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HR 1467 IH

To promote freedom, fairness, and economic opportunity for families by repealing the income tax , abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

April 15, 1999

Mr. TAUZIN (for himself, Mr. TRAFICANT, Mr. BRADY of Texas, Mr. CALLAHAN, Mr. CAMPBELL, Mrs. CHENOWETH, Mr. DEMINT, Mr. HALL of Texas, Mr. HEFLEY, Mr. HUNTER, Mr. LINDER, Mrs. MYRICK, Mr. NORWOOD, Mr. PACKARD, Mr. PETERSON of Minnesota, Mr. SCARBOROUGH, Mr. STUMP, and Mr. TANCREDO) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Rules, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To promote freedom, fairness, and economic opportunity for families by repealing the income tax , abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `National Retail Sales Tax Act of 1999'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Congressional findings.

Sec. 3. Repeal of the income tax , estate and gift taxes, and certain excise taxes.

Sec. 4. Sales tax .

`Chapter 1--Sales Tax

`SUBCHAPTER A--IMPOSITION OF TAX

`SUBCHAPTER B--CREDITS; REFUNDS; INSTALLMENT PAYMENTS OF TAX ON PURCHASES OF RESIDENCES

`SUBCHAPTER C--DEFINITIONS AND SPECIAL RULES; FINANCIAL INTERMEDIATION SERVICES

`SUBCHAPTER D--AUTHORITY FOR STATES TO COLLECT TAX

`SUBCHAPTER E--OTHER ADMINISTRATIVE PROVISIONS

Sec. 5. Phase-out of the Internal Revenue Service.

Sec. 6. Social Security Administration to collect payroll taxes.

Sec. 7. Self-employment tax .

Sec. 8. Social Security benefits indexed on sales tax inclusive basis.

Sec. 9. Compensating payments to certain persons on fixed income.

Sec. 10. Interest.

Sec. 11. Supermajority required to raise rate.

SEC. 2. CONGRESSIONAL FINDINGS.

(a) The Congress finds that the income tax --

(1) retards economic growth and has reduced the standard of living of the American public;

(2) impedes the international competitiveness of United States industry;

(3) reduces savings and investment in the United States;

(4) lowers productivity;

(5) imposes unacceptable administrative costs on taxpayers, individuals and businesses alike;

(6) is unfair and inequitable; and

(7) unnecessarily intrudes upon the privacy and civil rights of United States citizens.

(b) The Congress finds further that national sales, services and use tax on final consumption of goods and services--

(1) is similar in many respects to those in place in 45 of the 50 States;

(2) will promote savings;

(3) will promote fairness;

(4) will promote economic growth;

(5) will raise the standard of living;

(6) will increase savings and investment;

(7) will enhance productivity and international competitiveness;

(8) will reduce administrative burdens on the taxpayer; and

(9) will respect the privacy interests and civil rights of taxpayers.

(c) The Congress further finds that--

(1) most of the practical experience administering sales taxes is found at the State Governmental level;

(2) it is desirable to harmonize Federal and State collection and enforcement efforts to the maximum extent possible;

(3) it is sound tax administration policy to administer and collect the Federal sales and service tax at the State level in return for a reasonable administration fee to the States;

(4) businesses that must collect and remit taxes should receive reasonable compensation for the cost of doing so; and

(5) the sixteenth amendment to the Constitution should be repealed.

SEC. 3. REPEAL OF THE INCOME TAX , ESTATE AND GIFT TAXES, AND CERTAIN EXCISE TAXES.

(a) IN GENERAL- The following provisions of the Internal Revenue Code of 1986 are hereby repealed:

(1) Chapter 1 (relating to income tax ).

(2) Chapter 5 (relating to tax on transfers to avoid income tax ).

(3) Chapter 6 (relating to consolidated returns).

(4) Chapter 24 (relating to collection of income tax at source).

(5) Subtitle B (relating to estate and gift taxes).

(6) Chapter 31 (relating to retail excise taxes).

(7) Chapter 32 (relating to manufacturers excise taxes).

(8) Subtitle E (relating to alcohol, tobacco, and certain other excise taxes).

