[Ditto]

No he kept his portion, and I assumed the business kept the "employer's" portion.

So you switched him midstream from an S corp to a C corp? If he's an S corp, the money is his.

[RobFromGa]

If he's an S corp, the money is his.

You are right, it really is "his" but I was trying to give the FairTax the biggest benefit of the doubt possible. If I don't let the bakery keep half of the Self-Employment Tax and I give all 15% to the owner, then the example is even worse for the FairTax argument and the business can't save even ten percent.