendants, and courts.

Importantly, this is proposed legislation, not an enacted statewide rule.

Related Authority

N.Y. Assemb. A9097, 2025–2026 Reg. Sess.

What this authority is about

The bill would amend New York procedural law to require specified disclosures when lawyers use generative AI.

How this authority is being applied

As of September 2026, the bill remains in committee rather than being an enacted statewide requirement.

Nevertheless, the proposal demonstrates one direction lawmakers are considering: treating disclosure of AI use as part of professional transparency.

Potential problem

Disclosure can tell the client that AI was used.

It does not necessarily tell the client whether the lawyer actually verified what the AI produced.

Those are two very different things.

Cheeky Reality Check

Telling the court, “Yes, I used AI,” is transparency.  Telling the court, “And yes, I actually read what it wrote,” is competence. 

10. MARYLAND

Myth: “Government agencies can use AI however they want because the government is the one doing it.”

Reality: Maryland has imposed governance requirements on its own government.

Explanation

Maryland's AI Governance Act requires state agencies to inventory and assess their AI systems and establishes governmental oversight mechanisms.

Related Authority

Md. Code Ann., State Gov't § 3.5-801 et seq. (2024), enacted through S.B. 818, Chapter 496.

What this authority is about

The law establishes requirements concerning governmental AI inventories, assessments, policies, procedures, and oversight.

How this authority is being applied

Maryland maintains a public accounting of state AI use and has created a governance structure for state deployment.

The state has also continued adding AI-specific programs and oversight measures.

Potential problem

Government transparency creates a useful record—but also creates a logistical question:

Who audits the auditors?

If an agency uses an AI system to make recommendations, someone has to evaluate the system, the data, the vendor, the implementation, and the agency's use of the recommendation.

Eventually, the oversight apparatus can become almost as complicated as the technology it is supposed to oversee.

Cheeky Reality Check

Maryland's solution to government AI is apparently:  “Sure, government can use the robot. But government has to keep receipts.” 

11. EUROPEAN UNION

Myth: “The EU AI Act bans artificial intelligence.”

Reality: No. It regulates AI according to risk.

Explanation

The EU Artificial Intelligence Act is perhaps the most comprehensive AI regulatory framework currently operating.

It does not simply say “AI is illegal.”

Instead, it establishes categories of prohibited practices, general-purpose AI obligations, transparency requirements, and additional obligations for high-risk systems.

Related Authority

Regulation (EU) 2024/1689, 2024 O.J. (L 2024/1689).

What this authority is about

The AI Act prohibits specified AI practices regarded as presenting unacceptable risks, imposes obligations on providers of general-purpose AI models, establishes transparency requirements, and creates additional requirements for high-risk systems.

How this authority is being applied

The Act's provisions are being implemented in stages.

As of August 2, 2026, major portions of the framework—including enforcement powers and transparency obligations—have become applicable. Other high-risk provisions do not apply until later transition dates, including 2027 and 2028.

Potential problem

The EU model demonstrates the problem with comprehensive legislation:

The larger the regulatory framework becomes, the more difficult it becomes for businesses—particularly smaller businesses—to determine exactly which provisions apply to them.

And unlike software, legislation does not update itself when the next model arrives.

Cheeky Reality Check

The EU didn't outlaw AI.  It gave AI a regulatory passport, customs inspection, luggage search, and several forms to complete before entering the terminal. 

12. CHINA

Myth: “China has no meaningful AI regulation because AI developed too quickly for government regulation.”

Reality: China was regulating generative AI before many Western jurisdictions had enacted AI-specific statutes.

Explanation

China's regulatory model is significantly different from the risk-based European approach.

China has already established rules governing generative AI services offered to the public.

Related Authority

Generative Artificial Intelligence Service Management Interim Measures, Order No. 15 of the Cyberspace Administration of China (effective Aug. 15, 2023).

What this authority is about

The rules regulate publicly available generative AI services and impose requirements involving training data, intellectual property, personal information, content moderation, security, transparency, and labeling.

Providers must take measures concerning unlawful content and may face regulatory consequences for violations.

How this authority is being applied

The rules have been in force since August 2023 and operate alongside China's broader cybersecurity, data-security, and personal-information regimes.

Potential problem

A regulatory system that requires AI providers to control generated content creates an obvious technical problem:

Generative AI is probabilistic.

A rule can say “do not produce X.”

The machine still has to determine what X is.

The more expansive the prohibited-content category becomes, the more complicated moderation becomes—and the greater the possibility of both overblocking and underblocking.

Cheeky Reality Check

China solved one AI problem the old-fashioned way: It told the AI what it is allowed to say.  The harder part is getting the AI to agree. 

13. SINGAPORE

Myth: “Deepfakes become legal if the creator puts a disclaimer on them.”

Reality: A disclaimer can matter, but it is not a universal legal shield.

