FairTax Act of 2023
This bill imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income taxes, payroll taxes, and estate and gift taxes. The rate of the sales tax will be 23% in 2025, with adjustments to the rate in subsequent years. There are exemptions from the tax for used and intangible property; for property or services purchased for business, export, or investment purposes; and for state government functions.
Under the bill, family members who are lawful U.S. residents receive a monthly sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines.
The states have the responsibility for administering, collecting, and remitting the sales tax to the Treasury.
Tax revenues are to 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.
No funding is authorized for the operations of the Internal Revenue Service after FY2027.
Finally, the bill terminates the national sales tax if the Sixteenth Amendment to the Constitution (authorizing an income tax) is not repealed within seven years after the enactment of this bill.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 25 Introduced in House (IH)]
<DOC>
118th CONGRESS
1st Session
H. R. 25
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
January 9, 2023
Mr. Carter of Georgia (for himself, Mr. Clyde, Mr. Duncan, Mrs.
Cammack, Mr. Perry, Mr. Good of Virginia, Mr. Massie, Mr. Norman, Mr.
Posey, Mr. Palmer, Mr. Banks, and Mr. Loudermilk) 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 ``FairTax Act of
2023''.
(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. 201. Sales tax.
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.
TITLE IV--SUNSET OF SALES TAX IF SIXTEENTH AMENDMENT NOT REPEALED
Sec. 401. Elimination of sales tax if Sixteenth Amendment not repealed.
SEC. 2. CONGRESSIONAL FINDINGS.
(a) Findings Relating to Federal Income Tax.--Congress finds 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;
(5) lowers productivity;
(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) discourage capital formation and entrepreneurship;
(3) foster the continued dominance of large enterprises
over small family-owned companies and farms; and
(4) impose 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.
TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT
TAXES
SEC. 101. INCOME TAXES REPEALED.
Subtitle A 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 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 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
(2) by redesignating--
(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 2023.
(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
2023; and
(B) to the Internal Revenue Code of 2023 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, 2023.
TITLE II--SALES TAX ENACTED
SEC. 201. SALES TAX.
(a) In General.--The Internal Revenue Code of 2023 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. Federal and State Cooperative Tax Administration
``Chapter 5. Other Administrative Provisions
``Chapter 6. Collections; Appeals; Taxpayer Rights
``Chapter 7. Special Rules
``Chapter 8. Financial Intermediation Services
``Chapter 9. Additional Matters
``SEC. 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.
``(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.
``(12) Taxable employer.--
``(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).
``(C) Cross reference.--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) used 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 202, 203, or 205, or
``(B) property that was held other than for a
business purpose (as defined in section 102(b)) on
December 31, 2024.
``(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.
``(b) Cross References.--
``(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.
``(b) Rate.--
``(1) For 2025.--In the calendar year 2025, the rate of tax
is 23 percent of the gross payments for the taxable property or
service.
``(2) For years after 2025.--For years after the calendar
year 2025, 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)),
``(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, United States Code. 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.
``(d) Liability for Tax.--
``(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, except as provided in paragraph (2) of
this subsection.
``(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 509.
``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 business purpose in a trade or business.
``(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--
``(1) for resale,
``(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) 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.
``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--
``(1) the product 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 one 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--
``(1) $200, or
``(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 one 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 one 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 511).
``(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 one or more family members sharing a
common residence. All family members sharing a common residence shall
be considered as part of one 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--
``(A) an individual,
``(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 amount 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.--Thirty 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
birth dates of family members.
``(n) Cross Reference.--For penalty for filing false rebate claim,
see section 504(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
sections 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
sections 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) Smart Cards and Direct Electronic Deposit Permissible.--The
Social Security Administration may provide rebates in the form of smart
cards 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 one 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 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
commoner residence are listed,
``(6) a certification that no family members were
incarcerated on the family determination date (within the
meaning of section 302(1)), 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 the
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
(g) (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.
``(e) Services.--
``(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. Penalties.
``Sec. 505. Burden of persuasion and burden of production.
``Sec. 506. Attorneys' and accountancy fees.
``Sec. 507. Summons, examinations, audits, etc.
