HR 2525 IH
106th CONGRESS
1st Session
H. R. 2525
To promote freedom, fairness, and economic opportunity by repealing
the income tax and other taxes, abolishing the Internal Revenue Service, and
enacting a national sales tax to be administered primarily by the
States.
IN THE HOUSE OF REPRESENTATIVES
July 14, 1999
Mr. LINDER (for himself, and Mr. PETERSON of Minnesota) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To promote freedom, fairness, and economic opportunity by repealing
the income tax and other taxes, abolishing the Internal Revenue Service, and
enacting a national 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 `Fair Tax Act of 1999'.
(b) TABLE OF CONTENTS- The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Congressional findings.
TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT
TAXES
Sec. 101. Income taxes repealed.
Sec. 102. Payroll taxes repealed.
Sec. 103. Estate and gift taxes repealed.
Sec. 104. Conforming amendments; effective date.
TITLE II--SALES TAX ENACTED
Sec. 202. Conforming and technical amendments.
TITLE III--OTHER MATTERS
Sec. 301. Phase-out of administration of repealed Federal taxes.
Sec. 302. Administration of other Federal taxes.
Sec. 303. Sales tax inclusive social security benefits indexation.
SEC. 2. CONGRESSIONAL FINDINGS.
(a) FINDINGS RELATING TO FEDERAL INCOME TAX- Congress finds that the
Federal 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 by taxing income
multiple times;
(4) slows the capital formation necessary for real wages to steadily
increase;
(6) imposes unacceptable and unnecessary administrative and compliance
costs on individual and business taxpayers;
(7) is unfair and inequitable;
(8) unnecessarily intrudes upon the privacy and civil rights of United
States citizens;
(9) hides the true cost of government by embedding taxes in the costs of
everything Americans buy;
(10) is not being complied with at satisfactory levels and therefore
raises the tax burden on law abiding citizens; and
(11) impedes upward social mobility.
(b) FINDINGS RELATING TO FEDERAL PAYROLL TAXES- Congress finds further
that the social security and medicare payroll taxes and self-employment
taxes--
(1) raise the cost of employment;
(2) destroy jobs and cause unemployment; and
(3) have a disproportionately adverse impact on lower income
Americans.
(c) FINDINGS RELATING TO FEDERAL ESTATE AND GIFT TAXES- Congress finds
further that the Federal estate and gift taxes--
(1) force family businesses and farms to be sold by the family to pay
such taxes;
(2) discourages capital formation and entrepreneurship;
(3) fosters the continued dominance of large enterprises over small
family-owned companies and farms; and
(4) imposes unacceptably high tax planning costs on small businesses and
farms.
(d) FINDINGS RELATING TO NATIONAL SALES TAX- Congress finds further that a
broad-based national sales tax on goods and services purchased for final
consumption--
(1) is similar in many respects to the sales and use taxes in place in
45 of the 50 States;
(2) will promote savings and investment;
(3) will promote fairness;
(4) will promote economic growth;
(5) will raise the standard of living;
(6) will increase investment;
(7) will enhance productivity and international competitiveness;
(8) will reduce administrative burdens on the American taxpayer;
(9) will improve upward social mobility; and
(10) will respect the privacy interests and civil rights of
taxpayers.
(e) FINDINGS RELATING TO ADMINISTRATION OF NATIONAL SALES TAX- 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 foster administration and
collection of the Federal sales tax at the State level in return for a
reasonable administration fee to the States; and
(4) businesses that must collect and remit taxes should receive
reasonable compensation for the cost of doing so.
(f) FINDINGS RELATING TO REPEAL OF PRESENT FEDERAL TAX SYSTEM- Congress
further finds that the 16th amendment to the United States Constitution should
be repealed and that the repealing amendment should prohibit Federal taxation
of incomes, wages, estates, and gifts.
TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT
TAXES
SEC. 101. INCOME TAXES REPEALED.
Subtitle A of title 26 of the Internal Revenue Code of 1986 (relating to
income taxes and self-employment taxes) is repealed.
SEC. 102. PAYROLL TAXES REPEALED.
(a) IN GENERAL- Subtitle C of title 26 of the Internal Revenue Code of
1986 (relating to payroll taxes and withholding of income taxes) is
repealed.
(b) FUNDING OF SOCIAL SECURITY- For funding of the Social Security Trust
Funds from general revenue, see section 201 of the Social Security Act (42
U.S.C. 401).
SEC. 103. ESTATE AND GIFT TAXES REPEALED.
Subtitle B of title 26 of the Internal Revenue Code of 1986 (relating to
estate and gift taxes) is repealed.
SEC. 104. CONFORMING AMENDMENTS; EFFECTIVE DATE.
(a) CONFORMING AMENDMENTS- The Internal Revenue Code of 1986 is
amended--
(1) by striking subtitle H (relating to financing of Presidential
election campaigns), and
(A) subtitle D (relating to miscellaneous excise taxes) as subtitle
B,
(B) subtitle E (relating to alcohol, tobacco, and certain other excise
taxes) as subtitle C,
(C) subtitle F (relating to procedure and administration) as subtitle
D,
(D) subtitle G (relating to the Joint Committee on Taxation) as
subtitle E,
(E) subtitle I (relating to the Trust Fund Code) as subtitle
F,
(F) subtitle J (relating to coal industry health benefits) as subtitle
G, and
(G) subtitle K (relating to group health plan portability, access, and
renewability requirements) as subtitle H.
(b) REDESIGNATION OF 1986 CODE-
(1) IN GENERAL- The Internal Revenue Code of 1986 enacted on October 22,
1986, as heretofore, hereby, or hereafter amended, may be cited as the
`Internal Revenue Code of 1999'.
(2) REFERENCES IN LAWS, ETC- Except when inappropriate, any reference in
any law, Executive order, or other document--
(A) to the Internal Revenue Code of 1986 shall include a reference to
the Internal Revenue Code of 1999, and
(B) to the Internal Revenue Code of 1999 shall include a reference to
the provisions of law formerly known as the Internal Revenue Code of
1986.
(c) ADDITIONAL AMENDMENTS- For additional conforming amendments, see
section 202 of this Act.
(d) EFFECTIVE DATE- Except as otherwise provided in this Act, the
amendments made by this Act shall take effect on January 1, 2001.
TITLE II--SALES TAX ENACTED
SEC. 201. SALES TAX.
(a) IN GENERAL- The Internal Revenue Code of 1999 is amended by inserting
before subtitle B (as redesignated by section 104(a)(2)(A)) the following new
subtitle:
`Subtitle A--Sales Tax
`Sec. 1. Principles of interpretation.
`Sec. 2. Definitions.
`CHAPTER 1. Interpretation; definitions; imposition of tax; etc.
`CHAPTER 2. Credits; refunds.
`CHAPTER 3. Family consumption allowance.
`CHAPTER 4. State and Federal cooperative tax administration.
`CHAPTER 5. Other administrative provisions.
`CHAPTER 6. Collection; appeals; taxpayer rights.
`CHAPTER 7. Special rules.
`CHAPTER 8. Financial intermediation services.
`CHAPTER 9. Additional matters.
`SECTION 1. PRINCIPLES OF INTERPRETATION.
`(a) IN GENERAL- Any court, the Secretary, and any sales tax administering
authority shall consider the purposes of this subtitle (as set forth in
subsection (b)) as the primary aid in statutory construction.
`(b) PURPOSES- The purposes of this subtitle are as follows:
`(1) To raise revenue needed by the Federal Government in a manner
consistent with the other purposes of this subtitle.
`(2) To tax all consumption of goods and services in the United States
once, without exception, but only once.
`(3) To prevent double, multiple, or cascading taxation.
`(4) To simplify the tax law and reduce the administration costs of, and
the costs of compliance with, the tax law.
`(5) To provide for the administration of the tax law in a manner that
respects privacy, due process, individual rights when interacting with the
government, the presumption of innocence in criminal proceedings, and the
presumption of lawful behavior in civil proceedings.
`(6) To increase the role of State governments in Federal tax
administration because of State government expertise in sales tax
administration.
`(7) To enhance generally cooperation and coordination among State tax
administrators; and to enhance cooperation and coordination among Federal
and State tax administrators, consistent with the principle of
intergovernmental tax immunity.
`(c) SECONDARY AIDS TO STATUTORY CONSTRUCTION- As a secondary aid in
statutory construction, any court, the Secretary, and any sales tax
administering authority shall consider--
`(1) the common law canons of statutory construction;
`(2) the meaning and construction of concepts and terms used in the
Internal Revenue Code of 1986 as in effect before the effective date of this
subtitle; and
`(3) construe any ambiguities in this Act in favor of reserving powers
to the States respectively, or to the people.
`SEC. 2. DEFINITIONS AND SPECIAL RULES.
`(a) IN GENERAL- For purposes of this subtitle--
`(1) AFFILIATED FIRMS- A firm is affiliated with another if 1 firm owns
50 percent or more of--
`(A) the voting shares in a corporation, or
`(B) the capital interests of a business firm that is not a
corporation.
`(2) CONFORMING STATE SALES TAX- The term `conforming State sales tax'
means a sales tax imposed by a State that adopts the same definition of
taxable property and services as adopted by this subtitle.
`(3) DESIGNATED COMMERCIAL PRIVATE COURIER SERVICE- The term `designated
commercial private courier service' means a firm designated as such by the
Secretary or any sales tax administering authority, upon application of the
firm, if the firm--
`(A) provides its services to the general public,
`(B) records electronically to its data base kept in the regular
course of its business the date on which an item was given to such firm
for delivery, and
`(C) has been operating for at least 1 year.
`(4) EDUCATION AND TRAINING- The term `education and training' means
tuition for primary, secondary, or postsecondary level education, and
job-related training courses. Such term does not include room, board, sports
activities, recreational activities, hobbies, games, arts or crafts or
cultural activities.
`(5) GROSS PAYMENTS- The term `gross payments' means payments for
taxable property or services, including Federal taxes imposed by this
title.
`(6) INTANGIBLE PROPERTY-
`(A) IN GENERAL- The term `intangible property' includes copyrights,
trademarks, patents, goodwill, financial instruments, securities,
commercial paper, debts, notes and bonds, and other property deemed
intangible at common law. The Secretary shall, by regulation resolve
differences among the provisions of common law of the several
States.
`(B) CERTAIN TYPES OF PROPERTY- Such term does not include tangible
personal property (or rents or leaseholds of any term thereon), real
property (or rents or leaseholds of any term thereon) and computer
software.
`(7) PERSON- The term `person' means any natural person, and unless the
context clearly does not allow it, any corporation, partnership, limited
liability company, trust, estate, government, agency, administration,
organization, association, or other legal entity (foreign or
domestic).
`(8) PRODUCE, PROVIDE, RENDER, OR SELL TAXABLE PROPERTY OR
SERVICES-
`(A) IN GENERAL- A taxable property or service is used to produce,
provide, render, or sell a taxable property or service if such property or
service is purchased by a person engaged in a trade or business for the
purpose of employing or using such taxable property or service in the
production, provision, rendering, or sale of other taxable property or
services in the ordinary course of that trade or business.
`(B) RESEARCH, EXPERIMENTATION, TESTING, AND DEVELOPMENT- Taxable
property or services used in a trade or business for the purpose of
research, experimentation, testing, and development shall be treated as
used to produce, provide, render, or sell taxable property or
services.
`(C) INSURANCE PAYMENTS- Taxable property or services purchased by an
insurer on behalf of an insured shall be treated as used to produce,
provide, render, or sell taxable property or services if the premium for
the insurance contract giving rise to the insurer's obligation was subject
to tax pursuant to section 801 (relating to financial intermediation
services).
`(D) EDUCATION AND TRAINING- Education and training shall be treated
as services used to produce, provide, render, or sell taxable property or
services.
`(9) REGISTERED SELLER- The term `registered seller' means a person
registered pursuant to section 502.
`(10) SALES TAX ADMINISTERING AUTHORITY- The term `sales tax
administering authority' means--
`(A) the State agency designated to collect and administer the sales
tax imposed by this subtitle, in an administering State, or
`(B) the Secretary, in a State that is neither--
`(i) an administering State, nor
`(ii) a State that has elected to have its sales tax administered by
an administering State.
`(11) SECRETARY- The term `Secretary' means the Secretary of the
Treasury.
`(A) IN GENERAL- The term `taxable employer' includes--
`(i) any household employing domestic servants, and
`(ii) any government except for government enterprises (as defined
in section 704).
`(B) EXCEPTIONS- The term `taxable employer' does not include any
employer which is--
`(i) engaged in a trade or business,
`(ii) a not-for-profit organization (as defined in section 706),
or
`(iii) a government enterprise (as defined in section
704).
`For rules relating to collection and remittance of tax on wages by
taxable employers, see section 103(b)(2).
`(13) TAX INCLUSIVE FAIR MARKET VALUE- The term `tax inclusive fair
market value' means the fair market value of taxable property or services
plus the tax imposed by this subtitle.
`(14) TAXABLE PROPERTY OR SERVICE-
`(A) GENERAL RULE- The term `taxable property or service'
means--
`(i) any property (including leaseholds of any term or rents with
respect to such property) but excluding--
`(I) intangible property, and
`(ii) any service (including any financial intermediation services
as determined by section 801).
`(B) SERVICE- For purposes of subparagraph (A), the term
`service'--
`(i) shall include any service performed by an employee for which
the employee is paid wages or a salary by a taxable employer,
and
`(ii) shall not include any service performed by an employee for
which the employee is paid wages or a salary--
`(I) by an employer in the regular course of the employer's trade
or business,
`(II) by an employer that is a not-for-profit organization (as
defined in section 706),
`(III) by an employer that is a government enterprise (as defined
in section 704), and
`(IV) by taxable employers to employees directly providing
education and training.
`(15) UNITED STATES- The term `United States', when used in the
geographical sense, means each of the 50 States, the District of Columbia,
and any commonwealth, territory, or possession of the United States.
`(16) USED PROPERTY- The term `used property' means--
`(A) property on which the tax imposed by section 101 has been
collected and for which no credit has been allowed under section 203,
and
`(B) property that was held other than for a business purpose (as
defined in section 102(b)) on December 31, 2000.
`(17) WAGES AND SALARY- The terms `wage' and `salary' mean all
compensation paid for employment service including cash compensation,
employee benefits, disability insurance, or wage replacement insurance
payments, unemployment compensation insurance, workers' compensation
insurance, and the fair market value of any other consideration paid by an
employer to an employee in consideration for employment services
rendered.
`(1) For the definition of business purposes, see section
102(b).
`(2) For the definition of insurance contract, see section
206(e).
`(3) For the definition of qualified family, see section 302.
`(4) For the definition of monthly poverty level, see section
303.
`(5) For the definition of large seller, see section 501(e)(3).
`(6) For the definition of hobby activities, see section 701.
`(7) For the definition of gaming sponsor, see section 701(a).
`(8) For the definition of a chance, see section 701(b).
`(9) For the definition of government enterprise, see section
704(b).
`(10) For the definition of mixed use property, see section
705.
`(11) For the definition of qualified not-for-profit organization, see
section 706.
`(12) For the definition of financial intermediation services, see
section 801.
`CHAPTER 1--INTERPRETATION; DEFINITIONS; IMPOSITION OF TAX; ETC.
`Sec. 101. Imposition of sales tax.
`Sec. 102. Intermediate and export sales.
`Sec. 103. Rules relating to collection and remittance of tax.
`SEC. 101. IMPOSITION OF SALES TAX.
`(a) IN GENERAL- There is hereby imposed a tax on the use or consumption
in the United States of taxable property or services.
`(1) FOR 2001- In the calendar year 2001, the rate of tax is 23 percent
of the gross payments for the taxable property or service.
`(2) FOR YEARS AFTER 2001- For years after the calendar year 2001, the
rate of tax is the combined Federal tax rate percentage (as defined in
paragraph 3) of the gross payments for the taxable property or
service.
