Us Congress House Bill HB25 Introduced / Bill

                    I 
119THCONGRESS 
1
STSESSION 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 
JANUARY3, 2025 
Mr. C
ARTERof Georgia (for himself, Mr. CLYDE, Mr. CARTERof Texas, Mr. 
P
ERRY, Mr. BURLISON, Mr. RUTHERFORD, Mr. DAVIDSON, Mr. BIGGS 
of Arizona, Mr. S
TRONG, and Mr. MCCORMICK) 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 Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3
(a) S
HORTTITLE.—This Act may be cited as the 4
‘‘FairTax Act of 2025’’. 5
(b) T
ABLE OFCONTENTS.—The table of contents for 6
this Act is as follows: 7
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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 Income taxes repealed.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 Payroll taxes repealed.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 Estate and gift taxes repealed.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 Phase-out of administration of repealed Federal taxes.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NOT REPEALED 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 Elimination of sales tax if Sixteenth Amendment not repealed.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. 
1
(a) F
INDINGSRELATING TO FEDERALINCOME 2
T
AX.—Congress finds the Federal income tax— 3
(1) retards economic growth and has reduced 4
the standard of living of the American public; 5
(2) impedes the international competitiveness of 6
United States industry; 7
(3) reduces savings and investment in the 8
United States by taxing income multiple times; 9
(4) slows the capital formation necessary for 10
real wages to steadily increase; 11
(5) lowers productivity; 12
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(6) imposes unacceptable and unnecessary ad-1
ministrative and compliance costs on individual and 2
business taxpayers; 3
(7) is unfair and inequitable; 4
(8) unnecessarily intrudes upon the privacy and 5
civil rights of United States citizens; 6
(9) hides the true cost of government by embed-7
ding taxes in the costs of everything Americans buy; 8
(10) is not being complied with at satisfactory 9
levels and therefore raises the tax burden on law- 10
abiding citizens; and 11
(11) impedes upward social mobility. 12
(b) F
INDINGSRELATING TO FEDERALPAYROLL 13
T
AXES.—Congress finds further that the Social Security 14
and Medicare payroll taxes and self-employment taxes— 15
(1) raise the cost of employment; 16
(2) destroy jobs and cause unemployment; and 17
(3) have a disproportionately adverse impact on 18
lower income Americans. 19
(c) F
INDINGSRELATING TOFEDERALESTATE AND 20
G
IFTTAXES.—Congress finds further that the Federal es-21
tate and gift taxes— 22
(1) force family businesses and farms to be sold 23
by the family to pay such taxes; 24
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(2) discourage capital formation and entrepre-1
neurship; 2
(3) foster the continued dominance of large en-3
terprises over small family-owned companies and 4
farms; and 5
(4) impose unacceptably high tax planning costs 6
on small businesses and farms. 7
(d) F
INDINGSRELATING TO NATIONALSALES 8
T
AX.—Congress finds further that a broad-based national 9
sales tax on goods and services purchased for final con-10
sumption— 11
(1) is similar in many respects to the sales and 12
use taxes in place in 45 of the 50 States; 13
(2) will promote savings and investment; 14
(3) will promote fairness; 15
(4) will promote economic growth; 16
(5) will raise the standard of living; 17
(6) will increase investment; 18
(7) will enhance productivity and international 19
competitiveness; 20
(8) will reduce administrative burdens on the 21
American taxpayer; 22
(9) will improve upward social mobility; and 23
(10) will respect the privacy interests and civil 24
rights of taxpayers. 25