Explanation

Singapore has enacted legislation addressing digitally manipulated and AI-generated material in the context of online harms.

Its Online Safety (Relief and Accountability) Act specifically recognizes generative AI as a technology capable of producing realistic deceptive depictions.

Related Authority

Online Safety (Relief and Accountability) Act 2025 (Sing.).

What this authority is about

The statute addresses harmful online material and includes provisions dealing with realistic manipulated or generated depictions of individuals.

The statutory framework recognizes that labeling may affect whether a depiction is realistically deceptive to a reasonable person.

How this authority is being applied

The law is part of Singapore's broader online-safety framework, with provisions coming into operation according to commencement orders.

Potential problem

A label can reduce deception.

But it cannot necessarily undo the damage caused when millions of people see the image before they see the label or when the image is copied, cropped, reposted, or stripped of its original context.

Cheeky Reality Check

“AI-generated” may save the label but it doesn't necessarily save the reputation. 

14. UNITED KINGDOM

Myth: “Britain has already enacted one giant AI law equivalent to the EU AI Act.”

Reality: The British approach has been considerably more fragmented—and continues to evolve.

Explanation

The United Kingdom has pursued AI regulation through existing regulators, sector-specific legislation, consultations, proposed bills, and targeted amendments rather than simply reproducing the EU's comprehensive AI Act.

One particularly important recent development concerns AI-generated intimate imagery.

Related Authority

Data (Use and Access) Act 2025, c. 18, § 138 (U.K.); Sexual Offences Act 2003 provisions concerning purported intimate images.

What this authority is about

The legislation creates offenses concerning the creation or requesting of purported intimate images of adults without consent or reasonable belief in consent. The statutory concept expressly encompasses images that appear to depict a person but are not authentic photographs or films of that person.

How this authority is being applied

The law provides a direct criminal-law response to one of the most obvious harmful uses of generative AI: creating realistic intimate images of people who never consented to their creation.

At the same time, the UK continues to examine broader questions involving AI and copyright, including AI training on copyrighted material.

Potential problem

The British approach demonstrates a different problem from the EU model.  Instead of one comprehensive statute, regulation may emerge from numerous laws and regulators.

That can produce flexibility but also creates a legal scavenger hunt for businesses and citizens trying to determine which rule governs which AI activity.

Cheeky Reality Check

Britain apparently looked at the EU AI Act and said:  “That's a lot of legislation. Let's distribute the fun.”

15. AUSTRALIA

Myth: “If AI regulation has not been enacted yet, Australia has no legal position on AI.”

Reality: Australia is building a regulatory framework while simultaneously wrestling with AI, copyright, data centers, and training data.

Explanation

Australia provides an excellent example of the problem you identified at the beginning of this article: legislation frequently arrives after the technology has already changed the legal landscape.

Australia has been developing mandatory AI guardrails while maintaining a voluntary AI Safety Standard and considering copyright reforms concerning AI training.

Related Authority

Australian Department of Industry, Science and Resources, Voluntary AI Safety Standard (2025); Australian Government, “AI in Australia's interests” (July 15, 2026); Copyright and AI consultation and 2026 government report.

What this authority is about

Australia's voluntary AI Safety Standard establishes ten guardrails involving accountability, risk management, transparency, testing, human oversight, and related safeguards.

The Australian government has also announced plans for a mandatory AI framework and standards.

Meanwhile, the government continues to confront the difficult copyright question: Can AI developers train models on copyrighted Australian material without permission or compensation?

How this authority is being applied—or will be applied

The voluntary standard currently provides a framework for organizations using AI.

The government has announced a future mandatory framework, while copyright policy remains under active development.

As of September 2026, Australia is also considering how copyright law should address AI training and whether creators should receive compensation for use of their works.

Potential problem

This may be the most fundamental AI-regulation problem of all:

The law is trying to regulate the training of machines that may have been trained before the law was written.

If lawmakers require permission for every piece of copyrighted material used in training, the administrative burden could be enormous.

If they create broad exceptions, creators may argue that the law has effectively converted their work into free raw material for AI companies.

And if they impose compensation mechanisms, someone has to determine who gets paid, how much, and for what contribution.

Cheeky Reality Check

Australia has discovered the ultimate AI question:  Before you regulate what the machine learns, you have to figure out who owns the textbook.

Final Check 

The great irony of AI regulation is that legislators are attempting to write permanent rules for a technology that may look completely different by the time the ink dries.

The goal of regulation may be entirely reasonable: protect people from discrimination, fraud, identity theft, manipulation, privacy violations, and other harms.

But legislation can also create compliance costs, conflicting obligations, jurisdictional fragmentation, overbroad restrictions, false confidence, and rules aimed at yesterday's technology.

In other words, government may eventually succeed in regulating AI.  The question is whether AI will still be the same thing by the time government catches it.