(9) Subtitle F (relating to procedure and administration of the income tax and certain other taxes) except for section 6103 (relating to confidentiality), chapter 66 (relating to limitations), chapter 67 (relating to interest), section 6656 (relating to failure to make deposit of taxes), section 6657 (relating to bad checks), section 6658 (relating to coordination with title 11), chapter 75 (relating to crimes), chapter 76 (relating to Judicial Proceedings), section 7431 (relating to damages for unauthorized disclosure), section 7432 (relating to damages for failure to release lien), section 7433 (relating to damages for unauthorized collection data) and chapter 77 (relating to miscellaneous provisions). References to provisions repealed by the preceding sentence shall be treated as references to such provisions as in effect on the day before the date of the enactment of this Act.

(b) EFFECTIVE DATE-

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by subsection (a) shall take effect on July 1, 2001.

(2) INCOME TAX - The amendment made by subsection (a)(1) shall apply to taxable years beginning after June 30, 2001.

(3) SALES TAX - The amendment made by section 4 shall take effect on July 1, 2001.

(4) SOCIAL SECURITY BENEFITS- The amendment made by section 9 shall take effect on January 1, 2001.

(5) SUPERMAJORITY REQUIRED- The amendment made by section 11 shall take effect on January 1, 2001.

SEC. 4. SALES TAX .

Subtitle A of the Internal Revenue Code of 1986 is amended by inserting at the beginning the following new chapter:

`CHAPTER 1--SALES TAX

`SUBCHAPTER A. Imposition of tax .

`SUBCHAPTER B. Credits; refunds; installment payments of tax on purchases of residences.

`SUBCHAPTER C. Definitions and special rules; financial intermediation services.

`SUBCHAPTER D. Authority for States to collect tax .

`SUBCHAPTER E. Other administrative provisions.

`Subchapter A--Imposition of Tax

`Sec. 1. Imposition of tax .

`Sec. 2. Exemptions.

`Sec. 3. Special rules relating to collection and remittance of tax .

`SECTION 1. IMPOSITION OF TAX .

`(a) IN GENERAL- There is hereby imposed a tax of 15 percent on the gross payments for the use, consumption or enjoyment in the United States of any taxable property or service, whether produced or rendered within or without the United States.

`(b) COORDINATION WITH IMPORT DUTIES- The taxes imposed by this section are in addition to any import duties imposed by law. The Secretary shall provide by regulation that, to the maximum extent practicable, the taxes imposed by this section on imported property and services are collected and administered in conjunction with any applicable import duties.

`(c) LIABILITY FOR COLLECTION AND REMITTANCE OF THE TAX -

`(1) GENERAL RULE- The tax imposed by subsection (a) shall be collected and remitted by the seller, except as provided in subsection (2).

`(2) TAX TO BE PAID BY PURCHASER IN CERTAIN CIRCUMSTANCES-

`(A) GENERAL RULE- In the case of taxable property or services purchased outside of the United States for use, consumption or enjoyment in the United States, the purchaser shall remit the tax imposed by subsection (a).

`(B) In the case of a purchaser electing to pay tax in installments pursuant to section 12, the purchaser shall remit the tax imposed by subsection (a).

`(C) Employers that pay wages that are taxable services within the meaning of section 21(n) shall be responsible for paying and remitting the tax .

`(D) The Secretary may provide by regulation that the tax imposed by subsection (a) is to be collected and remitted by the purchaser rather than the seller.

`SEC. 2. EXEMPTIONS.

`(a) IN GENERAL- Except as provided in section 3(b)(2), no tax shall be imposed under section 1 on any taxable property or service purchased for--

`(1) a business purpose in an active trade or business, or

`(2) export from the United States for use or consumption outside the United States, provided that the purchaser provided the seller with--

`(A) an intermediate sales certificate, or

`(B) an export sales certificate.

`(b) BUSINESS PURPOSES- For purposes of this section, the term `purchased for a business purpose in an active trade or business' means purchased by a person engaged in an active trade or business and used in that active trade or business--

`(1) for resale,

`(2) to produce taxable property or services (as defined in section 21(e)), or

`(3) in furtherance of other bona fide business purposes.

`(c) DE MINIMIS PAYMENTS- Up to $400 of gross payments per calendar year--

`(1) made by a person not engaged in an active trade or business at any time during such calendar year prior to making such gross payments, and

`(2) made to purchase any taxable property or service which is imported into the United States by such person for use or consumption by such person in the United States,

shall be exempt from the tax imposed by section 1.