`(3) COMBINED FEDERAL TAX RATE PERCENTAGE- The combined Federal tax rate
percentage is the sum of--
`(A) the general revenue rate (as defined in paragraph 4),
and
`(B) the old-age, survivors and disability insurance rate,
and
`(C) the hospital insurance rate.
`(4) GENERAL REVENUE RATE- The general revenue rate shall be 14.91
percent.
`(c) COORDINATION WITH IMPORT DUTIES- The tax imposed by this section is
in addition to any import duties imposed by chapter 4 of title 19. The
Secretary shall provide by regulation that, to the maximum extent practicable,
the tax imposed by this section on imported taxable property and services is
collected and administered in conjunction with any applicable import duties
imposed by the United States.
`(1) IN GENERAL- The person using or consuming taxable property or
services in the United States is liable for the tax imposed by this section,
and except as provided by subsection (e) of this section.
`(2) EXCEPTION WHERE TAX PAID TO SELLER- A person using or consuming a
taxable property or service in the United States is not liable for the tax
imposed by this section if the person pays the tax to a person selling the
taxable property or service and receives from such person a purchaser's
receipt within the meaning of section 510.
`SEC. 102. INTERMEDIATE AND EXPORT SALES.
`(a) IN GENERAL- For purposes of this subtitle--
`(1) BUSINESS AND EXPORT PURPOSES- No tax shall be imposed under section
101 on any taxable property or service purchased for--
`(A) a business purpose in a trade or business, or
`(B) export from the United States for use or consumption outside the
United States, if, the purchaser provided the seller with a registration
certificate, and the seller was a wholesale seller.
`(2) INVESTMENT PURPOSE- No tax shall be imposed under section 101 on
any taxable property or service purchased for an investment purpose and held
exclusively for an investment purpose.
`(3) STATE GOVERNMENT FUNCTIONS- No tax shall be imposed under section
101 on State government functions that do not constitute the final
consumption of property or services.
`(b) BUSINESS PURPOSES- For purposes of this section, the term `purchased
for a business purpose in a trade or business' means purchased by a person
engaged in a trade or business and used in that trade or business--
`(2) to produce, provide, render, or sell taxable property or services,
or
`(3) in furtherance of other bona fide business purposes.
`(c) INVESTMENT PURPOSES- For purposes of this section, the term
`purchased for an investment purpose' means property purchased exclusively for
purposes of appreciation or the production of income but not entailing more
than minor personal efforts.
`SEC. 103. RULES RELATING TO COLLECTION AND REMITTANCE OF TAX.
`(a) LIABILITY FOR COLLECTION AND REMITTANCE OF THE TAX- Except as
provided otherwise by this section, any tax imposed by this subtitle shall be
collected and remitted by the seller of taxable property or services
(including financial intermediation services).
`(b) TAX TO BE REMITTED BY PURCHASER IN CERTAIN CIRCUMSTANCES-
`(1) IN GENERAL- In the case of taxable property or services purchased
outside of the United States and imported into the United States for use or
consumption in the United States, the purchaser shall remit the tax imposed
by section 101.
`(2) CERTAIN WAGES OR SALARY- In the case of wages or salary paid by a
taxable employer which are taxable services, the employer shall remit the
tax imposed by section 101.
`(c) CONVERSION OF BUSINESS OR EXPORT PROPERTY OR SERVICES- Property or
services purchased for a business purpose in a trade or business or for export
(sold untaxed pursuant to section 102(a)) that is subsequently converted to
personal use shall be deemed purchased at the time of conversion and shall be
subject to the tax imposed by section 101 at the fair market value of the
converted property as of the date of conversion. The tax shall be due as if
the property had been sold at the fair market value during the month of
conversion. The person using or consuming the converted property is liable for
and shall remit the tax.
`(d) SELLER RELIEVED OF LIABILITY IN CERTAIN CASES- In the case of any
taxable property or service which is sold untaxed pursuant to section 102(a),
the seller shall be relieved of the duty to collect and remit the tax imposed
under section 101 on such purchase if the seller--
`(1) received in good faith, and retains on file for the period set
forth in section 509, a copy of a registration certificate from the
purchaser, and
`(2) did not, at the time of sale, have reasonable cause to believe that
the buyer was not registered pursuant to section 502.
`(e) PURCHASER LIABLE TO COLLECT AND REMIT IN CERTAIN CASES- In the case
of any taxable property or service which is sold untaxed pursuant to section
102, if the seller is relieved by reason of subsection (d) of the duty to
collect and remit the tax imposed by section 101, then the duty to pay any tax
due shall rest with the purchaser.
`(f) BARTER TRANSACTIONS- If gross payment for taxable property or
services is made in other than money, then the person responsible for
collecting and remitting the tax shall remit the tax to the sales tax
administering authority in money as if gross payment had been made in money at
the tax inclusive fair market value of the taxable property or services
purchased.
`(g) INTERCOMPANY SALES- Firms that make purchases from affiliated firms
that are untaxed pursuant to section 102, or make sales to affiliated firms
that are untaxed pursuant to section 102, shall not need to comply with the
requirements of subsection (d) (relating to certificates) for said purchases
or sales to remain untaxed.
`CHAPTER 2--CREDITS; REFUNDS
`Sec. 201. Credits and refunds.
`Sec. 202. Business use conversion credit.
`Sec. 203. Intermediate and export sales credit.
`Sec. 204. Administration credit.
`Sec. 205. Bad debt credit.
`Sec. 206. Insurance proceeds credit.
`Sec. 207. Refunds.
`SEC. 201. CREDITS AND REFUNDS.
`(a) IN GENERAL- Each person shall be allowed a credit with respect to the
taxes imposed by section 101 for each month in an amount equal to the sum
of--
`(1) such person's business use conversion credit pursuant to section
202 for such month,
`(2) such person's intermediate and export sales credit pursuant to
section 203 for such month,
`(3) the administration credit pursuant to section 204 for such
month,
`(4) the bad debt credit pursuant to section 205 for such month,
`(5) the insurance proceeds credit pursuant to section 206 for such
month,
`(6) the transitional inventory credit pursuant to section 902,
and
`(7) any amount paid in excess of the amount due.
`(b) CREDITS NOT ADDITIVE- Only one credit allowed by chapter 2 may be
taken with respect to any particular gross payment.
`SEC. 202. BUSINESS USE CONVERSION CREDIT.
`(a) IN GENERAL- For purposes of section 201, a person's business use
conversion credit for any month is the aggregate of the amounts determined
under subsection (b) with respect to taxable property and services--
`(1) on which tax was imposed by section 101 (and actually paid),
and
`(2) which commenced to be 95 percent or more used during such month for
business purposes (within the meaning of section 102(b)).
`(b) AMOUNT OF CREDIT- The amount determined under this paragraph with
respect to any taxable property or service is the lesser of--
`(A) the rate imposed by section 101, and
`(B) the quotient that is--
`(i) the fair market value of the property or service when its use
is converted, divided by
`(ii) the quantity that is 1 minus the tax rate imposed by section
101, or
`(2) the amount of tax paid with respect to such taxable property or
service, including the amount, if any, determined in accordance with section
705 (relating to mixed use property).
`SEC. 203. INTERMEDIATE AND EXPORT SALES CREDIT.
`For purposes of section 201, a person's intermediate and export sales
credit is the amount of sales tax paid on the purchase of any taxable property
or service purchased for--
`(1) a business purpose in a trade or business (as defined in section
102(b)), or
`(2) export from the United States for use or consumption outside the
United States.
`SEC. 204. ADMINISTRATION CREDIT.
`(a) IN GENERAL- Every person filing a timely monthly report (with regard
to extensions) in compliance with section 501 shall be entitled to a taxpayer
administrative credit equal to the greater of--
`(2) one-quarter of 1 percent of the tax remitted.
`(b) LIMITATION- The credit allowed under this section shall not exceed 20
percent of the tax due to be remitted prior to the application of any credit
or credits permitted by section 201.
`SEC. 205. BAD DEBT CREDIT.
`(a) FINANCIAL INTERMEDIATION SERVICES- Any person who has experienced a
bad debt (other than unpaid invoices within the meaning of subsection (b))
shall be entitled to a credit equal to the product of--
`(1) the rate imposed by section 101, and
`(2) the quotient that is--
`(A) the amount of the bad debt (as defined in section 802), divided
by
`(B) the quantity that is 1 minus the rate imposed by section
101.
`(b) UNPAID INVOICES- Any person electing the accrual method pursuant to
section 503 that has with respect to a transaction--
`(1) invoiced the tax imposed by section 101,
`(2) remitted the invoiced tax,
`(3) actually delivered the taxable property or performed the taxable
services invoiced, and
`(4) not been paid 180 days after date the invoice was due to be
paid,
shall be entitled to a credit equal to the amount of tax remitted and
unpaid by the purchaser.
`(c) SUBSEQUENT PAYMENT- Any payment made with respect to a transaction
subsequent to a section 205 credit being taken with respect to that
transaction shall be subject to tax in the month the payment was received as
if a tax inclusive sale of taxable property and services in the amount of the
payment had been made.
`(d) PARTIAL PAYMENTS- Partial payments shall be treated as pro rata
payments of the underlying obligation and shall be allocated
proportionately--
`(1) for fully taxable payments, between payment for the taxable
property and service and tax, and
`(2) for partially taxable payments, among payment for the taxable
property and service, tax and other payment.
`(e) RELATED PARTIES- The credit provided by this section shall not be
available with respect to sales made to related parties. For purposes of this
section, related party means affiliated firms and family members (as defined
in section 302(b)).
`SEC. 206. INSURANCE PROCEEDS CREDIT.
`(a) IN GENERAL- A person receiving a payment from an insurer by virtue of
an insurance contract shall be entitled to a credit in an amount determined by
subsection (b), less any amount paid to the insured by the insurer pursuant to
subsection (c), if the entire premium (except that portion allocable to the
investment account of the underlying policy) for the insurance contract giving
rise to the insurer's obligation to make a payment to the insured was subject
to the tax imposed by section 101 and said tax was paid.
`(b) CREDIT AMOUNT- The amount of the credit shall be the product of--
`(1) the rate imposed by section 101, and
`(2) the quotient that is--
`(A) the amount of the payment made by the insurer to the insured,
divided by
`(B) the quantity that is 1 minus the rate imposed by section
101.
`(c) ADMINISTRATIVE OPTION- The credit determined in accordance with
subsection (b) shall be paid by the insurer to the insured and the insurer
shall be entitled to the credit in lieu of the insured, except that the
insurer may elect, in a form prescribed by the Secretary, to not pay the
credit and require the insured to make application for the credit. In the
event of such election, the insurer shall provide to the Secretary and the
insured the name and tax identification number of the insurer and of the
insured and indicate the proper amount of the credit.
`(d) COORDINATION WITH RESPECT TO EXEMPTION- If taxable property or
services purchased by an insurer on behalf of an insured are purchased free of
tax by virtue of section 2(a)(8)(C), then the credit provided by this section
shall not be available with respect to that purchase.
`(e) INSURANCE CONTRACT- For purposes of subsection (a), the term
`insurance contract' shall include a life insurance contract, a health
insurance contract, a property and casualty loss insurance contract, a general
liability insurance contract, a marine insurance contract, a fire insurance
contract, an accident insurance contract, a disability insurance contract, a
long-term care insurance contract, and an insurance contract that provides a
combination of these types of insurance.
`SEC. 207. REFUNDS.
`(a) REGISTERED SELLERS- If a registered seller files a monthly tax report
with an overpayment, then, upon application by the registered seller in a form
prescribed by the sales tax administering authority, the overpayment shown on
the report shall be refunded to the registered seller within 60 days of
receipt of said application.
In the absence of such application, the overpayment may be carried forward,
without interest, by the person entitled to the credit.
`(b) OTHER PERSONS- If a person other than a registered seller has an
overpayment for any month, then, upon application by the person in a form
prescribed by the sales tax administering authority, the credit balance due
shall be refunded to the person within 60 days of receipt of said
application.
`(c) INTEREST- No interest shall be paid on any balance due from the sales
tax administering authority under this subsection for any month if such
balance due is paid within 60 days after the application for refund is
received. Balances due not paid within 60 days after the application for
refund is received shall bear interest from the date of application. Interest
shall be paid at the Federal short-term rate (as defined in section 512).
`(d) SUSPENSION OF PERIOD TO PAY REFUND ONLY IF FEDERAL OR STATE COURT
RULING- The 60-day periods under subsections (a) and (b) shall be suspended
with respect to a purported overpayment (or portion thereof) only during any
period that there is in effect a preliminary, temporary, or final ruling from
a Federal or State court that there is reasonable cause to believe that such
overpayment may not actually be due.
`CHAPTER 3--FAMILY CONSUMPTION ALLOWANCE
`Sec. 301. Family consumption allowance.
`Sec. 302. Qualified family.
`Sec. 303. Monthly poverty level.
`Sec. 304. Rebate mechanism.
`Sec. 305. Change in family circumstances.
`SEC. 301. FAMILY CONSUMPTION ALLOWANCE.
`Each qualified family shall be eligible to receive a sales tax rebate
each month. The sales tax rebate shall be in an amount equal to the product
of--
`(1) the rate of tax imposed by section 101, and
`(2) the monthly poverty level.
`SEC. 302. QUALIFIED FAMILY.
`(a) GENERAL RULE- For purposes of this chapter, the term `qualified
family' shall mean 1 or more family members sharing a common residence. All
family members sharing a common residence shall be considered as part of 1
qualified family.
`(b) FAMILY SIZE DETERMINATION-
`(1) IN GENERAL- To determine the size of a qualified family for
purposes of this chapter, family members shall mean--
`(B) the individual's spouse,
`(C) all lineal ancestors and descendants of said individual (and such
individual's spouse),
`(D) all legally adopted children of such individual (and such
individual's spouse), and
`(E) all children under legal guardianship of such individual (or such
individual's spouse).
`(2) IDENTIFICATION REQUIREMENTS- In order for a person to be counted as
a member of the family for purposes of determining the size of the qualified
family, such person must--
`(A) have a bona fide social security number; and
`(B) be a lawful resident of the United States.
`(c) CHILDREN LIVING AWAY FROM HOME-
`(1) STUDENTS LIVING AWAY FROM HOME- Any person who was a registered
student during not fewer than 5 months in a calendar year while living away
from the common residence of a qualified family but who receives over 50
percent of such person's support during a calendar year from members of the
qualified family shall be included as part of the family unit whose members
provided said support for purposes of this chapter.
`(2) CHILDREN OF DIVORCED OR SEPARATED PARENTS- If a child's parents are
divorced or legally separated, a child for purposes of this chapter shall be
treated as part of the qualified family of the custodial parent. In cases of
joint custody, the custodial parent for purposes of this chapter shall be
the parent that has custody of the child for more than one- half of the time
during a given calendar year. A parent entitled to be treated as the
custodial parent pursuant to this paragraph may release this claim to the
other parent if said release is in writing.
`(d) ANNUAL REGISTRATION- In order to receive the family consumption
allowance provided by section 301, a qualified family must register with the
sales tax administering authority in a form prescribed by the Secretary. The
annual registration form shall provide--
`(1) the name of each family member who shared the qualified family's
residence on the family determination date,
`(2) the social security number of each family member on the family
determination date who shared the qualified family's residence on the family
determination date,
`(3) the family member or family members to whom the family consumption
allowance should be paid,
`(4) a certification that all listed family members are lawful residents
of the United States,
`(5) a certification that all family members sharing the common
residence are listed,
`(6) a certification that no family members were incarcerated on the
family determination date (within the meaning of subsection (l)), and
`(7) the address of the qualified family.
Said registration shall be signed by all members of the qualified family
that have attained the age of 21 years as of the date of filing.
