Sales Tax Fairness Act of 2002

Sales Tax Fairness Act of 2002 - Amends the Internal Revenue Code to permit the deduction of State and local sales taxes by residents of States which do not impose income taxes.

[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4487 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 4487

To amend the Internal Revenue Code of 1986 to allow residents of States 
    with no income tax a deduction for State and local sales taxes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 18, 2002

  Mr. Bryant (for himself and Mr. Hilleary) introduced the following 
      bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to allow residents of States 
    with no income tax a deduction for State and local sales taxes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sales Tax Fairness Act of 2002''.

SEC. 2. DEDUCTION OF STATE AND LOCAL GENERAL SALES TAXES FOR RESIDENTS 
              OF STATES WITH NO INCOME TAX.

    (a) In General.--Subsection (b) of section 164 of the Internal 
Revenue Code of 1986 (relating to definitions and special rules) is 
amended by adding at the end the following:
            ``(5) General sales taxes.--For purposes of this section--
                    ``(A) Deduction of state and local sales taxes by 
                residents of states imposing no income tax.--In the 
                case of an individual who is a resident for more than 
                half of the taxable year of a State which imposes no 
                income tax on income earned within such State by 
                residents of such State and who elects the application 
                of this paragraph, subsection (a) shall be applied--
                            ``(i) without regard to the reference to 
                        State and local income taxes,
                            ``(ii) as if State and local general sales 
                        taxes were referred to in a paragraph thereof, 
                        and
                            ``(iii) without regard to the last 
                        sentence.
                    ``(B) Definition of general sales tax.--The term 
                `general sales tax' means a tax imposed at one rate 
                with respect to the sale at retail of a broad range of 
                classes of items.
                    ``(C) Special rules for food, etc.--In the case of 
                items of food, clothing, medical supplies, and motor 
                vehicles--
                            ``(i) the fact that the tax does not apply 
                        with respect to some or all of such items shall 
                        not be taken into account in determining 
                        whether the tax applies with respect to a broad 
                        range of classes of items, and
                            ``(ii) the fact that the rate of tax 
                        applicable with respect to some or all of such 
                        items is lower than the general rate of tax 
                        shall not be taken into account in determining 
                        whether the tax is imposed at one rate.
                    ``(D) Items taxed at different rates.--Except in 
                the case of a lower rate of tax applicable with respect 
                to an item described in subparagraph (C), no deduction 
                shall be allowed under this paragraph for any general 
                sales tax imposed with respect to an item at a rate 
                other than the general rate of tax.
                    ``(E) Compensating use taxes.--A compensating use 
                tax with respect to an item shall be treated as a 
                general sales tax. For purposes of the preceding 
                sentence, the term `compensating use tax' means, with 
                respect to any item, a tax which--
                            ``(i) is imposed on the use, storage, or 
                        consumption of such item, and
                            ``(ii) is complementary to a general sales 
                        tax, but only if a deduction is allowable under 
                        this paragraph with respect to items sold at 
                        retail in the taxing jurisdiction which are 
                        similar to such item.
                    ``(F) Special rule for motor vehicles.--In the case 
                of motor vehicles, if the rate of tax exceeds the 
                general rate, such excess shall be disregarded and the 
                general rate shall be treated as the rate of tax.
                    ``(G) Separately stated general sales taxes.--If 
                the amount of any general sales tax is separately 
                stated, then, to the extent that the amount so stated 
                is paid by the consumer (other than in connection with 
                the consumer's trade or business) to the seller, such 
                amount shall be treated as a tax imposed on, and paid 
                by, such consumer.
                    ``(H) Amount of deduction to be determined under 
                tables.--
                            ``(i) In general.--The amount of the 
                        deduction allowed under this paragraph shall be 
                        determined under tables prescribed by the 
                        Secretary.
                            ``(ii) Requirements for tables.--The tables 
                        prescribed under clause (i)--
                                    ``(I) shall reflect the provisions 
                                of this paragraph,
                                    ``(II) shall be based on the 
                                average consumption by taxpayers on a 
                                State-by-State basis, as determined by 
                                the Secretary, taking into account 
                                filing status, number of dependents, 
                                adjusted gross income, and rates of 
                                State and local general sales taxation, 
                                and
                                    ``(III) need only be determined 
                                with respect to adjusted gross incomes 
                                up to the applicable amount (as 
                                determined under section 68(b)).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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