``Sec. 508. Records.
``Sec. 509. Tax to be separately stated and charged.
``Sec. 510. Coordination with title 11.
``Sec. 511. 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.
``(b) Tax Payments Date.--
``(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.
``(2) Cross reference.--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.
``(i) Cross Reference.--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) 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 calender year to remit taxes and report transactions with
respect to the month where a sale was invoiced and accrued.
``(c) Cross Reference.--See section 205 for rules relating to bad
debts for sellers electing the accrual method.
``SEC. 504. 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 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--
``(A) $50, or
``(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.
``(4) Exceptions.--
``(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--
``(1) $25, or
``(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.
``(q) Cross Reference.--For interest due on late payments, see
section 6601.
``SEC. 505. 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. 506. 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. 507. 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. 508. RECORDS.
``Any person liable to remit taxes pursuant to this subtitle shall
keep records (including a record of all section 509 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. 509. 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. 510. COORDINATION WITH TITLE 11.
``No addition to tax shall be made under section 504 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
``(2) if--
``(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. 511. APPLICABLE INTEREST RATE.
``(a) In General.--
``(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 Garnishments.--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 officer (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 505), the right of the person to
professional fees (pursuant to section 506), 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 one 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 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 two 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 one 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
``(2) the sum of--
``(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.
``(b) Cross References.--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,
``(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 use property in any month
following the calendar year giving rise to the credit.
``(c) Cross Reference.--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--
``(A) brokerage fees,
``(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,
``(E) trustees' fees, and
``(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.
``(d) Cross Reference.--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 or 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 511) 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 511).
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.
``(c) Cross References.--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.
``(a) Inventory.--
``(1) Qualified inventory.--Inventory held by a trade or
business on the close of business on December 31, 2024, shall
be qualified inventory if it is sold--
``(A) before December 31, 2025,
``(B) by a registered person, and
``(C) subject to the tax imposed by section 101.
``(2) Costs.--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, 2024
(including any amounts capitalized by reason of section 263A of
the Internal Revenue Code of 1986 as in effect on December 31,
2024).
``(3) Transitional inventory credit.--The trade or business
which held the qualified inventory on the close of business on
December 31, 2024, 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.
``(b) General Rule.--
``(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 2025.--Notwithstanding subsection (b), the
revenue allocation pursuant to subsection (a) for calendar year 2025
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 2024
(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 2024 (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).
(56) Section 7701(b).
(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).
(63) Section 7805.
(64) Section 7851.
(65) Section 7872.
(66) Section 7873.
(b) Other Conforming and Technical Amendments.--
(1) Section 6151 of such Code is amended by striking
subsection (b) and by redesignating subsection (c) as
subsection (b).
(2) Section 6161 of such Code 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) of such Code 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) of such Code 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(b) of such Code 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) of such Code is amended by striking
``21,''.
(7) Section 6302 of such Code is amended by striking
subsections (g) and (i) and by redesignating subsection (h) as
subsection (g).
(8) Section 6325 of such Code is amended by striking
subsection (c) and by redesignating subsections (d) through (h)
as subsections (c) through (g), respectively.
(9) Section 6402(d) of such Code is amended by striking
paragraph (3).
(10) Section 6402 of such Code is amended by striking
subsection (j) and by redesignating subsection (k) as
subsection (j).
(11) Section 6501(b) of such Code is amended--
(A) by striking ``except tax imposed by chapter 3,
4, 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) of such Code is amended by striking
paragraphs (5) through (9).
(13) Section 6501(e) of such Code 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 of such Code is amended by striking
subsections (f) through (k) and subsections (m) and (n) and by
redesignating subsection (1) as subsection (f).
(15) Section 6503(a) of such Code 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 of such Code 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 of such Code 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) of such Code 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 of such Code is amended--
(A) by striking ``(a) Early Return or Advance
Payment of Tax.--'', and
(B) by striking subsections (b) and (e).
(20) Chapter 67 of such Code is amended by striking
subchapters A through D and inserting the following:
``SEC. 6601. INTEREST ON OVERPAYMENTS AND UNDERPAYMENT.
``(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
511(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 511(b)) from 60 days after the
date of the overpayment until the date the overpayment is refunded.''.