`(e) REGISTRATION NOT MANDATORY- Registration is not mandatory for any
qualified family.
`(f) EFFECT OF FAILURE TO PROVIDE ANNUAL REGISTRATION- Any qualified
family that fails to register in accordance with this section within 30 days
of the family determination date, shall cease receiving the monthly family
consumption allowance in the month beginning 90 days after the family
determination date.
`(g) EFFECT OF CURING FAILURE TO PROVIDE ANNUAL REGISTRATION- Any
qualified family that failed to timely make its annual registration in
accordance with this
section but subsequently cures its failure to register, shall be entitled to
up to 6 months of lapsed sales tax rebate payments. No interest on lapsed
payment amounts shall be paid.
`(h) EFFECTIVE DATE OF ANNUAL REGISTRATIONS- Annual registrations shall
take effect for the month beginning 90 days after the family registration
date.
`(i) EFFECTIVE DATE OF REVISED REGISTRATIONS- A revised registration made
pursuant to section 305 shall take effect for the first month beginning 60
days after the revised registration was filed. The existing registration shall
remain in effect until the effective date of the revised registration.
`(j) DETERMINATION OF REGISTRATION FILING DATE- An annual or revised
registration shall be deemed filed when--
`(1) deposited in the United States mail, postage prepaid, to the
address of the sales tax administering authority,
`(2) delivered and accepted at the offices of the sales tax
administering authority, or
`(3) provided to a designated commercial private courier service for
delivery within 2 days to the sales tax administering authority at the
address of the sales tax administering authority.
`(k) PROPOSED REGISTRATION TO BE PROVIDED- 30 or more days before the
family registration date, the sales tax administering authority shall mail to
the address shown on the most recent rebate registration or change of address
notice filed pursuant to section 305(d) a proposed registration that may be
simply signed by the appropriate family members if family circumstances have
not changed.
`(l) INCARCERATED INDIVIDUALS- An individual shall not be eligible under
this chapter to be included as a member of any qualified family if that
individual--
`(1) is incarcerated in a local, State, or Federal jail, prison, mental
hospital, or other institution on the family determination date, and
`(2) is scheduled to be incarcerated for 6 months or more in the
12-month period following the effective date of the annual registration or
the revised registration of said qualified family.
`(m) FAMILY DETERMINATION DATE- The family determination date is a date
assigned to each family by the Secretary for purposes of determining qualified
family size and other information necessary for the administration of this
chapter. The Secretary shall promulgate regulations regarding the issuance of
family determination dates. In the absence of any regulations, the family
determination date for all families shall be October 1. The Secretary may
assign family determination dates for administrative convenience. Permissible
means of assigning family determination dates include a method based on the
birthdates of family members.
`For penalty for filing false rebate claim, see section 505(i).
`SEC. 303. MONTHLY POVERTY LEVEL.
`(a) IN GENERAL- The monthly poverty level for any particular month shall
be one-twelfth of the `annual poverty level'. For purposes of this section the
`annual poverty level' shall be the sum of--
`(1) the annual level determined by the Department of Health and Human
Services poverty guidelines required by section 652 and 673(2) of the
Omnibus Reconciliation Act of 1981 for a particular family size, and
`(2) in case of families that include a married couple, the `annual
marriage penalty elimination amount'.
`(b) ANNUAL MARRIAGE PENALTY ELIMINATION AMOUNT- The annual marriage
penalty elimination amount shall be the amount that is--
`(1) the amount that is two times the annual level determined by the
Department of Health and Human Services poverty guidelines required by
sections 652 and 673(2) of the Omnibus Reconciliation Act of 1981 for a
family of one, less
`(2) the annual level determined by the Department of Health and Human
Services poverty guidelines required by section 652 and 673(2) of the
Omnibus Reconciliation Act of 1981 for a family of two.
`SEC. 304. REBATE MECHANISM.
`(a) GENERAL RULE- The Social Security Administration shall provide a
monthly sales tax rebate to duly registered qualified families in an amount
determined in accordance with section 301.
`(b) PERSONS RECEIVING REBATE- The payments shall be made to the persons
designated by the qualifying family in the annual or revised registration for
each qualified family in effect with respect to the month for which payment is
being made. Payments may only be made to persons 18 years or older. If more
than 1 person is designated in a registration to receive the rebate, then the
rebate payment shall be divided evenly between or among those persons
designated.
`(c) WHEN REBATES MAILED- Rebates shall be mailed on or before the first
business day of the month for which the rebate is being provided.
`(d) SMARTCARDS AND DIRECT ELECTRONIC DEPOSIT PERMISSIBLE- The Social
Security Administration may provide rebates in the form of smartcards that
carry cash balances in their memory for use in making purchases at retail
establishments or by direct electronic deposit.
`SEC. 305. CHANGE IN FAMILY CIRCUMSTANCES.
`(a) GENERAL RULE- In the absence of the filing of a revised registration
in accordance with this chapter, the common residence of the qualified family,
marital status and number of persons in a qualified family on the family
registration date shall govern determinations required to be made under this
chapter for purposes of the following calendar year.
`(b) NO DOUBLE COUNTING- In no event shall any person be considered part
of more than 1 qualified family.
`(c) REVISED REGISTRATION PERMISSIBLE- A qualified family may file a
revised registration for purposes of section 302(d) to reflect a change in
family circumstances. A revised registration form shall provide--
`(1) the name of each family member who shared the qualified family's
residence on the filing date of the revised registration,
`(2) the social security number of each family member 2 years of age or
older who shared the qualified family's residence on the filing date of the
revised registration,
`(3) the family member or family members to whom the family consumption
allowance should be paid,
`(4) a certification that all listed family members are lawful residents
of the United States,
`(5) a certification that all family members sharing the common
residence are listed,
`(6) a certification that no family members were incarcerated on the
family determination date (within the meaning of section 302(l)), and
`(7) the address of the qualified family.
Said revised registration shall be signed by all members of the qualified
family that have attained the age of 21 years as of the filing date of the
revised registration.
`(d) CHANGE OF ADDRESS- A change of address for a qualified family may be
filed with the sales tax administering authority at any time and shall not
constitute a revised registration.
`(e) REVISED REGISTRATION NOT MANDATORY- Revised registrations reflecting
changes in family status are not mandatory.
`CHAPTER 4--FEDERAL AND STATE COOPERATIVE TAX ADMINISTRATION
`Sec. 401. Authority for States to collect tax.
`Sec. 402. Federal administrative support for States.
`Sec. 403. Federal-State tax conferences.
`Sec. 404. Federal administration in certain States.
`Sec. 405. Interstate allocation and destination determination.
`Sec. 406. General administrative matters.
`Sec. 407. Jurisdiction.
`SEC. 401. AUTHORITY FOR STATES TO COLLECT TAX.
`(a) IN GENERAL- The tax imposed by section 101 on gross payments for the
use or consumption of taxable property or services within a State shall be
administered, collected, and remitted to the United States Treasury by such
State if the State is an administering State.
`(b) ADMINISTERING STATE- For purposes of this section, the term
`administering State' means any State--
`(1) which maintains a sales tax, and
`(2) which enters into a cooperative agreement with the Secretary
containing reasonable provisions governing the administration by such State
of the taxes imposed by this subtitle and the remittance to the United
States in a timely manner of taxes collected under this chapter.
`(c) COOPERATIVE AGREEMENTS- The agreement under subsection (b)(2) shall
include provisions for the expeditious transfer of funds, contact officers,
dispute resolution, information exchange, confidentiality, taxpayer rights,
and other matters of importance. The agreement shall not contain extraneous
matters.
`(d) TIMELY REMITTANCE OF TAX-
`(1) IN GENERAL- Administering States shall remit and pay over taxes
collected under this subtitle on behalf of the United States (less the
administration fee allowable under paragraph (2)) not later than 5 days
after receipt. Interest at 150 percent of the Federal short-term rate shall
be paid with respect to amounts remitted after the due date.
`(2) ADMINISTRATION FEE- An administering State may retain an
administration fee equal to one-quarter of 1 percent of the amounts
otherwise required to be remitted to the United States under this chapter by
the administering State.
`(e) LIMITATION ON ADMINISTRATION OF TAX BY UNITED STATES- The Secretary
may administer the tax imposed by this subtitle in an administering State only
if--
`(1)(A) such State has failed on a regular basis to timely remit to the
United States taxes collected under this chapter on behalf of the United
States, or
`(B) such State has on a regular basis otherwise materially breached the
agreement referred to in subsection (b)(2);
`(2) the State has failed to cure such alleged failures and breaches
within a reasonable time;
`(3) the Secretary provides such State with written notice of such
alleged failures and breaches; and
`(4) a District Court of the United States within such State, upon
application of the Secretary, has rendered a decision--
`(A) making findings of fact that--
`(i) such State has failed on a regular basis to timely remit to the
United States taxes collected under this chapter on behalf of the United
States, or such State has on a regular basis otherwise materially
breached the agreement referred to in subsection (b)(2);
`(ii) the Secretary has provided such State with written notice of
such alleged failures and breaches; and
`(iii) the State has failed to cure such alleged failures and
breaches within a reasonable time; and
`(B) making a determination that it is in the best interest of the
citizens of the United States that the administering State's authority to
administer the tax imposed by this subtitle be revoked and said tax be
administered directly by the Secretary.
The order of the District Court revoking the authority of an
Administering State shall contain provisions governing the orderly transfer
of authority to the Secretary.
`(f) REINSTITUTION- A State that has had its authority revoked pursuant to
subsection (e) shall not be an administering State for a period of not less
than 5 years after the date of the order of revocation. For the first calendar
year commencing 8 years after the date of the order of revocation, the State
shall be regarded without prejudice as eligible to become an administering
State.
`(g) THIRD STATE ADMINISTRATION PERMISSIBLE- It shall be permissible for a
State to contract with an administering State to administer the State's sales
tax for an agreed fee. In this case, the agreement contemplated by subsection
(c) shall have both the State and the Federal Government as parties.
`(h) INVESTIGATIONS AND AUDITS- Administering States shall not conduct
investigations or audits at facilities in other administering States in
connection with the tax imposed by section 101 or conforming State sales tax
but shall instead cooperate with other administering States using the
mechanisms established by section 402, by compact or by other agreement.
`SEC. 402. FEDERAL ADMINISTRATIVE SUPPORT FOR STATES.
`(a) IN GENERAL- The Secretary shall administer a program to facilitate
information sharing among States.
`(b) STATE COMPACTS- The Secretary shall facilitate, and may be a party to
a compact among States for purposes of facilitating the taxation of interstate
purchases and for other purposes that may facilitate implementation of this
subtitle.
`(c) AGREEMENT WITH CONFORMING STATES- The Secretary is authorized to
enter into and shall enter into an agreement among conforming States enabling
conforming States to collect conforming State sales tax on sales made by
sellers without a particular conforming State to a destination within that
particular conforming State.
`(d) SECRETARY'S AUTHORITY- The Secretary shall have the authority to
promulgate regulations, to provide guidelines, to assist States in
administering the national sales tax, to provide for uniformity in the
administration of the tax and to provide guidance to the public.
`SEC. 403. FEDERAL-STATE TAX CONFERENCES.
`Not less than once annually, the Secretary shall host a conference with
the sales tax administrators from the various administering States to evaluate
the state of the national sales tax system, to address issues of mutual
concern and to develop and consider legislative, regulatory, and
administrative proposals to improve the tax system.
`SEC. 404. FEDERAL ADMINISTRATION IN CERTAIN STATES.
`The Secretary shall administer the tax imposed by this subtitle in any
State or other United States jurisdiction that--
`(1) is not an administering State, or
`(2) elected to have another State administer its tax in accordance with
section 401(g).
`SEC. 405. INTERSTATE ALLOCATION AND DESTINATION DETERMINATION.
`(a) DESTINATION GENERALLY- The tax imposed by this subtitle is a
destination principle tax. This section shall govern for purposes of
determining--
`(1) whether the destination of taxable property and services is within
or without the United States, and
`(2) which State or territory within the United States is the
destination of taxable property and services.
`(b) TANGIBLE PERSONAL PROPERTY- Except as provided in subsection (f)
(relating to certain leases), the destination of tangible personal property
shall be the State or territory in which the property was first delivered to
the purchaser (including agents and authorized representatives).
`(c) REAL PROPERTY- The destination of real property, or rents or
leaseholds on real property, shall be the State or territory in which the real
property is located.
`(d) OTHER PROPERTY- The destination of any other taxable property shall
be the residence of the purchaser.
`(1) GENERAL RULE- The destination of services shall be the State or
territory in which the use or consumption of the services occurred.
Allocation of service invoices relating to more than 1 jurisdiction shall be
on the basis of time or another method determined by regulation.
`(2) TELECOMMUNICATIONS SERVICES- The destination of telecommunications
services shall be the residence of the purchaser. Telecommunications
services include telephone, telegraph, beeper, radio, cable television,
satellite, and computer on-line or network services.
`(3) DOMESTIC TRANSPORTATION SERVICES- For transportation services where
all of the final destinations are within the United States, the destination
of transportation services shall be the final destination of the trip (in
the case of round or multiple trip fares, the services amount shall be
equally allocated among each final destination).
`(4) INTERNATIONAL TRANSPORTATION SERVICES- For transportation services
where the final destination or origin of the trip is without the United
States, the service amount shall be deemed 50 percent attributable to the
United States destination or origin.
`(5) ELECTRICAL SERVICE- The destination of electrical services shall be
the residence of the purchaser.
`(f) FINANCIAL INTERMEDIATION SERVICES- The destination of financial
intermediation services shall be the residence of the purchaser.
`(g) RENTS PAID FOR THE LEASE OF TANGIBLE PROPERTY-
`(1) GENERAL RULE- Except as provided in paragraph (2), the destination
of rents paid for the lease of tangible property and leaseholds on such
property shall be where the property is located while in use.
`(2) LAND VEHICLES; AIRCRAFT, WATER CRAFT- The destination of rental and
lease payments on land vehicles, aircraft and water craft shall be--
`(A) in the case of rentals and leases of a term of 1 month or less,
the location where the land vehicle, aircraft, or water craft was
originally delivered to the renter or lessee; and
`(B) in the case of rentals and leases of a term greater than 1 month,
the residence of the renter or lessee.
`(h) ALLOCATION RULES- For purposes of allocating revenue--
`(1) between or among administering States from taxes imposed by this
subtitle or from State sales taxes administered by third-party administering
States, or
`(2) between or among States imposing conforming State sales
taxes,
the revenue shall be allocated to those States that are the destination of
the taxable property or service.
`(i) FEDERAL OFFICE OF REVENUE ALLOCATION- The Secretary shall establish
an Office of Revenue Allocation to arbitrate any claims or disputes among
administering States as to the destination of taxable property and services
for purposes of allocating revenue between or among the States from taxes
imposed by this subtitle. The determination of the Administrator of the Office
of Revenue Allocation shall be subject to judicial review in any Federal court
with competent jurisdiction. The standard of review shall be abuse of
discretion.
`SEC. 406. GENERAL ADMINISTRATIVE MATTERS.
`(a) IN GENERAL- The Secretary and each sales tax administering authority
may employ such persons as may be necessary for the administration of this
subtitle and may delegate to employees the authority to conduct interviews,
hearings, prescribe rules, promulgate regulations, and perform such other
duties as are required by this subtitle.
`(b) RESOLUTION OF ANY INCONSISTENT RULES AND REGULATIONS- In the event
that the Secretary and any sales tax administering authority have issued
inconsistent rules or regulations, any lawful rule or regulation issued by the
Secretary shall govern.
`(c) ADEQUATE NOTICE TO BE PROVIDED- Except in the case of an emergency
declared by the Secretary (and not his designee), no rule or regulation issued
by the Secretary with respect to any internal revenue law shall take effect
before 90 days have elapsed after its publication in the Federal Register.