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(e) FINDINGSRELATING TOADMINISTRATION OF 1
N
ATIONALSALESTAX.—Congress further finds that— 2
(1) most of the practical experience admin-3
istering sales taxes is found at the State govern-4
mental level; 5
(2) it is desirable to harmonize Federal and 6
State collection and enforcement efforts to the max-7
imum extent possible; 8
(3) it is sound tax administration policy to fos-9
ter administration and collection of the Federal sales 10
tax at the State level in return for a reasonable ad-11
ministration fee to the States; and 12
(4) businesses that must collect and remit taxes 13
should receive reasonable compensation for the cost 14
of doing so. 15
(f) F
INDINGSRELATING TOREPEAL OFPRESENT 16
F
EDERALTAXSYSTEM.—Congress further finds that the 17
16th Amendment to the United States Constitution should 18
be repealed. 19
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TITLE I—REPEAL OF THE IN-1
COME TAX, PAYROLL TAXES, 2
AND ESTATE AND GIFT TAXES 3
SEC. 101. INCOME TAXES REPEALED. 4
Subtitle A of the Internal Revenue Code of 1986 (re-5
lating to income taxes and self-employment taxes) is re-6
pealed. 7
SEC. 102. PAYROLL TAXES REPEALED. 8
(a) I
NGENERAL.—Subtitle C of the Internal Rev-9
enue Code of 1986 (relating to payroll taxes and with-10
holding of income taxes) is repealed. 11
(b) F
UNDING OFSOCIALSECURITY.—For funding of 12
the Social Security Trust Funds from general revenue, see 13
section 201 of the Social Security Act (42 U.S.C. 401). 14
SEC. 103. ESTATE AND GIFT TAXES REPEALED. 15
Subtitle B of the Internal Revenue Code of 1986 (re-16
lating to estate and gift taxes) is repealed. 17
SEC. 104. CONFORMING AMENDMENTS; EFFECTIVE DATE. 18
(a) C
ONFORMINGAMENDMENTS.—The Internal Rev-19
enue Code of 1986 is amended— 20
(1) by striking subtitle H (relating to financing 21
of Presidential election campaigns); and 22
(2) by redesignating— 23
(A) subtitle D (relating to miscellaneous 24
excise taxes) as subtitle B; 25
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(B) subtitle E (relating to alcohol, tobacco, 1
and certain other excise taxes) as subtitle C; 2
(C) subtitle F (relating to procedure and 3
administration) as subtitle D; 4
(D) subtitle G (relating to the Joint Com-5
mittee on Taxation) as subtitle E; 6
(E) subtitle I (relating to the Trust Fund 7
Code) as subtitle F; 8
(F) subtitle J (relating to coal industry 9
health benefits) as subtitle G; and 10
(G) subtitle K (relating to group health 11
plan portability, access, and renewability re-12
quirements) as subtitle H. 13
(b) R
EDESIGNATION OF1986 CODE.— 14
(1) I
N GENERAL.—The Internal Revenue Code 15
of 1986 enacted on October 22, 1986, as heretofore, 16
hereby, or hereafter amended, may be cited as the 17
Internal Revenue Code of 2025. 18
(2) R
EFERENCES IN LAWS , ETC.—Except when 19
inappropriate, any reference in any law, Executive 20
order, or other document— 21
(A) to the Internal Revenue Code of 1986 22
shall include a reference to the Internal Rev-23
enue Code of 2025; and 24
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(B) to the Internal Revenue Code of 2025 1
shall include a reference to the provisions of law 2
formerly known as the Internal Revenue Code 3
of 1986. 4
(c) A
DDITIONALAMENDMENTS.—For additional con-5
forming amendments, see section 202 of this Act. 6
(d) E
FFECTIVEDATE.—Except as otherwise pro-7
vided in this Act, the amendments made by this Act shall 8
take effect on January 1, 2027. 9
TITLE II—SALES TAX ENACTED 10
SEC. 201. SALES TAX. 11
(a) I
NGENERAL.—The Internal Revenue Code of 12
2025 is amended by inserting before subtitle B (as redes-13
ignated by section 104(a)(2)(A)) the following new sub-14
title: 15
‘‘Subtitle A—Sales Tax 16
‘‘Sec. 1. Principles of interpretation. 
‘‘Sec. 2. Definitions. 
‘‘C
HAPTER1. INTERPRETATION; DEFINITIONS; IMPOSITION OFTAX; ETC. 