`(d) DE MINIMIS SALES- Up to $2,500 per calendar year of gross payments received--

`(1) by a person not engaged in an active trade or business during such calendar year prior to the receipt of such gross payments, and

`(2) in connection with a casual or isolated sale,

shall be exempt from the tax imposed by section 1.

`(e) AFFILIATED FIRMS- Firms that make purchases from or sell to affiliated firms which are exempt pursuant to subsection (a) shall not need to comply with the requirements of subsection (g) for such purchases to remain exempt. For purposes of this section, a firm is affiliated with another if 1 firm owns 50 percent of the voting shares or interest in the other.

`(f) DE MINIMIS SALE OF FINANCIAL INTERMEDIATION SERVICES- The first $10,000 per calendar year of gross payments received by a person from the sale of financial intermediation services shall be exempt from the tax imposed by section 1. The exemption provided by this subsection is in addition to other exemptions afforded by this chapter.

`(g) SELLER RELIEVED OF LIABILITY IN CERTAIN CASES- In the case of any property or service which is sold exempt from tax pursuant to subsection (a), if the seller--

`(1) has on file a copy of an exemption certificate (whether an intermediate sale or export sale certificate) from the purchaser, and

`(2) did not have reasonable cause to believe that an exemption from the tax imposed by section 1 was unavailable to the purchaser with respect to such purchase, then the seller shall be relieved of liability to collect and remit the tax imposed by section 1 on such purchase.

`SEC. 3. RULES RELATING TO COLLECTION AND REMITTANCE OF TAX .

`(a) OBLIGATION OF GOVERNMENTAL UNITS AND NOT-FOR-PROFIT ORGANIZATIONS TO COLLECT, REMIT AND PAY TAXES-

`(1) GOVERNMENTAL UNITS- Nothing in this subtitle shall be construed to exempt any Federal, State, or local governmental unit or political subdivision from paying any tax imposed by this subtitle on any sale, purchase, use, consumption or enjoyment by such a unit.

`(2) NOT-FOR-PROFIT ORGANIZATIONS-

`(A) IN GENERAL- Dues, contributions and payments to qualified not-for-profit organizations shall not be considered gross payments for taxable property or services for purposes of this subtitle.

`(B) EXCEPTION- Notwithstanding subparagraph (2)(A), payments of any form to a qualified not-for-profit organization shall be considered gross payments for taxable property or services unless said organization establishes that the property or service provided in exchange is--

`(i) substantially related to the purposes of the qualified not-for-profit organization, or

`(ii) is not commercially available.

`(C) For purposes of this section, qualified not-for-profit organization means a not-for-profit organization organized and operated exclusively--

`(i) for religious, charitable, scientific, testing for public safety, literary or educational purposes;

`(ii) as civic leagues or social welfare organizations;

`(iii) as labor, agricultural or horticultural organizations;

`(iv) as chambers of commerce, business leagues or trade associations; or

`(v) as fraternal beneficiary societies, orders or associations;

no part of the net earnings of which inures to the benefit of any private shareholder or individual.

`(D) Upon application in a form prescribed by the State Administrator, the State Administrator shall provide qualification certificates to qualified not-for-profit organizations.

`(E) If a not-for-profit organization provides taxable property or services in connection with contributions or dues to the organizations, then it shall be required to treat the provision of said taxable property or services as a purchase taxable pursuant to this subtitle at the fair market value of said property or personal services.

`(F) Taxable property and services purchased by not-for-profit organizations for resale or for use in the production of taxable property or services shall be eligible for the exemptions provided in section 2.

`(b) TAX COLLECTED ON CERTAIN EXEMPT PURCHASES-

`(1) IN GENERAL- In the case of a purchase which would (but for this subsection (b)) be exempt from the tax imposed by section 1 by reason of section 2(a), such subsection shall not apply to such purchase if the seller--

`(A) elects the application of this subsection, and

`(B) immediately provides the purchaser with a receipt reflecting the information required by section 54. Seller may elect to exercise the application of this section with respect to some or all purchases or purchasers.

`(2) The Secretary may by regulation provide that certain industries or specific products are such that the vendor must collect the tax on otherwise exempt purchases if, in the Secretary's judgment, said

industry or products are such that consumers buy 25 percent or more of the product sold by the industry or the product. A registered vendor may by application for good cause shown elect to opt out of the application of this paragraph.

`(3) CROSS REFERENCE-

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