Upon issuance, the Secretary shall provide copies of all rules or regulations
issued under this title to each sales tax administering authority.
`(d) NO RULES, RULINGS, OR REGULATIONS WITH RETROACTIVE EFFECT- No rule,
ruling, or regulation issued or promulgated by the Secretary relating to any
internal revenue law or by a sales tax administering authority shall apply to
a period prior to its publication in the Federal Register (or State
equivalent) except that a regulation may take retroactive effect to prevent
abuse.
`(e) REVIEW OF IMPACT OF REGULATIONS, RULES, AND RULINGS ON SMALL
BUSINESS-
`(1) SUBMISSION TO SMALL BUSINESS ADMINISTRATION- After publication of
any proposed or temporary regulation by the Secretary relating to internal
revenue laws, the Secretary shall submit such regulation to the Chief
Counsel for Advocacy of the Small Business Administration for comment on
the
impact of such regulation on small businesses. Not later than the date 30
days after the date of such submission, the Chief Counsel for Advocacy of the
Small Business Administration shall submit comments on such regulation to the
Secretary.
`(2) CONSIDERATION OF COMMENTS- In prescribing any final regulation
which supersedes a proposed or temporary regulation which had been submitted
under this subsection to the Chief Counsel for Advocacy of the Small
Business Administration, the Secretary shall--
`(A) consider the comments of the Chief Counsel for Advocacy of the
Small Business Administration on such proposed or temporary regulation,
and
`(B) in promulgating such final regulation, include a narrative that
describes the response to such comments.
`(3) SUBMISSION OF CERTAIN FINAL REGULATION- In the case of promulgation
by the Secretary of any final regulations (other than a temporary
regulation) which do not supersede a proposed regulation, the requirements
of paragraphs (1) and (2) shall apply, except that the submission under
paragraph (1) shall be made at least 30 days before the date of such
promulgation, and the consideration and discussion required under paragraph
(2) shall be made in connection with the promulgation of such final
regulation.
`(f) SMALL BUSINESS REGULATORY SAFEGUARDS- The Small Business Regulatory
Enforcement Fairness Act (Public Law 104-121; 110 Stat. 857 (`SBREFA')) and
the Regulatory Flexibility Act (5 U.S.C. 601-612 (`RFA')) shall apply to
regulations promulgated under this subtitle.
`SEC. 407. JURISDICTION.
`(a) STATE JURISDICTION- A sales tax administering authority shall have
jurisdiction over any gross payments made which have a destination (as
determined in accordance with section 405) within the State of said sales tax
administering authority. This grant of jurisdiction is not exclusive of any
other jurisdiction that such sales tax administering authority may have.
`(b) FEDERAL JURISDICTION- The grant of jurisdiction in subsection (a)
shall not be in derogation of Federal jurisdiction over the same matter. The
Federal Government shall have the right to exercise preemptive jurisdiction
over matters relating to the taxes imposed by this subtitle.
`CHAPTER 5--OTHER ADMINISTRATIVE PROVISIONS
`Sec. 501. Monthly reports and payments.
`Sec. 502. Registration.
`Sec. 503. Accounting.
`Sec. 504. Registration certificates.
`Sec. 505. Penalties.
`Sec. 506. Burden of persuasion and burden of production.
`Sec. 507. Attorneys' and accountancy fees.
`Sec. 508. Summons, examinations, audits, etc.
`Sec. 509. Records.
`Sec. 510. Tax to be separately stated and charged.
`Sec. 511. Coordination with title 11.
`Sec. 512. Applicable interest rate.
`SEC. 501. MONTHLY REPORTS AND PAYMENTS.
`(a) TAX REPORTS AND FILING DATES-
`(1) IN GENERAL- On or before the 15th day of each month, each person
who is--
`(A) liable to collect and remit the tax imposed by this subtitle by
reason of section 103(a), or
`(B) liable to pay tax imposed by this subtitle which is not collected
pursuant to section 103(a),
shall submit to the appropriate sales tax administering authority (in a
form prescribed by the Secretary) a report relating to the previous calendar
month.
`(2) CONTENTS OF REPORT- The report required under paragraph (1) shall
set forth--
`(A) the gross payments referred to in section 101,
`(B) the tax collected under chapter 4 in connection with such
payments,
`(C) the amount and type of any credit claimed, and
`(D) other information reasonably required by the Secretary or the
sales tax administering authority for the administration, collection, and
remittance of the tax imposed by this subtitle.
`(1) GENERAL RULE- The tax imposed by this subtitle during any calendar
month is due and shall be paid to the appropriate sales tax administering
authority on or before the 15th day of the succeeding month. Both Federal
tax imposed by this subtitle and conforming State sales tax (if any) shall
be paid in 1 aggregate payment.
`See subsection (e) relating to remitting of separate segregated funds
for sellers that are not small sellers.
`(c) EXTENSIONS FOR FILING REPORTS-
`(1) AUTOMATIC EXTENSIONS FOR NOT MORE THAN 30 DAYS- On application, an
extension of not more than 30 days to file reports under subsection (a)
shall be automatically granted.
`(2) OTHER EXTENSIONS- On application, extensions of 30 to 60 days to
file such reports shall be liberally granted by the sales tax administering
authority for reasonable cause. Extensions greater than 60 days may be
granted by the sales tax administering authority to avoid hardship.
`(3) NO EXTENSION FOR PAYMENT OF TAXES- Notwithstanding paragraphs (1)
and (2), no extension shall be granted with respect to the time for paying
or remitting the taxes under this subtitle.
`(d) TELEPHONE REPORTING OF VIOLATIONS- The Secretary shall establish a
system under which a violation of this subtitle can be brought to the
attention of the sales tax administering authority for investigation through
the use of a toll-free telephone number and otherwise.
`(e) SEPARATE SEGREGATED ACCOUNTS-
`(1) IN GENERAL- Any registered seller that is not a small seller shall
deposit all sales taxes collected pursuant to section 103 in a particular
week in a separate segregated account maintained at a bank or other
financial institution within 3 business days of the end of such week. Said
registered seller shall also maintain in that account sufficient funds to
meet the bank or financial institution minimum
balance requirements, if any, and to pay account fees and costs.
`(2) SMALL SELLER- For purposes of this subsection, a small seller is
any person that has not collected $20,000 or more of the taxes imposed by
this subtitle in any of the previous 12 months.
`(3) LARGE SELLERS- Any seller that has collected $100,000 or more of
the taxes imposed by this subtitle in any of the previous 12 months is a
large seller. A large seller shall remit to the sales tax administering
authority the entire balance of deposited taxes in its separate segregated
account on the first business day following the end of the calendar week.
The Secretary may by regulation require the electronic transfer of funds due
from large sellers.
`(4) WEEK- For purposes of this subsection, the term `week' shall mean
the 7-day period ending on a Friday.
`(f) DETERMINATION OF REPORT FILING DATE- A report filed pursuant to
subsection (a) shall be deemed filed when--
`(1) deposited in the United States mail, postage prepaid, addressed to
the sales tax administering authority,
`(2) delivered and accepted at the offices of the sales tax
administering authority,
`(3) provided to a designated commercial private courier service for
delivery within 2 days to the sales tax administering authority at the
address of the sales tax administering authority, or
`(4) by other means permitted by the Secretary.
`(g) SECURITY REQUIREMENTS- A large seller (within the meaning of
subsection (e)(3)) shall be required to provide security in an amount equal to
the greater of $100,000 or one and one-half times the seller's average monthly
tax liability during the previous 6 calendar months. Security may be a cash
bond, a bond from a surety company approved by the Secretary, a certificate of
deposit, or a State or United States Treasury bond. A bond qualifying under
this subsection must be a continuing instrument for each calendar year (or
portion thereof) that the bond is in effect. The bond must remain in effect
until the surety or sureties are released and discharged. Failure to provide
security in accordance with this section shall result in revocation of the
seller's section 502 registration. If a person who has provided security
pursuant to this subsection--
`(1) fails to pay an amount indicated in a final notice of amount due
under this subtitle (within the meaning of section 605(d)),
`(2) no Taxpayer Assistance Order is in effect relating to the amount
due,
`(3) either the time for filing an appeal pursuant to section 604 has
passed or the appeal was denied, and
`(4) the amount due is not being litigated in any judicial forum,
then the security or part of the security, as the case may be, may be
forfeited in favor of the Secretary to the extent of such tax due (plus
interest if any).
`(h) REWARDS PROGRAM- The Secretary is authorized to maintain a program of
awards wherein individuals that assist the Secretary or sales tax
administering authorities in discovering or prosecuting tax fraud may be
remunerated.
`For interest due on taxes remitted late, see section 6601.
`SEC. 502. REGISTRATION.
`(a) IN GENERAL- Any person liable to collect and remit taxes pursuant to
section 103(a) who is engaged in a trade or business shall register as a
seller with the sales tax administering authority administering the taxes
imposed by this subtitle.
`(b) AFFILIATED FIRMS- Affiliated firms shall be treated as 1 person for
purposes of this section. Affiliated firms may elect, upon giving notice to
the Secretary in a form prescribed by the Secretary, to treat separate firms
as separate persons for purposes of this subtitle.
`(c) DESIGNATION OF TAX MATTERS PERSON- Every person registered pursuant
to subsection (a) shall designate a tax matters person who shall be an
individual whom the sales tax administering authority may contact regarding
tax matters. Each person registered must provide notice of a change in the
identity of the tax matters person within 30 days of said change.
`(d) CERTIFICATES OF REGISTRATION- The sales tax administering authority
shall provide certificates of registration to registered sellers.
`(e) EFFECT OF FAILURE TO REGISTER- Any person that is required to
register and who fails to do so is prohibited from selling taxable property or
services. The Secretary or a sales tax administering authority may bring an
action seeking a temporary restraining order, an injunction, or such other
order as may be appropriate to enforce this section.
`SEC. 503. ACCOUNTING.
`(a) CASH METHOD TO BE USED GENERALLY- Registered sellers and other
persons shall report transactions using the cash method of accounting unless
an election to use the accrual method of accounting is made pursuant to
subsection (b).
`(b) ELECTION TO USE ACCRUAL METHOD- A person may elect with respect to a
calendar year to remit taxes and report transactions with respect to the month
where a sale was invoiced and accrued.
`See section 205 for rules relating to bad debts for sellers electing
the accrual method.
`SEC. 504. REGISTRATION CERTIFICATES.
`The sales tax administering authority shall issue certificates of
registration to registered sellers and such other certificates as are
necessary or may prove useful in the administration of the taxes imposed by
this subtitle.
`SEC. 505. PENALTIES.
`(a) FAILURE TO REGISTER- Each person who is required to register pursuant
to section 502 but fails to do so prior to notification by the sales tax
administering authority shall be liable for a penalty of $500.
`(b) RECKLESS OR WILLFUL FAILURE TO COLLECT TAX-
`(1) CIVIL PENALTY; FRAUD- Each person who is required to and recklessly
or willfully fails to collect taxes imposed by this subtitle shall be liable
for a penalty equal to the greater of $500 or 20 percent of the tax not
collected.
`(2) CRIMINAL PENALTY- Each person who is required to and willfully
fails as part of a trade or business to collect taxes imposed by this
subtitle may be fined an amount up to the amount determined in accordance
with paragraph (1) or imprisoned for a period of not more than 1 year or
both.
`(c) RECKLESS OR WILLFUL ASSERTION OF INVALID EXEMPTION-
`(1) CIVIL PENALTY; FRAUD- Each person who recklessly or willfully
asserts an invalid intermediate or export sales exemption from the taxes
imposed by this subtitle shall be liable for a penalty equal to the greater
of $500 or 20 percent of the tax not collected or remitted.
`(2) CRIMINAL PENALTY- Each person who willfully asserts an invalid
intermediate or export sales exemption from the taxes imposed by this
subtitle may be fined an amount up to the amount determined in accordance
with paragraph (1) or imprisoned for a period of not more than 1 year or
both.
`(d) RECKLESS OR WILLFUL FAILURE TO REMIT TAX COLLECTED-
`(1) CIVIL PENALTY; FRAUD- Each person who is required to and recklessly
or willfully fails to remit taxes imposed by this subtitle and collected
from purchasers shall be liable for a penalty equal to the greater of $1,000
or 50 percent of the tax not remitted.
`(2) CRIMINAL PENALTY- Each person who willfully fails to remit taxes
imposed by this subtitle and collected from purchasers may be fined an
amount up to the amount determined in accordance with paragraph (1) or
imprisoned for a period of not more than 2 years or both.
`(e) RECKLESS OR WILLFUL FAILURE TO PAY TAX- Each person who is required
to and recklessly or willfully fails to pay taxes imposed by this subtitle
shall be liable for a penalty equal to the greater of $500 or 20 percent of
the tax not paid.
`(f) PENALTY FOR LATE FILING-
`(1) IN GENERAL- In the case of a failure by any person who is required
to and fails to file a report required by section 501 on or before the due
date (determined with regard to any extension) for such report, such person
shall pay a penalty for each month or fraction thereof that said report is
late equal to the greater of--
`(B) 0.5 percent of the gross payments required to be shown on the
report.
`(2) INCREASED PENALTY ON RETURNS FILED AFTER WRITTEN INQUIRY- The
amount of the penalty under paragraph (1) shall be doubled with respect to
any report filed after a written inquiry with respect to such report is
received by the taxpayer from the sales tax administering authority.
`(3) LIMITATION- The penalty imposed under this subsection shall not
exceed 12 percent.
`(A) REASONABLE CAUSE- No penalty shall be imposed under this
subsection with respect to any failure if it is shown that such failure is
due to reasonable cause.
`(B) OTHER WAIVER AUTHORITY- In addition to penalties not imposed by
reason of subparagraph (A), the sales tax administering authority, on
application, shall waive the penalty imposed by paragraph (1) once per
registered person per 24-month period. The preceding sentence shall not
apply to a penalty determined under paragraph (2).
`(g) PENALTY FOR WILLFULLY OR RECKLESSLY ACCEPTING A FALSE INTERMEDIATE OR
EXPORT SALES CERTIFICATE- A person who willingly or recklessly accepts a false
intermediate or export sales certificate shall pay a penalty equal to 20
percent of the tax not collected by reason of said acceptance.
`(h) PENALTY FOR LATE REMITTANCE OF TAXES-
`(1) IN GENERAL- A person who is required to timely remit taxes imposed
by this subtitle and remits taxes more than 1 month after such taxes are due
shall pay a penalty equal to 1 percent per month (or fraction thereof) from
the due date.
`(2) LIMITATION- The penalty imposed under this subsection shall not
exceed 24 percent.
`(3) EXCEPTIONS FOR REASONABLE CAUSE- No penalty shall be imposed under
paragraph (1) with respect to any late remittance if it is shown that such
late remittance is due to reasonable cause.
`(i) PENALTY FOR FILING FALSE REBATE CLAIM-
`(1) CIVIL PENALTY; FRAUD- A person who willingly or recklessly files a
false claim for a family
consumption allowance rebate (within the meaning of chapter 3) shall--
`(A) pay a penalty equal to the greater of $500 or 50 percent of the
claimed annual rebate amount not actually due, and
`(B) repay any rebates received as a result of the false rebate claim
(together with interest).
`(2) CRIMINAL PENALTY- A person who willingly files a false claim for a
family consumption allowance rebate (within the meaning of chapter 3) may be
fined an amount up to the amount determined in accordance with paragraph (1)
or imprisoned for a period not more than 1 year or both.
`(j) PENALTY FOR BAD CHECK- If any check or money order in payment of any
amount receivable under this subtitle is not duly paid, in addition to other
penalties provided by law, the person who tendered such check shall pay a
penalty equal to the greater of--
`(2) two percent of the amount of such check.