‘‘C
HAPTER2. CREDITS; REFUNDS 
‘‘C
HAPTER3. FAMILYCONSUMPTIONALLOWANCE 
‘‘C
HAPTER4. FEDERAL ANDSTATECOOPERATIVETAXADMINISTRATION 
‘‘C
HAPTER5. OTHERADMINISTRATIVEPROVISIONS 
‘‘C
HAPTER6. COLLECTIONS; APPEALS; TAXPAYERRIGHTS 
‘‘C
HAPTER7. SPECIALRULES 
‘‘C
HAPTER8. FINANCIALINTERMEDIATION SERVICES 
‘‘C
HAPTER9. ADDITIONALMATTERS 
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‘‘SEC. 1. PRINCIPLES OF INTERPRETATION. 1
‘‘(a) I
NGENERAL.—Any court, the Secretary, and 2
any sales tax administering authority shall consider the 3
purposes of this subtitle (as set forth in subsection (b)) 4
as the primary aid in statutory construction. 5
‘‘(b) P
URPOSES.—The purposes of this subtitle are 6
as follows: 7
‘‘(1) To raise revenue needed by the Federal 8
Government in a manner consistent with the other 9
purposes of this subtitle. 10
‘‘(2) To tax all consumption of goods and serv-11
ices in the United States once, without exception, 12
but only once. 13
‘‘(3) To prevent double, multiple, or cascading 14
taxation. 15
‘‘(4) To simplify the tax law and reduce the ad-16
ministration costs of, and the costs of compliance 17
with, the tax law. 18
‘‘(5) To provide for the administration of the 19
tax law in a manner that respects privacy, due proc-20
ess, individual rights when interacting with the gov-21
ernment, the presumption of innocence in criminal 22
proceedings, and the presumption of lawful behavior 23
in civil proceedings. 24
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‘‘(6) To increase the role of State governments 1
in Federal tax administration because of State gov-2
ernment expertise in sales tax administration. 3
‘‘(7) To enhance generally cooperation and co-4
ordination among State tax administrators; and to 5
enhance cooperation and coordination among Fed-6
eral and State tax administrators, consistent with 7
the principle of intergovernmental tax immunity. 8
‘‘(c) S
ECONDARYAIDS TOSTATUTORYCONSTRUC-9
TION.—As a secondary aid in statutory construction, any 10
court, the Secretary, and any sales tax administering au-11
thority shall consider— 12
‘‘(1) the common law canons of statutory con-13
struction, 14
‘‘(2) the meaning and construction of concepts 15
and terms used in the Internal Revenue Code of 16
1986 as in effect before the effective date of this 17
subtitle, and 18
‘‘(3) construe any ambiguities in this Act in 19
favor of reserving powers to the States respectively, 20
or to the people. 21
‘‘SEC. 2. DEFINITIONS. 22
‘‘(a) I
NGENERAL.—For purposes of this subtitle— 23
‘‘(1) A
FFILIATED FIRMS.—A firm is affiliated 24
with another if 1 firm owns 50 percent or more of— 25
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‘‘(A) the voting shares in a corporation, or 1
‘‘(B) the capital interests of a business 2
firm that is not a corporation. 3
‘‘(2) C
ONFORMING STATE SALES TAX .—The 4
term ‘conforming State sales tax’ means a sales tax 5
imposed by a State that adopts the same definition 6
of taxable property and services as adopted by this 7
subtitle. 8
‘‘(3) D
ESIGNATED COMMERCIAL PRIVATE COU -9
RIER SERVICE.—The term ‘designated commercial 10
private courier service’ means a firm designated as 11
such by the Secretary or any sales tax administering 12
authority, upon application of the firm, if the firm— 13
‘‘(A) provides its services to the general 14
public, 15
‘‘(B) records electronically to its data base 16
kept in the regular course of its business the 17
date on which an item was given to such firm 18
for delivery, and 19
‘‘(C) has been operating for at least 1 20
year. 21
‘‘(4) E
DUCATION AND TRAINING .—The term 22
‘education and training’ means tuition for primary, 23
secondary, or postsecondary level education, and job- 24
related training courses. Such term does not include 25
