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H.R.2525
Fair Tax Act of 1999 (Introduced in the House)
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 INCOME TAXES REPEALED.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income taxes and self-employment taxes) is repealed.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 PAYROLL TAXES REPEALED.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repealed.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TAXES REPEALED.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repealed.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).
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