`(k) PENALTY FOR FAILURE TO MAINTAIN A SEPARATE SEGREGATED ACCOUNT- Any
person required to maintain a separate segregated account pursuant to section
501(e) that fails to maintain such a separate segregated account shall pay a
penalty of $1,000.
`(l) PENALTY FOR FAILURE TO DEPOSIT COLLECTED TAXES IN A SEPARATE
SEGREGATED ACCOUNT- Any person required to deposit collected taxes into a
separate segregated account maintained pursuant to section 501(e) that fails
to timely deposit said taxes into the separate segregated account shall pay a
penalty equal to 1 percent of the amount required to be deposited. The penalty
imposed by the previous sentence shall be tripled unless said taxes have been
deposited in the separate segregated account or remitted to the sales tax
administering authority within 16 days of the date said deposit was due.
`(m) JOINT AND SEVERAL LIABILITY FOR TAX MATTERS PERSON AND RESPONSIBLE
OFFICERS- The tax matters person (designated pursuant to section 502(c)) and
responsible officers or partners of a firm shall be jointly and severally
liable for the tax imposed by this subtitle and penalties imposed by this
subtitle.
`(n) RIGHT OF CONTRIBUTION- If more than 1 person is liable with respect
to any tax or penalty imposed by this subtitle, each person who paid such tax
or penalty shall be entitled to recover from other persons who are liable for
such tax or penalty an amount equal to the excess of the amount paid by such
person over such person's proportionate share of the tax or penalty.
`(o) CIVIL PENALTIES AND CRIMINAL FINES NOT EXCLUSIVE-
`(1) CIVIL PENALTY- The fact that a civil penalty has been imposed shall
not prevent the imposition of a criminal fine.
`(2) CRIMINAL FINE- The fact that a criminal fine has been imposed shall
not prevent the imposition of a civil penalty.
`(p) CONFIDENTIALITY- Any person who violates the requirements relating to
confidentiality of tax information (as provided in section 605(e)) may be
fined up to $10,000 or imprisoned for a period of not more than 1 year, or
both.
`For interest due on late payments, see section 6601.
`SEC. 506. BURDEN OF PERSUASION AND BURDEN OF PRODUCTION.
`In all disputes concerning taxes imposed by this subtitle, the person
engaged in a dispute with the sales tax administering authority or the
Secretary, as the case may be, shall have the burden of production of
documents and records but the sales tax administering authority or the
Secretary shall have the burden of persuasion. In all disputes concerning an
exemption claimed by a purchaser, if the seller has on file an intermediate
sale or export sale certificate from the purchaser and did not have reasonable
cause to believe that the certificate was improperly provided by the purchaser
with respect to such purchase (within the meaning of section 103), then the
burden of production of documents and records relating to that exemption shall
rest with the purchaser and not with the seller.
`SEC. 507. ATTORNEYS' AND ACCOUNTANCY FEES.
`In all disputes concerning taxes imposed by this subtitle, the person
engaged in a dispute with the sales tax administering authority or the
Secretary, as the case may be, shall be entitled to reasonable attorneys'
fees, accountancy fees, and other reasonable professional fees incurred in
direct relation to the dispute unless the sales tax administering authority or
the Secretary establishes that its position was substantially justified.
`SEC. 508. SUMMONS, EXAMINATIONS, AUDITS, ETC.
`(a) SUMMONS- Persons are subject to administrative summons by the sales
tax administering authority for records, documents, and testimony required by
the sales tax administering authority to accurately determine liability for
tax under this subtitle. A summons shall be served by the sales tax
administering authority by an attested copy delivered in hand to the person to
whom it is directed or left at his last known address. The summons shall
describe with reasonable certainty what is sought.
`(b) EXAMINATIONS AND AUDITS- The sales tax administering authority has
the authority to conduct at a reasonable time and place examinations and
audits of persons who are or may be liable to collect and remit tax imposed by
this subtitle and to examine the books, papers, records, or other data of such
persons which may be relevant or material to the determination of tax due.
`(c) LIMITATION ON AUTHORITY IN CASE OF REFERRAL- No administrative
summons may be issued by the sales tax administering authority and no action
be commenced to enforce an administrative summons with respect to any person
if a Justice Department referral or referral to a State Attorney General's
Office is in effect with respect to such person relating to a tax imposed by
this subtitle. Such referral is in effect with respect to any person if the
sales tax administering authority or the Secretary has recommended to the
Justice Department or a State Attorney General's Office a grand jury
investigation of such person or a criminal prosecution of such person that
contemplates criminal sanctions under this title. A referral shall be
terminated when--
`(1) the Justice Department or a State Attorney General's Office
notifies the sales tax administering authority or the Secretary that he will
not--
`(A) prosecute such person for any offense connected with the internal
revenue laws,
`(B) authorize a grand jury investigation of such person with respect
to such offense, or
`(C) continue such a grand jury investigation, or
`(2) a final disposition has been made of any criminal proceeding
connected with the internal revenue laws, or conforming State sales tax,
against such person.
`SEC. 509. RECORDS.
`Any person liable to remit taxes pursuant to this subtitle shall keep
records (including a record of all section 510 receipts provided, complete
records of intermediate and export sales, including purchaser's intermediate
and export sales certificates and tax number and the net of tax amount of
purchase) sufficient to determine the amounts reported, collected, and
remitted for a period of 6 years after the latter of the filing of the report
for which the records formed the basis or when the report was due to be filed.
Any purchaser who purchased taxable property or services but did not pay tax
by reason of asserting an intermediate and export sales exemption shall keep
records sufficient to determine whether said exemption was valid for a period
of 7 years after the purchase of taxable property or services.
`SEC. 510. TAX TO BE SEPARATELY STATED AND CHARGED.
`(a) IN GENERAL- For each purchase of taxable property or services for
which a tax is imposed by section 101, the seller shall charge the tax imposed
by section 101 separately from the purchase. For purchase of taxable property
or services for which a tax is imposed by section 101, the seller shall
provide to the purchaser a receipt for each transaction that includes--
`(1) the property or services price exclusive of tax;
`(2) the amount of tax paid;
`(3) the property or service price inclusive of tax;
`(4) the tax rate (the amount of tax paid (per paragraph (2)) divided by
the property or service price inclusive of tax (per paragraph (3));
`(5) the date that the good or service was sold;
`(6) the name of the vendor; and
`(7) the vendor registration number.
`(b) VENDING MACHINE EXCEPTION- The requirements of subsection (a) shall
be inapplicable in the case of sales by vending machines. Vending machines for
purposes of this subsection are machines--
`(1) that dispense taxable property in exchange for coins or currency;
and
`(2) that sell no single item exceeding $10 per unit in price.
`(c) FINANCIAL INTERMEDIATION SERVICES EXCEPTION- The requirements of
subsection (a) shall be inapplicable in the case of sales financial
intermediation service. Receipts shall be issued when the tax is imposed (in
accordance with section 803 (relating to timing of tax on financial
intermediation services)).
`SEC. 511. COORDINATION WITH TITLE 11.
`No addition to tax shall be made under section 505 with respect to a
period during which a case is pending under title 11, United States Code--
`(1) if such tax was incurred by the estate and the failure occurred
pursuant to an order of the court finding probable insufficiency of funds of
the estate to pay administrative expenses; or
`(A) such tax was incurred by the debtor before the earlier of the
order for relief or (in the involuntary case) the appointment of a
trustee; and
`(B) the petition was filed before the due date prescribed by law
(including extensions) for filing a return of such tax, or the date for
making the addition to tax occurs on or after the date the petition was
filed.
`SEC. 512. APPLICABLE INTEREST RATE.
`(1) FEDERAL SHORT-TERM RATE- In the case of a debt instrument,
investment, financing lease, or account with a term of not over 3 years, the
applicable interest rate is the Federal short-term rate.
`(2) FEDERAL MID-TERM RATE- In the case of a debt instrument,
investment, financing lease, or account with a term of over 3 years but not
over 9 years, the applicable interest rate is the Federal mid-term
rate.
`(3) FEDERAL LONG-TERM RATE- In the case of a debt instrument,
investment, financing lease, or account with a term of over 9 years, the
applicable interest rate is the Federal long-term rate.
`(b) FEDERAL SHORT-TERM RATE- The Federal short-term rate shall be the
rate determined by the Secretary based on the average market yield (selected
by the Secretary and ending in the calendar month in which the determination
is made during any one month) on outstanding marketable obligations of the
United States with remaining periods to maturity of 3 years or fewer.
`(c) FEDERAL MID-TERM RATE- The Federal mid-term rate shall be the rate
determined by the Secretary based on the average market yield (selected by the
Secretary and ending in the calendar month in which the determination is made
during any 1 month) on outstanding marketable obligations of the United States
with remaining periods to maturity of more than 3 years and not over 9
years.
`(d) FEDERAL LONG-TERM RATE- The Federal long-term rate shall be the rate
determined by the Secretary based on the average market yield (selected by the
Secretary and ending in the calendar month in which the determination is made
during any 1 month) on outstanding marketable obligations of the United States
with remaining periods to maturity of over 9 years.
`(e) DETERMINATION OF RATES- During each calendar month, the Secretary
shall determine the Federal short-term rate, the Federal mid-term rate and the
Federal long-term rate which shall apply during the following calendar
month.
`CHAPTER 6--COLLECTIONS; APPEALS; TAXPAYER RIGHTS
`Sec. 601. Collections.
`Sec. 602. Power to levy, etc.
`Sec. 603. Problem resolution offices.
`Sec. 604. Appeals.
`Sec. 605. Taxpayer rights.
`Sec. 606. Installment agreements; compromises.
`SEC. 601. COLLECTIONS.
`The sales tax administering authority shall collect the taxes imposed by
this subtitle, except as provided in section 404 (relating to Federal
administration in certain States).
`SEC. 602. POWER TO LEVY, ETC.
`(a) IN GENERAL- The sales tax administering authority may levy and seize
property, garnish wages or salary and file liens to collect amounts due under
this subtitle, pursuant to enforcement of--
`(1) a judgment duly rendered by a court of law;
`(2) an amount due if the taxpayer has failed to exercise his appeals
rights under section 604; or
`(3) an amount due if the appeals process determined that an amount
remained due and the taxpayer has failed to timely petition the Tax Court
for relief.
`(b) EXEMPTION FROM LEVY, SEIZURE, AND GARNISHMENT- There shall be exempt
from levy, seizure, and garnishment or penalty in connection with any tax
imposed by this subtitle--
`(1) wearing apparel, school books, fuel, provisions, furniture,
personal effects, tools of a trade or profession, livestock in a household
up to an aggregate value of $15,000; and
`(2) monthly money income equal to 150 percent of the monthly poverty
level (as defined in section 303).
`(c) LIENS TO BE TIMELY RELEASED- Subject to such reasonable regulations
as the Secretary may provide, any lien imposed with respect to a tax imposed
by this title shall be released not later than 30 days after--
`(1) the liability was satisfied or became unenforceable; or
`(2) a bond was accepted as security.
`SEC. 603. PROBLEM RESOLUTION OFFICES.
`(a) PROBLEM RESOLUTION OFFICE TO BE ESTABLISHED- Each sales tax
administering authority shall establish an independent Problem Resolution
Office and appoint an adequate number of problem resolution officers. The head
of the problem resolution office must be appointed by, and serve at the
pleasure of, either the State Governor (in the case of an administering State)
or the President of the United States.
`(b) AUTHORITY OF PROBLEM RESOLUTION OFFICERS- Problem resolution officers
shall have the authority to investigate complaints and issue a Taxpayer
Assistance Order to administratively enjoin any collection activity if, in the
opinion of the problem resolution officer, said collection activity is
reasonably likely to not be in compliance with law or to prevent hardship
(other than by reason of having to pay taxes lawfully due). Problem resolution
officers shall also have the authority to issue Taxpayer Assistance Orders
releasing or returning property that has been levied upon or seized, ordering
that a lien be released and that garnished wages be returned. A Taxpayer
Assistance Order may only be rescinded or modified by the problem resolution
officer that issued it, by the highest official in the relevant sales tax
administering authority or by its general counsel upon a finding that the
collection activity is justified by clear and convincing evidence. The
authority to reverse this Taxpayer Assistance Order may not be delegated.
`(c) FORM OF REQUEST FOR TAXPAYER ASSISTANCE ORDER- The Secretary shall
establish a form and procedure to aid persons requesting the assistance of the
Problem Resolution Office and to aid the Problem Resolution Office in
understanding the needs of the person seeking assistance. The use of this
form, however, shall not be a prerequisite to a problem resolution officer
taking action, including issuing a Taxpayer Assistance Order.
`(d) CONTENT OF TAXPAYER ASSISTANCE ORDER- A Taxpayer Assistance Order
shall contain the name of the problem resolution officer, any provision
relating to the running of any applicable period of limitation, the name of
the person that the Taxpayer Assistance Order assists, the government office
(or employee or officer of said government office) to whom it is directed and
the action or cessation of action that the Taxpayer Assistance Order requires
of said government office (or employee or officer of said government office).
The Taxpayer Assistance Order need not contain findings of fact or its legal
basis; however, the problem resolution officer must provide findings of fact
and the legal basis for the issuance of the Taxpayer Assistance Order to the
sales tax administering authority upon the request of an officer of said
authority within 2 weeks of the receipt of such request.
`(e) INDEPENDENCE PROTECTED- Problem resolution officers shall not be
disciplined or adversely affected for the issuance of administrative
injunctions unless a pattern of issuing injunctions that are manifestly
unreasonable is proven in an administrative hearing by a preponderance of the
evidence.
`(f) OTHER RIGHTS NOT LIMITED- Nothing in this section shall limit the
authority of the sales tax administering authority, the registered person or
other person from pursuing any legal remedy in any court with jurisdiction
over the dispute at issue.
`(g) LIMITATIONS- The running of any applicable period of limitation shall
be suspended for a period of 8 weeks following the issuance of a Taxpayer
Assistance Order or, if specified, for a longer period set forth in the
Taxpayer Assistance Order provided the suspension does not exceed 6 months.
`SEC. 604. APPEALS.
`(a) ADMINISTRATIVE APPEALS- The sales tax administering authority shall
establish an administrative appeals process wherein the registered person or
other person in disagreement with a decision of the sales tax administering
authority asserting liability for tax is provided a full and fair hearing in
connection with any disputes said person has with the sales tax administering
authority.
`(b) TIMING OF ADMINISTRATIVE APPEALS- Said administrative appeal must be
made within 60 days of receiving a final notice of amount due pursuant to
section 605(d) unless leave for an extension is granted by the appeals officer
in a form prescribed by the Secretary. Leave shall be granted to avoid
hardship.
`SEC. 605. TAXPAYER RIGHTS.
`(a) RIGHTS TO BE DISCLOSED- The sales tax administering authority shall
provide to any person against whom it has--
`(1) commenced an audit or investigation;
`(2) issued a final notice of amount due;
`(3) filed an administrative lien, levy, or garnishment;
`(4) commenced other collection action;
`(5) commenced an action for civil penalties; or
`(6) any other legal action,
a document setting forth in plain English the rights of the person. The
document shall explain the administrative appeals process, the authority of
the Problem Resolution Office (established pursuant to section 603) and how to
contact that Office, the burden of production and persuasion that the person
and the sales tax administering authority bear (pursuant to section 506), the
right of the person to professional fees (pursuant to section 507), the right
to record interviews and such other rights as the person may possess under
this subtitle. Said document will also set forth the procedures for entering
into an installment agreement.
`(b) RIGHT TO PROFESSIONAL ASSISTANCE- In all dealings with the sales tax
administering authority, a person shall have the right to assistance, at their
own expense, of 1 or more professional advisors.
`(c) RIGHT TO RECORD INTERVIEWS- Any person who is interviewed by an agent
of the sales tax administering authority shall have the right to video or
audio tape the interview at the person's own expense.