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room, board, sports activities, recreational activities, 1
hobbies, games, arts or crafts or cultural activities. 2
‘‘(5) G
ROSS PAYMENTS.—The term ‘gross pay-3
ments’ means payments for taxable property or serv-4
ices, including Federal taxes imposed by this title. 5
‘‘(6) I
NTANGIBLE PROPERTY .— 6
‘‘(A) I
N GENERAL.—The term ‘intangible 7
property’ includes copyrights, trademarks, pat-8
ents, goodwill, financial instruments, securities, 9
commercial paper, debts, notes and bonds, and 10
other property deemed intangible at common 11
law. The Secretary shall, by regulation resolve 12
differences among the provisions of common 13
law of the several States. 14
‘‘(B) C
ERTAIN TYPES OF PROPERTY .— 15
Such term does not include tangible personal 16
property (or rents or leaseholds of any term 17
thereon), real property (or rents or leaseholds 18
of any term thereon) and computer software. 19
‘‘(7) P
ERSON.—The term ‘person’ means any 20
natural person, and unless the context clearly does 21
not allow it, any corporation, partnership, limited li-22
ability company, trust, estate, government, agency, 23
administration, organization, association, or other 24
legal entity (foreign or domestic). 25
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‘‘(8) PRODUCE, PROVIDE, RENDER, OR SELL 1
TAXABLE PROPERTY OR SERVICES .— 2
‘‘(A) I
N GENERAL.—A taxable property or 3
service is used to produce, provide, render, or 4
sell a taxable property or service if such prop-5
erty or service is purchased by a person en-6
gaged in a trade or business for the purpose of 7
employing or using such taxable property or 8
service in the production, provision, rendering, 9
or sale of other taxable property or services in 10
the ordinary course of that trade or business. 11
‘‘(B) R
ESEARCH, EXPERIMENTATION, 12
TESTING, AND DEVELOPMENT .—Taxable prop-13
erty or services used in a trade or business for 14
the purpose of research, experimentation, test-15
ing, and development shall be treated as used to 16
produce, provide, render, or sell taxable prop-17
erty or services. 18
‘‘(C) I
NSURANCE PAYMENTS .—Taxable 19
property or services purchased by an insurer on 20
behalf of an insured shall be treated as used to 21
produce, provide, render, or sell taxable prop-22
erty or services if the premium for the insur-23
ance contract giving rise to the insurer’s obliga-24
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tion was subject to tax pursuant to section 801 1
(relating to financial intermediation services). 2
‘‘(D) E
DUCATION AND TRAINING .—Edu-3
cation and training shall be treated as services 4
used to produce, provide, render, or sell taxable 5
property or services. 6
‘‘(9) R
EGISTERED SELLER .—The term ‘reg-7
istered seller’ means a person registered pursuant to 8
section 502. 9
‘‘(10) S
ALES TAX ADMINISTERING AUTHOR -10
ITY.—The term ‘sales tax administering authority’ 11
means— 12
‘‘(A) the State agency designated to collect 13
and administer the sales tax imposed by this 14
subtitle, in an administering State, or 15
‘‘(B) the Secretary, in a State that is nei-16
ther— 17
‘‘(i) an administering State, nor 18
‘‘(ii) a State that has elected to have 19
its sales tax administered by an admin-20
istering State. 21
‘‘(11) S
ECRETARY.—The term ‘Secretary’ 22
means the Secretary of the Treasury. 23
‘‘(12) T
AXABLE EMPLOYER .— 24
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‘‘(A) IN GENERAL.—The term ‘taxable em-1
ployer’ includes— 2
‘‘(i) any household employing domes-3
tic servants, and 4
‘‘(ii) any government except for gov-5
ernment enterprises (as defined in section 6
704). 7
‘‘(B) E
XCEPTIONS.—The term ‘taxable 8
employer’ does not include any employer which 9
is— 10
‘‘(i) engaged in a trade or business, 11
‘‘(ii) a not-for-profit organization (as 12