(21) Section 6651(a)(1) of such Code is amended by striking
``subchapter A of chapter 61 (other than part III thereof),''.
(22) Section 6656 of such Code is amended by striking
subsection (c) and by redesignating subsection (d) as
subsection (c).
(23) Section 6663 of such Code is amended by striking
subsection (c).
(24) Section 6664(c) of such Code 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 of such Code is amended by striking all
matter preceding section 7011.
(26) Section 7422 of such Code is amended by striking
subsections (h) and (i) and by redesignating subsections (j)
and (k) as subsections (h) and (i), respectively.
(27) Section 7451 of such Code 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 of such Code is amended by striking
subsection (b) and by redesignating subsection (c) as
subsection (b).
(29) Section 7463(a) of such Code 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) of such Code is amended by striking
``sections 6214(a) and'' and inserting ``section''.
(31) Section 7463(e) of such Code is amended by striking
``, to the extent that the procedures described in subchapter B
of chapter 63 apply''.
(32) Section 7481 of such Code is amended by striking
subsection (d).
(33) Section 7608 of such Code is amended by striking
``subtitle E'' each place it appears and inserting ``subtitle
C''.
(34) Section 7701(a)(29) of such Code is amended by
striking ``1986'' and inserting ``2023''.
(35) Section 7809(c) of such Code is amended by striking
paragraphs (1) and (4) and by redesignating paragraphs (2) and
(3) as paragraphs (1) and (2), respectively.
(36) Section 7871(a) of such Code is amended by striking
paragraphs (1) and (3) through (6) and by redesignating
paragraphs (2) and (7) as paragraphs (1) and (2), respectively.
(37) Section 7871 of such Code is amended by striking
subsection (c) and by redesignating subsections (d) and (e) as
subsections (c) and (d), respectively.
(38) Section 8021 of such Code is amended by striking
subsection (a) and by redesignating subsections (b) through (f)
as subsections (a) through (e), respectively.
(39) Section 8022(2)(A) of such Code is amended by striking
``, particularly the income tax''.
(40) Section 8023 of such Code is amended by striking
``Internal Revenue Service'' each place it appears and
inserting ``Department of the Treasury''.
(41) Section 9501(b)(2) of such Code is amended by striking
subparagraph (C).
(42) Section 9702(a) of such Code is amended by striking
paragraph (4).
(43) Section 9705(a) of such Code is amended by striking
paragraph (4) and by redesignating paragraph (5) as paragraph
(4).
(44) Section 9706(d)(2)(A) of such Code is amended by
striking ``6103'' and inserting ``605(e)''.
(45) Section 9707 of such Code is amended by striking
subsection (f).
(46) Section 9712(d) of such Code is amended by striking
paragraph (5) and by redesignating paragraph (6) as paragraph
(5).
(47) Section 9803(a) of such Code 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 2027
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 2027, 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 to taxes owed or refunds due shall be retained until final
disposition of such litigation.
(c) Conforming Amendments.--Section 7802 of the Internal Revenue
Code of 1986 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, 2027.
SEC. 302. ADMINISTRATION OF OTHER FEDERAL TAXES.
(a) In General.--Section 7801 of the Internal Revenue Code of 1986
(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, Firearms and
Explosives.
``(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(a)(2) of such Code 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 one plus
the quotient that is--
``(I) the sales tax rate imposed by section 101 of
the Internal Revenue Code of 2023, divided by
``(II) the quantity that is one minus such sales
tax rate.''.
TITLE IV--SUNSET OF SALES TAX IF SIXTEENTH AMENDMENT NOT REPEALED
SEC. 401. ELIMINATION OF SALES TAX IF SIXTEENTH AMENDMENT NOT REPEALED.
If the Sixteenth Amendment to the Constitution of the United States
is not repealed before the end of the 7-year period beginning on the
date of the enactment of this Act, then all provisions of, and
amendments made by, this Act shall not apply to any use or consumption
in any year beginning after December 31 of the calendar year in which
or with which such period ends, except that the Sales Tax Bureau of the
Department of the Treasury shall not be terminated until 6 months after
such December 31.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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