`(d) RIGHT TO FINAL NOTICE OF AMOUNT DUE- No collection or enforcement
action will be commenced against a person until 30 days after they have been
provided with a final notice of amount due under this subtitle by the sales
tax administering authority. The final notice of amount due shall set forth
the amount of tax due (along with any interest and penalties due) and the
factual and legal basis for such amounts being due with sufficient specificity
that such basis can be understood by a reasonable person who is not a tax
professional reading the notice. The final notice shall be sent by certified
mail, return receipt requested, to--
`(1) the address last provided by a registered seller; or
`(2) the best available address to a person who is not a registered
seller.
`(e) CONFIDENTIALITY OF TAX INFORMATION-
`(1) IN GENERAL- All reports and report information (related to any
internal revenue law) shall be confidential and except as authorized by this
title--
`(A) no officer or employee (including former officers and employees)
of the United States;
`(B) no officer or employee (including former officers and employees)
of any State or local agency who has had access to returns or return
information; and
`(C) no other person who has had access to returns or return
information,
shall disclose any report or report information obtained by him in any
manner in connection with his service as such officer or employee or
otherwise.
`(2) DESIGNEES- The sales tax administering authority may, subject to
such requirements as the Secretary may impose, disclose the report and
report information of a person to that person or persons as that person may
designate to receive said information or return.
`(3) OTHER SALES TAX ADMINISTERING AUTHORITIES- A sales tax
administering authority may, subject to such requirements as the Secretary
may impose, disclose the report and report information to another sales tax
administering authority.
`(4) INCOMPETENCY- A sales tax administering authority may, subject to
such requirements as the Secretary may impose, disclose the report and
report information to the committee, trustee, or guardian of a person who is
incompetent.
`(5) DECEASED PERSONS- A sales tax administering authority may, subject
to such requirements as the Secretary may impose, disclose the report and
report information to the decedent's--
`(A) administrator, executor, estate trustee, or
`(B) heir at law, next of kin, or beneficiary under a will who has a
material interest that will be affected by the information.
`(6) BANKRUPTCY- A sales tax administering authority may, subject to
such requirements as the Secretary may impose, disclose the report and
report information to a person's trustee in bankruptcy.
`(7) CONGRESS- Upon written request from the Chairman of the Committee
on Ways and Means, the Chairman of the Committee on Finance of the Senate,
or the Chairman or Chief of Staff of the Joint Committee on Taxation, a
sales tax administering authority shall disclose the report and report
information, except that any report or report information that can be
associated with or otherwise identify a particular person shall be furnished
to such committee only when sitting in closed executive session unless such
person otherwise consents in writing to such disclosure.
`(8) WAIVER OF PRIVACY RIGHTS- A person may waive confidentiality rights
provided by this section. Such waiver must be in writing.
`(9) INTERNAL USE- Disclosure of the report or report information by
officers or employees of a sales tax administering authority to other
officers or employees of a sales tax administering authority in the ordinary
course of tax administration activities shall not constitute unlawful
disclosure of the report or report information.
`(10) STATISTICAL USE- Upon request in writing by the Secretary of
Commerce, the Secretary shall furnish such reports and report information to
officers and employees of the Department of Commerce as the Secretary may
prescribe by regulation for the purposes of, and only to the extent
necessary in, the structuring of censuses and national economic accounts and
conducting related statistical activities authorized by law.
`(11) DEPARTMENT OF THE TREASURY- Returns and return information shall
be open for inspection by officers and employees of the Department of the
Treasury whose official duties require such inspection or disclosure for the
purpose of, and only to the extent necessary for, preparing economic or
financial forecasts, projections, analyses, or estimates. Such inspection or
disclosure shall be permitted only upon written request that sets forth the
reasons why such inspection or disclosure is necessary and is signed by the
head of the bureau or office of the Department of the Treasury requesting
the inspection or disclosure.
`SEC. 606. INSTALLMENT AGREEMENTS; COMPROMISES.
`The sales tax administering authority is authorized to enter into written
agreements with any person under which the person is allowed to satisfy
liability for payment of any tax under this subtitle (and penalties and
interest relating thereto) in installment payments if the sales tax
administering authority determines that such agreement will facilitate the
collection of such liability. The agreement shall remain in effect for the
term of the agreement unless the information that the person provided to the
sales tax administering authority was materially inaccurate or incomplete. The
sales tax administering authority may compromise any amounts alleged to be
due.
`CHAPTER 7--SPECIAL RULES
`Sec. 701. Hobby activities.
`Sec. 702. Gaming activities.
`Sec. 703. Government purchases.
`Sec. 704. Government enterprises.
`Sec. 705. Mixed use property.
`Sec. 706. Not-for-profit organizations.
`SEC. 701. HOBBY ACTIVITIES.
`(a) HOBBY ACTIVITIES- Neither the exemption afforded by section 102 for
intermediate sales nor the credits available pursuant to section 202 or 203
shall be available for any taxable property or service purchased for use in an
activity if that activity is not engaged in for-profit.
`(b) STATUS DEEMED- If the activity has received gross payments for the
sale of taxable property or services that exceed the sum of--
`(1) taxable property and services purchased;
`(2) wages and salary paid; and
`(3) taxes (of any type) paid,
in 2 or more of the most recent 3 calendar years during which it operated
then the business activity shall be conclusively deemed to be engaged in for
profit.
`SEC. 702. GAMING ACTIVITIES.
`(a) REGISTRATION- Any person selling 1 or more chances is a gaming
sponsor and shall register, in a form prescribed by the Secretary, with the
sales tax administering authority as a gaming sponsor.
`(b) CHANCE DEFINED- For purposes of this section, the term `chance' means
a lottery ticket, a raffle ticket, chips, other tokens, a bet or bets placed,
a wager or wagers placed, or any similar device where the purchase of the
right gives rise to an obligation by the gaming sponsor to pay upon the
occurrence of--
`(1) a random or unpredictable event; or
`(2) an event over which neither the gaming sponsor nor the person
purchasing the chance has control over the outcome.
`(c) CHANCES NOT TAXABLE PROPERTY OR SERVICE- Notwithstanding any other
provision in this subtitle, a chance is not taxable property or services for
purposes of section 101.
`(d) TAX ON GAMING SERVICES IMPOSED- A 23-percent tax is hereby imposed on
the taxable gaming services of a gaming sponsor. This tax shall be paid and
remitted by the gaming sponsor. The tax shall be remitted by the 15th day of
each month with respect to taxable gaming services during the previous
calendar month.
`(e) TAXABLE GAMING SERVICES DEFINED- For purposes of this section, the
term `taxable gaming services' means--
`(1) gross receipts of the gaming sponsor from the sale of chances,
minus
`(A) total gaming payoffs to chance purchasers (or their designees);
and
`(B) gaming specific taxes (other than the tax imposed by this
section) imposed by the Federal, State, or local government.
`SEC. 703. GOVERNMENT PURCHASES.
`(a) GOVERNMENT PURCHASES-
`(1) PURCHASES BY THE FEDERAL GOVERNMENT- Purchases by the Federal
Government of taxable property and services shall be subject to the tax
imposed by section 101.
`(2) PURCHASE BY STATE GOVERNMENTS AND THEIR POLITICAL SUBDIVISIONS-
Purchases by State governments and their political subdivisions of taxable
property and services shall be subject to the tax imposed by section
101.
`For purchases by government enterprises see section 704.
`SEC. 704. GOVERNMENT ENTERPRISES.
`(a) GOVERNMENT ENTERPRISES TO COLLECT AND REMIT TAXES ON SALES- Nothing
in this subtitle shall be construed to exempt any Federal, State, or local
governmental unit or political subdivision (whether or not the State is an
administering State) operating a government enterprise from collecting and
remitting tax imposed by this subtitle on any sale of taxable property or
services. Government enterprises shall comply with all duties imposed by this
subtitle and shall be liable for penalties and subject to enforcement action
in the same manner as private persons that are not government enterprises.
`(b) GOVERNMENT ENTERPRISE- Any entity owned or operated by a Federal,
State, or local governmental unit or political subdivision that receives gross
payments from private persons is a government enterprise, except that a
government-owned entity shall not become a government enterprise for purposes
of this section unless in any quarter it has revenues from selling taxable
property or services that exceed $2,500.
`(c) GOVERNMENT ENTERPRISES INTERMEDIATE SALES-
`(1) IN GENERAL- Government enterprises shall not be subject to tax on
purchases that would not be subject to tax pursuant to section 102(b) if the
government enterprise were a private enterprise.
`(2) EXCEPTION- Government enterprises may not use the exemption
afforded by section 102(b) to serve as a conduit for tax-free
purchases by government units that would otherwise be subject to taxation on
purchases pursuant to section 703. Transfers of taxable property or services
purchased exempt from tax from a government enterprise to such government unit
shall be taxable.
`(d) SEPARATE BOOKS OF ACCOUNT- Any government enterprise must maintain
books of account, separate from the nonenterprise government accounts,
maintained in accordance with generally accepted accounting principles.
`(e) TRADE OR BUSINESS- A government enterprise shall be treated as a
trade or business for purposes of this subtitle.
`(f) ENTERPRISE SUBSIDIES CONSTITUTE TAXABLE PURCHASE- A transfer of funds
to a government enterprise by a government entity without full consideration
shall constitute a taxable government purchase with the meaning of section 703
to the extent that the transfer of funds exceeds the fair market value of the
consideration.
`SEC. 705. MIXED USE PROPERTY.
`(a) MIXED USE PROPERTY OR SERVICE-
`(1) MIXED USE PROPERTY OR SERVICE DEFINED- For purposes of this
section, the term `mixed use property or service' is a taxable property or
taxable service used for both taxable use or consumption and for a purpose
that would not be subject to tax pursuant to section 102(a)(1).
`(2) TAXABLE THRESHOLD- Mixed use property or service shall be subject
to tax notwithstanding section 102(a)(1) unless such property or service is
used more than 95 percent for purposes that would give rise to an exemption
pursuant to section 102(a)(1) during each calendar year (or portions
thereof) it is owned.
`(3) MIXED USE PROPERTY OR SERVICES CREDIT- A person registered pursuant
to section 502 is entitled to a business use conversion credit (pursuant to
section 202) equal to the product of--
`(A) the mixed use property amount; and
`(B) the business use ratio; and
`(C) the rate of tax imposed by section 101.
`(4) MIXED USE PROPERTY AMOUNT- The mixed use property amount for each
month (or fraction thereof) in which the property was owned shall be--
`(A) one-three-hundred-sixtieth of the gross payments for real
property for 360 months or until the property is sold;
`(B) one-eighty-fourth of the gross payments for tangible personal
property for 84 months or until the property is sold;
`(C) one-sixtieth of the gross payments for vehicles for 60 months or
until the property is sold; or
`(D) for other types of taxable property or services, a reasonable
amount or in accordance with regulations prescribed by the
Secretary.
`(5) BUSINESS USE RATIO- For purposes of this section, the term
`business use ratio' means the ratio of business use to total use for a
particular calendar month (or portion thereof if the property was owned for
only part of said calendar month). For vehicles, the business use ratio will
be the ratio of business purpose miles to total miles in a particular
calendar month. For real property, the business use ratio is the ratio of
floor space used primarily for business purposes to total floor space in a
particular calendar month. For tangible personal property (except for
vehicles), the business use ratio is the ratio of total time used for
business purposes to total time used in a particular calendar year. For
other property or services, the business ratio shall be calculated using a
reasonable method. Reasonable records must be maintained to support a
person's business use of the mixed use property or service.
`(b) TIMING OF BUSINESS USE CONVERSION CREDIT ARISING OUT OF OWNERSHIP OF
MIXED USE PROPERTY- A person entitled to a credit pursuant to subsection
(a)(3) arising out of the ownership of mixed use property must account for the
mixed use on a calendar year basis, and may file for the credit with respect
to mixed used property in any month following the calendar year giving rise to
the credit.
`For business use conversion credit, see section 202.
`SEC. 706. NOT-FOR-PROFIT ORGANIZATIONS.
`(a) NOT-FOR-PROFIT ORGANIZATIONS- Dues, contributions, and similar
payments to qualified not-for-profit organizations shall not be considered
gross payments for taxable property or services for purposes of this
subtitle.
`(b) DEFINITION- For purposes of this section, the term `qualified
not-for-profit organization' means a not-for-profit organization organized and
operated exclusively--
`(1) for religious, charitable, scientific, testing for public safety,
literary, or educational purposes;
`(2) as civic leagues or social welfare organizations;
`(3) as labor, agricultural, or horticultural organizations;
`(4) as chambers of commerce, business leagues, or trade associations;
or
`(5) 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.
`(c) QUALIFICATION CERTIFICATES- Upon application in a form prescribed by
the Secretary, the sales tax administering authority shall provide
qualification certificates to qualified not-for-profit organizations.
`(d) TAXABLE TRANSACTIONS- If a qualified not-for-profit organization
provides taxable property or services in connection with contributions, dues,
or similar payments to the organization, 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 taxable property or
services.
`(e) EXEMPTIONS- Taxable property and services purchased by a qualified
not-for-profit organization shall be eligible for the exemptions provided in
section 102.
`CHAPTER 8--FINANCIAL INTERMEDIATION SERVICES
`Sec. 801. Determination of financial intermediation services amount.
`Sec. 802. Bad debts.
`Sec. 803. Timing of tax on financial intermediation services.
`Sec. 804. Financing leases.
`Sec. 805. Basic interest rate.
`Sec. 806. Foreign financial intermediation services.
`SEC. 801. DETERMINATION OF FINANCIAL INTERMEDIATION SERVICES AMOUNT.
`(a) FINANCIAL INTERMEDIATION SERVICES- For purposes of this subtitle--
`(1) IN GENERAL- The term `financial intermediation services' means the
sum of--
`(A) explicitly charged fees for financial intermediation services,
and
`(B) implicitly charged fees for financial intermediation
services.
`(2) EXPLICITLY CHARGED FEES FOR FINANCIAL INTERMEDIATION SERVICES- The
term `explicitly charged fees for financial intermediation services'
includes--
`(B) explicitly stated banking, loan origination, processing,
documentation, credit check fees, or other similar fees;
`(C) safe-deposit box fees;
`(D) insurance premiums, to the extent such premiums are not allocable
to the investment account of the underlying insurance policy;
`(F) other financial services fees (including mutual fund management,
sales, and exit fees).
`(3) IMPLICITLY CHARGED FEES FOR FINANCIAL INTERMEDIATION
SERVICES-
`(A) IN GENERAL- The term `implicitly charged fees for financial
intermediation services' includes the gross imputed amount in relation to
any underlying interest-bearing investment, account, or debt.
`(B) GROSS IMPUTED AMOUNT- For purposes of subparagraph (A), the term
`gross imputed amount' means--
`(i) with respect to any underlying interest-bearing investment or
account, the product of--
`(I) the excess (if any) of the basic interest rate (as defined in
section 805) over the rate paid on such investment; and
`(II) the amount of the investment or account; and
`(ii) with respect to any underlying interest-bearing debt, the
product of--
`(I) the excess (if any) of the rate paid on such debt over the
basic interest rate (as defined in section 805); and
`(II) the amount of the debt.
`(b) SELLER OF FINANCIAL INTERMEDIATION SERVICES- For purposes of section
103(a), the seller of financial intermediation services shall be--
`(1) in the case of explicitly charged fees for financial intermediation
services, the seller shall be the person who receives the gross payments for
the charged financial intermediation services;
`(2) in the case of implicitly charged fees for financial intermediation
services with respect to any underlying interest-bearing investment or
account, the person making the interest payments on the interest-bearing
investment or account; and
`(3) in the case of implicitly charged fees for financial intermediation
services with respect to any interest-bearing debt, the person receiving the
interest payments on the interest-bearing debt.
`SEC. 802. BAD DEBTS.