defined in section 706), or 13
‘‘(iii) a government enterprise (as de-14
fined in section 704). 15
‘‘(C) C
ROSS REFERENCE.—For rules relat-16
ing to collection and remittance of tax on wages 17
by taxable employers, see section 103(b)(2). 18
‘‘(13) T
AX INCLUSIVE FAIR MARKET VALUE .— 19
The term ‘tax inclusive fair market value’ means the 20
fair market value of taxable property or services plus 21
the tax imposed by this subtitle. 22
‘‘(14) T
AXABLE PROPERTY OR SERVICE .— 23
‘‘(A) G
ENERAL RULE.—The term ‘taxable 24
property or service’ means— 25
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‘‘(i) any property (including leaseholds 1
of any term or rents with respect to such 2
property) but excluding— 3
‘‘(I) intangible property, and 4
‘‘(II) used property, and 5
‘‘(ii) any service (including any finan-6
cial intermediation services as determined 7
by section 801). 8
‘‘(B) S
ERVICE.—For purposes of subpara-9
graph (A), the term ‘service’— 10
‘‘(i) shall include any service per-11
formed by an employee for which the em-12
ployee is paid wages or a salary by a tax-13
able employer, and 14
‘‘(ii) shall not include any service per-15
formed by an employee for which the em-16
ployee is paid wages or a salary— 17
‘‘(I) by an employer in the reg-18
ular course of the employer’s trade or 19
business, 20
‘‘(II) by an employer that is a 21
not-for-profit organization (as defined 22
in section 706), 23
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‘‘(III) by an employer that is a 1
government enterprise (as defined in 2
section 704), and 3
‘‘(IV) by taxable employers to 4
employees directly providing education 5
and training. 6
‘‘(15) U
NITED STATES.—The term ‘United 7
States’, when used in the geographical sense, means 8
each of the 50 States, the District of Columbia, and 9
any commonwealth, territory, or possession of the 10
United States. 11
‘‘(16) U
SED PROPERTY.—The term ‘used prop-12
erty’ means— 13
‘‘(A) property on which the tax imposed by 14
section 101 has been collected and for which no 15
credit has been allowed under section 202, 203, 16
or 205, or 17
‘‘(B) property that was held other than for 18
a business purpose (as defined in section 19
102(b)) on December 31, 2026. 20
‘‘(17) W
AGES AND SALARY.—The terms ‘wage’ 21
and ‘salary’ mean all compensation paid for employ-22
ment service including cash compensation, employee 23
benefits, disability insurance, or wage replacement 24
insurance payments, unemployment compensation 25
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insurance, workers’ compensation insurance, and the 1
fair market value of any other consideration paid by 2
an employer to an employee in consideration for em-3
ployment services rendered. 4
‘‘(b) C
ROSSREFERENCES.— 5
‘‘(1) For the definition of business purposes, 6
see section 102(b). 7
‘‘(2) For the definition of insurance contract, 8
see section 206(e). 9
‘‘(3) For the definition of qualified family, see 10
section 302. 11
‘‘(4) For the definition of monthly poverty level, 12
see section 303. 13
‘‘(5) For the definition of large seller, see sec-14
tion 501(e)(3). 15
‘‘(6) For the definition of hobby activities, see 16
section 701. 17
‘‘(7) For the definition of gaming sponsor, see 18
section 701(a). 19
‘‘(8) For the definition of a chance, see section 20
701(b). 21
‘‘(9) For the definition of government enter-22
prise, see section 704(b). 23
‘‘(10) For the definition of mixed use property, 24
see section 705. 25
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‘‘(11) For the definition of qualified not-for- 1
profit organization, see section 706. 2
‘‘(12) For the definition of financial intermedi-3
ation services, see section 801. 4
‘‘CHAPTER 1—INTERPRETATION; 5
DEFINITIONS; IMPOSITION OF TAX; ETC. 6
‘‘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. 