`(a) IN GENERAL- For purposes of section 205(a), a bad debt shall be a
business debt that becomes wholly or partially worthless to the payee.
`(b) BUSINESS LOAN- For purposes of subsection (a), a business loan or
debt is a bona fide loan or debt made for a business purpose that both parties
intended be repaid.
`(c) DETERMINATION OF WORTHLESSNESS-
`(1) IN GENERAL- No loan or debt shall be considered wholly or partially
worthless unless it has been in arrears for 180 days or more, except that if
a debt is discharged wholly or partially in bankruptcy before 180 days has
elapsed, then it shall be deemed wholly or partially worthless on the date
of discharge.
`(2) DETERMINATION BY HOLDER- A loan or debt that has been in arrears
for 180 days or more may be deemed wholly or partially worthless by the
holder unless a payment schedule has been entered into between the debtor
and the lender.
`See section 205(c) for tax on subsequent payments.
`SEC. 803. TIMING OF TAX ON FINANCIAL INTERMEDIATION SERVICES.
`The tax on financial intermediation services provided by section 801 with
respect to an underlying investment account or debt shall be imposed and
collected with the same frequency that statements are rendered by the
financial institution in connection with the investment account or debt but
not less frequently than quarterly.
`SEC. 804. FINANCING LEASES.
`(a) DEFINITION- For purposes of this section, the term `financing lease'
means any lease under which the lessee has the right to acquire the property
for 50 percent or less of its fair market value at the end of the lease
term.
`(b) GENERAL RULE- Financing leases shall be taxed in the method set forth
in this section.
`(c) DETERMINATION OF PRINCIPAL AND INTEREST COMPONENTS OF FINANCING
LEASE- The Secretary shall promulgate rules for disaggregating the principal
and interest components of a financing lease. The principal amount shall be
determined to the extent possible by examination of the contemporaneous sales
price or prices of property the same or similar as the leased property.
`(d) ALTERNATIVE METHOD- In the event that contemporaneous sales prices of
property the same or similar as the leased property are not available, the
principal and interest components of a financing lease shall be disaggregated
using the applicable interest rate (as defined in section 512) plus 4
percent.
`(e) PRINCIPAL COMPONENT- The principal component of the financing lease
shall be subject to tax as if a purchase in the amount of the principal
component had been made on the day on which said lease was executed.
`(f) INTEREST COMPONENT- The financial intermediation services amount with
respect to the interest component of the financing lease shall be subject to
tax under this subtitle.
`(g) COORDINATION- If the principal component and financial intermediation
services amount with respect to the interest component of a lease have been
taxed pursuant to this section, then the gross lease or rental payments shall
not be subject to additional tax.
`SEC. 805. BASIC INTEREST RATE.
`For purposes of this chapter, the basic interest rate with respect to a
debt instrument, investment, financing lease, or account shall be the
applicable interest rate (as determined in section 512). For debt instruments,
investments, or accounts of contractually fixed interest, the applicable
interest rate of the month of issuance shall apply. For debt instruments,
investments, or accounts of variable interest rates and which have no
reference interest rate, the applicable interest shall be the Federal
short-term interest rate for each month. For debt instruments, investments, or
accounts of variable interest rates and which have a reference interest rate,
the applicable interest shall be the applicable interest rate for the
reference interest rate for each month.
`SEC. 806. FOREIGN FINANCIAL INTERMEDIATION SERVICES.
`(a) SPECIAL RULES RELATING TO INTERNATIONAL FINANCIAL INTERMEDIATION
SERVICES- Financial intermediation services shall be deemed as used or
consumed within the United States if the person (or any related party as
defined in section 205(e)) purchasing the services is a resident of the United
States.
`(b) DESIGNATION OF TAX REPRESENTATIVE- Any person that provides financial
intermediation services to United States residents must, as a condition of
lawfully providing such services, designate, in a form prescribed by the
Secretary, a tax representative for purposes of this subtitle. The tax
representative shall be responsible for ensuring that the taxes imposed by
this subtitle are collected and remitted and shall be jointly and severally
liable for collecting and remitting these taxes. The Secretary may require
reasonable bond of the tax representative. The Secretary or a sales tax
administering authority may bring an action seeking a temporary restraining
order, an injunction, or such other order as may be appropriate to enforce
this section.
`For definition of person, see section 901.
`CHAPTER 9--ADDITIONAL MATTERS
`Sec. 901. Additional matters.
`Sec. 902. Transition matters.
`Sec. 903. Wages to be reported to Social Security Administration.
`Sec. 904. Trust Fund revenue.
`Sec. 905. Withholding of tax on nonresident aliens and foreign corporations.
`SEC. 901. ADDITIONAL MATTERS.
`(a) INTANGIBLE PROPERTY ANTIAVOIDANCE RULE- Notwithstanding section
2(a)(14)(A)(i), the sale of a copyright or trademark shall be treated as the
sale of taxable services (within the meaning of section 101(a)) if the
substance of the sales of copyright or trademark constituted the sale of the
services that produced the copyrighted material or the trademark.
`(b) DE MINIMIS PAYMENTS- Up to $400 of gross payments per calendar year
shall be exempt from the tax imposed by section 101 if--
`(1) made by a person not in connection with a trade or business at any
time during such calendar year prior to making said 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.
`(c) DE MINIMIS SALES- Up to $1,200 per calendar year of gross payments
shall be exempt from the tax imposed by section 101 if received--
`(1) by a person not in connection with a trade or business during such
calendar year prior to the receipt of said gross payments; and
`(2) in connection with a casual or isolated sale.
`(d) DE MINIMIS SALE OF FINANCIAL INTERMEDIATION SERVICES- Up to $10,000
per calendar year of gross payments received by a person from the sale of
financial intermediation services (as determined in accordance with section
801) shall be exempt from the tax imposed by section 101. The exemption
provided by this subsection is in addition to other exemptions afforded by
this chapter. The exemption provided by this subsection shall not be available
to large sellers (as defined in section 501(e)(3)).
`(e) PROXY BUYING TAXABLE- If a registered person provides taxable
property or services to a person either as a gift, prize, reward, or as
remuneration for employment, and such taxable property or services were not
previously subject to tax pursuant to section 101, then the provision of such
taxable property or services by the registered person shall be deemed the
conversion of such taxable property or services to personal use subject to tax
pursuant to section 103(c) at the tax inclusive fair market value of such
taxable property or services.
`(f) SUBSTANCE OVER FORM- The substance of a transaction will prevail over
its form if the transaction has no bona fide economic purpose and is designed
to evade tax imposed by this subtitle.
`(g) CERTAIN EMPLOYEE DISCOUNTS TAXABLE-
`(1) EMPLOYEE DISCOUNT- For purposes of this subsection, the term
`employee discount' means an employer's offer of taxable property or
services for sale to its employees or their families (within the meaning of
section 302(b)) for less than the offer of such taxable property or services
to the general public.
`(2) EMPLOYEE DISCOUNT AMOUNT- For purposes of this subsection, the
employee discount amount is the amount by which taxable property or services
are sold pursuant to an employee discount below the amount for which such
taxable property or services would have been sold to the general
public.
`(3) TAXABLE AMOUNT- If the employee discount amount exceeds 20 percent
of the price that the taxable property or services would have been sold to
the general public, then the sale of such taxable property or services by
the employer shall be deemed the conversion of such taxable property or
services to personal use and tax shall be imposed on the taxable employee
discount amount. The taxable employee discount amount shall be--
`(A) the employee discount amount, minus
`(B) 20 percent of the amount for which said taxable property or
services would have been sold to the general public.
`(h) SATURDAY, SUNDAY, OR LEGAL HOLIDAY- When the last day prescribed for
performing any act required by this subtitle falls on a Saturday, Sunday, or
legal holiday (in the jurisdiction where the return is to be filed), the
performance of such act shall be considered timely if it is performed on the
next day which is not a Saturday, Sunday, or legal holiday (in the
jurisdiction where the return is to be filed).
`SEC. 902. TRANSITION MATTERS.
`(1) QUALIFIED INVENTORY- Inventory held by a trade or business on the
close of business on December 31, 2000, shall be qualified inventory if it
is sold--
`(A) before December 31, 2004;
`(B) by a registered person; and
`(C) subject to the tax imposed by section 101.
`(2) COST- For purposes of this section, qualified inventory shall have
the cost that it had for Federal income tax purposes for the trade or
business as of December 31, 2000 (including any amounts capitalized by
reason of section 263A of the Internal Revenue Code of 1986 as in effect on
December 31, 2000).
`(3) TRANSITIONAL INVENTORY CREDIT- The trade or business which held the
qualified inventory on the close of business on December 31, 2000, shall be
entitled to a transitional inventory credit equal to the cost of the
qualified inventory (determined in accordance with paragraph (2)) times the
rate of tax imposed by section 101.
`(4) TIMING OF CREDIT- The credit provided under paragraph (3) shall be
allowed with respect to the month when the inventory is sold subject to the
tax imposed by this subtitle. Said credit shall be reported as an
intermediate and export sales credit and the person claiming said credit
shall attach supporting schedules in the form that the Secretary may
prescribe.
`(b) WORK-IN-PROCESS- For purposes of this section, inventory shall
include work-in-process.
`(c) QUALIFIED INVENTORY HELD BY BUSINESSES NOT SELLING SAID QUALIFIED
INVENTORY AT RETAIL-
`(1) IN GENERAL- Qualified inventory held by businesses that sells said
qualified inventory not subject to tax pursuant to section 102(a) shall be
eligible for the transitional inventory credit only if that business (or a
business that has successor rights pursuant to paragraph (2)) receives
certification in a form satisfactory to the Secretary that the qualified
inventory was subsequently sold subject to the tax imposed by this
subtitle.
`(2) TRANSITIONAL INVENTORY CREDIT RIGHT MAY BE SOLD- The business
entitled to the transitional inventory credit may sell the right to receive
said transitional inventory credit to the purchaser of the qualified
inventory that gave rise to the credit entitlement. Any purchaser of such
qualified inventory (or property or services into which the qualified
inventory has been incorporated) may sell the right to said transitional
inventory credit to a subsequent purchaser of said qualified inventory (or
property or
services into which the qualified inventory has been incorporated).
`SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY ADMINISTRATION.
`(a) IN GENERAL- Employers shall submit such information to the Social
Security Administration as is required by the Social Security Administration
to calculate social security benefits under title II of the Social Security
Act, including wages paid, in a form prescribed by the Secretary. A copy of
the employer submission to the Social Security Administration relating to each
employee shall be provided to each employee by the employer.
`(b) WAGES- For purposes of this section, the term `wages' means all cash
remuneration for employment (including tips to an employee by third parties
provided that the employer or employee maintains records documenting such
tips) including self-employment income; except that such term shall not
include--
`(1) any insurance benefits received (including death benefits);
`(2) pension or annuity benefits received;
`(3) tips received by an employee over $5,000 per year; and
`(4) benefits received under a government entitlement program (including
social security benefits and unemployment compensation benefits).
`(c) SELF-EMPLOYMENT INCOME- For purposes of subsection (b), the term
`self-employment income' means gross payments received for taxable property or
services minus the sum of--
`(1) gross payments made for taxable property or services (without
regard to whether tax was paid pursuant to section 101 on such taxable
property or services), and
`(2) wages paid by the self-employed person to employees of the
self-employed person.
`SEC. 904. TRUST FUND REVENUE.
`(a) SECRETARY TO MAKE ALLOCATION OF SALES TAX REVENUE- The Secretary
shall allocate the revenue received by virtue of the tax imposed by section
101 in accordance with this section. The revenue shall be allocated among--
`(1) the general revenue,
`(2) the old-age and survivors insurance trust fund,
`(3) the disability insurance trust fund,
`(4) the hospital insurance trust fund, and
`(5) the Federal supplementary medical insurance trust fund.
`(1) GENERAL REVENUE- The proportion of total revenue allocated to the
general revenue shall be the same proportion as the rate in section
101(b)(4) bears to the combined Federal tax rate percentage (as defined in
section 101(b)(3)).
`(2) The amount of revenue allocated to the old-age and survivors
insurance and disability insurance trust funds shall be the same proportion
as the old-age, survivors and disability insurance rate (as defined in
subsection (d)) bears to the combined Federal tax rate percentage (as
defined in section 101(b)(3)).
`(3) The amount of revenue allocated to the hospital insurance and
Federal supplementary medical insurance trust funds shall be the same
proportion as the hospital insurance rate (as defined in subsection (e))
bears to the combined Federal tax rate percentage (as defined in section
101(b)(3)).
`(c) CALENDAR YEAR 2001- Notwithstanding subsection (b), the revenue
allocation pursuant to subsection (a) for calendar year 2001 shall be as
follows:
`(1) 64.83 percent of total revenue to general revenue;
`(2) 27.43 percent of total revenue to the old-age and survivors
insurance and disability insurance trust funds, and
`(3) 7.74 percent of total revenue to the hospital insurance and Federal
supplementary medical insurance trust funds.
`(d) OLD-AGE, SURVIVORS AND DISABILITY INSURANCE RATE- The old-age,
survivors and disability insurance rate shall be determined by the Social
Security Administration. The old-age, survivors and disability insurance rate
shall be that sales tax rate which is necessary to raise the same amount of
revenue that would have been raised by imposing a 12.4 percent tax on the
Social Security wage base (including self-employment income) as determined in
accordance with chapter 21 of the Internal Revenue Code most recently in
effect prior to the enactment of this Act. The rate shall be determined using
actuarially sound methodology and announced at least 6 months prior to the
beginning of the calendar year for which it applies.
`(e) HOSPITAL INSURANCE RATE- The hospital insurance rate shall be
determined by the Social Security Administration. The hospital insurance rate
shall be that sales tax rate which is necessary to raise the same amount of
revenue that would have been raised by imposing a 2.9 percent tax on the
Medicare wage base (including self-employment income) as determined in
accordance with chapter 21 of the Internal Revenue Code most recently in
effect prior to the enactment of this Act. The rate shall be determined using
actuarially sound methodology and announced at least 6 months prior to the
beginning of the calendar year for which it applies.
`(f) ASSISTANCE- The Secretary shall provide such technical assistance as
the Social Security Administration shall require to determine the old-age,
survivors and disability insurance rate and the hospital insurance rate.
`(g) FURTHER ALLOCATIONS-
`(1) OLD-AGE, SURVIVORS AND DISABILITY INSURANCE- The Secretary shall
allocate revenue received because of the old-age, survivors and disability
insurance rate to the old-age and survivors insurance trust fund and the
disability insurance trust fund in accordance with law or, in the absence of
other statutory provision, in the same proportion that the old-age and
survivors insurance trust fund receipts bore to the sum of the old-age and
survivors insurance trust fund receipts and the disability insurance trust
fund receipts in calendar year 2000
(taking into account only receipts pursuant to chapter 21 of the Internal
Revenue Code).
`(2) HOSPITAL INSURANCE- the Secretary shall allocate revenue received
because of the hospital insurance rate to the hospital insurance trust fund
and the Federal supplementary medical insurance trust fund in accordance
with law or, in the absence of other statutory provision, in the same
proportion that hospital insurance trust fund receipts bore to the sum of
the hospital insurance trust fund receipts and Federal supplementary medical
insurance trust fund receipts in calendar year 2000 (taking into account
only receipts pursuant to chapter 21 of the Internal Revenue Code).
`SEC. 905. WITHHOLDING OF TAX ON NONRESIDENT ALIENS AND FOREIGN
CORPORATIONS.
`(a) IN GENERAL- All persons, in whatever capacity acting (including
lessees or mortgagors or real or personal property, fiduciaries, employers,
and all officers and employees of the United States) having control, receipt,
custody, disposal, or payment of any income to the extent such income
constitutes gross income from sources within the United States of any
nonresident alien individual, foreign partnership, or foreign corporation
shall deduct and withhold from that income a tax equal to 23 percent
thereof.
`(b) EXCEPTION- No tax shall be required to be deducted from interest on
portfolio debt investments.
`(c) TREATY COUNTRIES- In the case of payments to nonresident alien
individuals, foreign partnerships, or foreign corporations that have a
residence in (or the nationality of a country) that has entered into a tax
treaty with the United States, then the rate of withholding tax prescribed by
the treaty shall govern.'.
SEC. 202. CONFORMING AND TECHNICAL AMENDMENTS.
(a) REPEALS- The following provisions of the Internal Revenue Code of 1986
are repealed:
(1) Subchapter A of chapter 61 of subtitle D (as redesignated by section
104) (relating to information and returns).
(2) Sections 6103 through 6116 of subchapter B of chapter 61 of subtitle
D (as so redesignated).
(3) Section 6157 (relating to unemployment taxes).
(4) Section 6163 (relating to estate taxes).
(5) Section 6164 (relating to corporate taxes).
(6) Section 6166 (relating to estate taxes).
(7) Section 6167 (relating to foreign expropriation losses).
(8) Sections 6201, 6205 and 6207 (relating to assessments).
(9) Subchapter C of chapter 63 of subtitle D (as so redesignated)
(relating to tax treatment of partnership items).
(10) Section 6305 (relating to collections of certain
liabilities).
(11) Sections 6314, 6315, 6316, and 6317 (relating to payments of
repealed taxes).
(12) Sections 6324, 6324A and 6324B (relating to liens for estate and
gift taxes).
(13) Section 6344 (relating to cross references).
(14) Section 6411 (relating to carrybacks).
(15) Section 6413 (relating to employment taxes).
(16) Section 6414 (relating to withheld income taxes).
(17) Section 6422 (relating to cross references).
(18) Section 6425 (relating to overpayment of corporate estimated
taxes).
(19) Section 6504 (relating to cross references).
(20) Section 6652 (relating to failure to file certain information
returns).
(21) Sections 6654 and 6655 (relating to failure to payment estimated
income tax).
(22) Section 6662 (relating to penalties).
(23) Sections 6677 through 6711 (relating to income tax related
penalties).
(24) Part II of subchapter B of chapter 68 (relating to certain
information returns).
(25) Part I of subchapter A of chapter 70 (relating to termination of
taxable year).
(26) Section 6864 (relating to certain carrybacks).
(27) Section 7103 (relating to cross references).
(28) Section 7204 (relating to withholding statements).
(29) Section 7211 (relating certain statements).
(30) Section 7231 (relating to failure to obtain certain
licenses).
(31) Section 7270 (relating to insurance policies).
(32) Section 7404 (relating to estate taxes).
(33) Section 7407 (relating to income tax preparers).
(34) Section 7408 (relating to income tax shelters).
(35) Section 7409 (relating to 501(c)(3) organizations).
(36) Section 7427 (relating to income tax preparers).
(37) Section 7428 (relating to 501(c)(3) organizations).
(38) Section 7476 (relating to declaratory judgments relating to
retirement plans).
(39) Section 7478 (relating to declaratory judgments relating to certain
tax-exempt obligations).
(40) Section 7508 (relating to postponing time for certain actions
required by the income, estate, and gift tax).
(41) Section 7509 (relating to Postal Service payroll taxes).
(42) Section 7512 (relating to payroll taxes).
(43) Section 7517 (relating to estate and gift tax evaluation).
(44) Section 7518 (relating to Merchant Marine tax incentives).
(45) Section 7519 (relating to taxable years).
(46) Section 7520 (relating to insurance and annuity valuation
tables).
(47) Section 7523 (relating to reporting Federal income and outlays on
Form 1040s).
(48) Section 7611 (relating to church income tax exemptions and church
unrelated business income tax inquiries).
(49) Section 7654 (relating to possessions' income taxes).
(50) Section 7655 (relating to cross references).
(51) Section 7701(a)(16).
(52) Section 7701(a)(19).
(53) Section 7701(a)(20).
(54) Paragraphs (32) through (38) of section 7701(a).
(55) Paragraphs (41) through (46) of section 7701(a).
(57) Subsections (e) through (m) of section 7701.
(58) Section 7702 (relating to life insurance contracts).
(59) Section 7702A (relating to modified endowment contracts).
(60) Section 7702B (relating to long-term care insurance).
(61) Section 7703 (relating to the determination of marital
status).
(62) Section 7704 (relating to publicly traded partnerships).
(b) OTHER CONFORMING AND TECHNICAL AMENDMENTS-
(1) Section 6151 is amended by striking subsection (b) and by
redesignating subsection (c) as subsection (b).
(2) Section 6161 is amended to read as follows:
`SEC. 6161. EXTENSION OF TIME FOR PAYING TAX.
`The Secretary, except as otherwise provided in this title, may extend the
time for payment of the amount of the tax shown or required to be shown on any
return, report, or declaration required under authority of this title for a
reasonable period not to exceed 6 months (12 months in the case of a taxpayer
who is abroad).'.
(3) Section 6211(a) is amended--
(A) by striking `income, estate and gift taxes imposed by subtitles A
and B and',
(B) by striking `subtitle A or B, or', and
(C) by striking `, as defined in subsection (b)(2),' in paragraph
(2).
(4) Section 6211(b) is amended to read as follows:
`(b) REBATE DEFINED- For purposes of subsection (a)(2), the term `rebate'
means so much of an abatement, credit, refund, or other payment, as was made
on the ground that the tax imposed by chapter 41, 42, 43, or 44 was less than
the excess of the amount specified in subsection (a)(1) over the rebates
previously made.'.
(5) Section 6212 is amended to read as follows:
`(b) ADDRESS FOR NOTICE OF DEFICIENCY- In the absence of notice to the
Secretary under section 6903 of the existence of a fiduciary relationship,
notice of a deficiency in respect of a tax imposed by chapter 42, 43, or 44 if
mailed to the taxpayer at his last known address, shall be sufficient for
purposes of such chapter and this chapter even if such taxpayer is deceased,
or is under a legal disability, or, in the case of a corporation, has
terminated its existence.'.
(6) Section 6302(b) is amended by striking `21,'.
(7) Section 6302 is amended by striking subsections (g) and (i) and by
redesignating subsection (h) as subsection (g).
(8) Section 6325 is amended by striking subsection (c) and by
redesignating subsections (d) through (h) as subsections (c) through (g),
respectively.
(9) Section 6402(d) is amended by striking paragraph (3).
(10) Section 6402 is amended by striking subsection (j) and by
redesignating subsection (k) as subsection (j).
(11) Section 6501(b) is amended--
(A) by striking `except tax imposed by chapter 3, 21 or 24,' in
paragraph (1), and
(B) by striking paragraph (2) and by redesignating paragraphs (3) and
(4) as paragraphs (2) and (3), respectively.
(12) Section 6501(c) is amended by striking paragraphs (5) through
(9).
(13) Section 6501(e) is amended by striking `subsection (c)--' and all
that follows through `subtitle D' in paragraph (3) and inserting `subsection
(c), in the case of a return of a tax imposed under a provision of subtitle
B'.
(14) Section 6501 is amended by striking subsections (f) through (k) and
subsections (m) and (n) and by redesignating subsection (l) as subsection
(f).
(15) Section 6503(a) is amended--
(A) by striking paragraph (2),
(B) by striking `DEFICIENCY- ' and all that follows through `The
running' and inserting `DEFICIENCY- The running', and
(C) by striking `income, estate, gift and'.
(16) Section 6503 is amended by striking subsections (e), (f), (i), and
(k) and by redesignating subsections (g), (h), and (j) as subsections (e),
(f), and (g), respectively.
(17) Section 6511 is amended by striking subsections (d) and (g) and by
redesignating subsections (f) and (h) as subsections (d) and (e),
respectively.
(18) Section 6512(b)(1) is amended by striking `of income tax for the
same taxable year, of gift tax for the same calendar year or calendar
quarter, of estate tax in respect of the taxable estate of the same decedent
or'.
(19) Section 6513 is amended--
(A) by striking `(a) EARLY RETURN OR ADVANCE PAYMENT OF TAX- ',
and
(B) by striking subsections (b) through (e).
(20) Chapter 67 is amended by striking subchapters A through D and
inserting the following:
`SEC. 6601. INTEREST ON OVERPAYMENTS AND UNDERPAYMENTS.
`(a) UNDERPAYMENTS- If any amount of tax imposed by this title is not paid
on or before the last date prescribed for payment, interest on such amount at
the Federal short-term rate (as defined in section 512(b)) shall be paid from
such last date to the date paid.
`(b) OVERPAYMENTS- Interest shall be allowed and paid upon any overpayment
in respect of any internal revenue tax at the Federal short-term rate (as
defined in section 512(b)) from 60 days after the date of the overpayment
until the date the overpayment is refunded.'.
(21) Section 6651(a)(1) is amended by striking `subchapter A of chapter
61 (other than part III thereof),'.
(22) Section 6656 is amended by striking subsection (c) and by
redesignating subsection (d) as subsection (c).
(23) Section 6663 is amended by striking subsection (c).
(24) Section 6664(c) is amended--
(A) by striking `EXCEPTION- ' and all that follows through `No
penalty' and inserting `EXCEPTION- No penalty', and
(B) by striking paragraphs (2) and (3).
(25) Chapter 72 is amended by striking all matter preceding section
7011.
(26) Section 7422 is amended by striking subsections (h) and (i) and by
redesignating subsections (j) and (k) as subsections (h) and (i),
respectively.
(27) Section 7451 is amended to read as follows:
`SEC. 7451. FEE FOR FILING PETITION.
`The Tax Court is authorized to impose a fee in an amount not in excess of
$60 to be fixed by the Tax Court for the filing of any petition for the
redetermination of a deficiency.'.
(28) Section 7454 is amended by striking subsection (b) and by
redesignating subsection (c) as subsection (b).
(29) Section 7463(a) is amended--
(A) by striking paragraphs (2) and (3),
(B) by redesignating paragraph (4) as paragraph (2), and
(C) by striking `D' in paragraph (2) (as so redesignated) and
inserting `B'.
(30) Section 7463(c) is amended by striking `sections 6214(a) and' and
inserting `section'.
(31) Section 7463(e) is amended by striking `, to the extent that the
procedures described in subchapter B of chapter 63 apply'.
(32) Section 7481 is amended by striking subsection (d).
(33) Section 7608 is amended by striking `subtitle E' each place it
appears and inserting `subtitle C'.
(34) Section 7651 is amended by striking paragraph (5).
(35) Section 7701(a)(29) is amended by striking `1986' and inserting
`1998'.
(36) Section 7809(c) is amended by striking paragraphs (1) and (4) and
by redesignating paragraphs (2) and (3) as paragraphs (1) and (2),
respectively.
(37) Section 7871(a) is amended by striking paragraphs (1) and (3)
through (6) and by redesignating paragraphs (2) and (7) as paragraphs (1)
and (2), respectively.
(38) Section 7871 is amended by striking subsection (c) and by
redesignating subsections (d) and (e) as subsections (c) and (d),
respectively.
(39) Section 8021 is amended by striking subsection (a) and by
redesignating subsections (b) through (f) as subsections (a) through (e),
respectively.
(40) Section 8022(a)(2)(A) is ammended by striking `, particularly the
income tax'.
(41) Section 8023 is amended by striking `Internal Revenue Service' each
place it appears and inserting `Department of the Treasury'.
(42) Section 9501(b)(2) is amended by striking subparagraph (C).
(43) Section 9702(a) is amended by striking paragraph (4).
(44) Section 9705(a) is amended by striking paragraph (4) and by
redesignating paragraph (5) as paragraph (4).
(45) Section 9706(d)(2)(A) is amended by striking `6103' and inserting
`605(e)'.
(46) Section 9707 is amended by striking subsection (f).
(47) Section 9712(d) is amended by striking paragraph (5) and by
redesignating paragraph (6) as paragraph (5).
(48) Section 9803(a) is amended by striking `(as defined in section
414(f))'.
TITLE III--OTHER MATTERS
SEC. 301. PHASE-OUT OF ADMINISTRATION OF REPEALED FEDERAL TAXES.
(a) APPROPRIATIONS- Appropriations for any expenses of the Internal
Revenue Service including processing tax returns for years prior to the repeal
of the taxes repealed by title I of this Act, revenue accounting, management,
transfer of payroll and wage data to the Social Security Administration for
years after fiscal year 2005 shall not be authorized.
(b) RECORDS- Federal records related to the administration of taxes
repealed by title I of this Act shall be destroyed by the end of fiscal year
2005, except that any records necessary to calculate social security benefits
shall be retained by the Social Security Administration and any records
necessary to support ongoing litigation with respect taxes to owed or refunds
due shall be retained until final disposition of such litigation.
(c) CONFORMING AMENDMENTS- Section 7802 is amended--
(1) by striking subsections (a) and (b) and by redesignating subsections
(c) and (d) as subsections (a) and (b),
(2) by striking `Internal Revenue Service' each place it appears and
inserting `Department of the Treasury', and
(3) by striking `Commissioner' or `Commissioner of Internal Revenue'
each place they appear and inserting `Secretary'.
(d) EFFECTIVE DATE- The amendments made by subsection (c) shall take
effect on January 1, 2003.
SEC. 302. ADMINISTRATION OF OTHER FEDERAL TAXES.
(a) IN GENERAL- Section 7801 (relating to the authority of the Department
of the Treasury) is amended by adding at the end the following:
`(d) EXCISE TAX BUREAU- There shall be in the Department of the Treasury
an Excise Tax Bureau to administer those excise taxes not administered by the
Bureau of Alcohol, Tobacco and Firearms.
`(e) SALES TAX BUREAU- There shall be in the Department of the Treasury a
Sales Tax Bureau to administer the national sales tax in those States where it
is required pursuant to section 404, and to discharge other Federal duties and
powers relating to the national sales tax (including those required by
sections 402, 403, and 405). The Office of Revenue Allocation shall be within
the Sales Tax Bureau.'.
(b) ASSISTANT GENERAL COUNSELS- Section 7801(b)(2) is amended to read as
follows:
`(2) ASSISTANT GENERAL COUNSELS- The Secretary of the Treasury may
appoint, without regard to the provisions of the civil service laws, and fix
the duties of not more than 5 assistant general counsels.'.
SEC. 303. SALES TAX INCLUSIVE SOCIAL SECURITY BENEFITS INDEXATION.
Subparagraph (D) of section 215(i)(1) of the Social Security Act (42
U.S.C. 415(i)(1)) (relating to cost-of-living increases in social security
benefits) is amended to read as follows:
`(D)(i) the term `CPI increase percentage', with respect to a base
quarter or cost-of-living quarter in any calendar year, means the percentage
(rounded to the nearest one-tenth of 1 percent) by which the Consumer Price
Index for that quarter (as prepared by the Department of Labor) exceeds such
index for the most recent prior calendar quarter which was a base quarter
under subparagraph (A)(ii) or, if later, the most recent cost-of-living
computation quarter under subparagraph (B);
`(ii) if the Consumer Price Index (as so prepared) does not include the
national sales tax paid, then the term `CPI increase percentage', with
respect to a base quarter or cost-of-living quarter in any calendar year,
means the percentage (rounded to the nearest one-tenth of 1 percent) by
which the product of--
`(I) the Consumer Price Index for that quarter (as so prepared),
and
`(II) the national sales tax factor,
exceeds such index for the most recent prior calendar quarter which was
a base quarter under subparagraph (A)(ii) or, if later, the most recent cost
of living computation quarter under subparagraph (B); and
`(iii) the national sales tax factor is equal to 1 plus the quotient
that is--
`(I) the sales tax rate imposed by section 101 of of the Internal
Revenue Code of 1999, divided by
`(II) the quantity that is 1 minus such sales tax rate.'.
END