7
‘‘(a) I
NGENERAL.—There is hereby imposed a tax 8
on the use or consumption in the United States of taxable 9
property or services. 10
‘‘(b) R
ATE.— 11
‘‘(1) F
OR 2027.—In the calendar year 2027, the 12
rate of tax is 23 percent of the gross payments for 13
the taxable property or service. 14
‘‘(2) F
OR YEARS AFTER 2027.—For years after 15
the calendar year 2027, the rate of tax is the com-16
bined Federal tax rate percentage (as defined in 17
paragraph (3)) of the gross payments for the taxable 18
property or service. 19
‘‘(3) C
OMBINED FEDERAL TAX RATE PERCENT -20
AGE.—The combined Federal tax rate percentage is 21
the sum of— 22
‘‘(A) the general revenue rate (as defined 23
in paragraph (4)), 24
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‘‘(B) the old-age, survivors and disability 1
insurance rate, and 2
‘‘(C) the hospital insurance rate. 3
‘‘(4) G
ENERAL REVENUE RATE .—The general 4
revenue rate shall be 14.91 percent. 5
‘‘(c) C
OORDINATIONWITHIMPORTDUTIES.—The 6
tax imposed by this section is in addition to any import 7
duties imposed by chapter 4 of title 19, United States 8
Code. The Secretary shall provide by regulation that, to 9
the maximum extent practicable, the tax imposed by this 10
section on imported taxable property and services is col-11
lected and administered in conjunction with any applicable 12
import duties imposed by the United States. 13
‘‘(d) L
IABILITY FORTAX.— 14
‘‘(1) I
N GENERAL.—The person using or con-15
suming taxable property or services in the United 16
States is liable for the tax imposed by this section, 17
except as provided in paragraph (2) of this sub-18
section. 19
‘‘(2) E
XCEPTION WHERE TAX PAID TO SELL -20
ER.—A person using or consuming a taxable prop-21
erty or service in the United States is not liable for 22
the tax imposed by this section if the person pays 23
the tax to a person selling the taxable property or 24
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service and receives from such person a purchaser’s 1
receipt within the meaning of section 509. 2
‘‘SEC. 102. INTERMEDIATE AND EXPORT SALES. 3
‘‘(a) I
NGENERAL.—For purposes of this subtitle— 4
‘‘(1) B
USINESS AND EXPORT PURPOSES .—No 5
tax shall be imposed under section 101 on any tax-6
able property or service purchased for a business 7
purpose in a trade or business. 8
‘‘(2) I
NVESTMENT PURPOSE .—No tax shall be 9
imposed under section 101 on any taxable property 10
or service purchased for an investment purpose and 11
held exclusively for an investment purpose. 12
‘‘(3) S
TATE GOVERNMENT FUNCTIONS .—No tax 13
shall be imposed under section 101 on State govern-14
ment functions that do not constitute the final con-15
sumption of property or services. 16
‘‘(b) B
USINESSPURPOSES.—For purposes of this 17
section, the term ‘purchased for a business purpose in a 18
trade or business’ means purchased by a person engaged 19
in a trade or business and used in that trade or business— 20
‘‘(1) for resale, 21
‘‘(2) to produce, provide, render, or sell taxable 22
property or services, or 23
‘‘(3) in furtherance of other bona fide business 24
purposes. 25
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‘‘(c) INVESTMENTPURPOSES.—For purposes of this 1
section, the term ‘purchased for an investment purpose’ 2
means property purchased exclusively for purposes of ap-3
preciation or the production of income but not entailing 4
more than minor personal efforts. 5
‘‘SEC. 103. RULES RELATING TO COLLECTION AND REMIT-6
TANCE OF TAX. 7
‘‘(a) L
IABILITY FORCOLLECTION ANDREMITTANCE 8
OF THETAX.—Except as provided otherwise by this sec-9
tion, any tax imposed by this subtitle shall be collected 10
and remitted by the seller of taxable property or services 11
(including financial intermediation services). 12
‘‘(b) T
AXTOBEREMITTED BYPURCHASER INCER-13
TAINCIRCUMSTANCES.— 14
‘‘(1) I
N GENERAL.—In the case of taxable prop-15
erty or services purchased outside of the United 16
States and imported into the United States for use 17
or consumption in the United States, the purchaser 18
shall remit the tax imposed by section 101. 19
‘‘(2) C
ERTAIN WAGES OR SALARY .—In the case 20
of wages or salary paid by a taxable employer which 21
are taxable services, the employer shall remit the tax 22
imposed by section 101. 23
‘‘(c) C
ONVERSION OFBUSINESS OREXPORTPROP-24
ERTY ORSERVICES.—Property or services purchased for 25
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a business purpose in a trade or business or for export 1
(sold untaxed pursuant to section 102(a)) that is subse-2
quently converted to personal use shall be deemed pur-3
chased at the time of conversion and shall be subject to 4
the tax imposed by section 101 at the fair market value 5
of the converted property as of the date of conversion. The 6
tax shall be due as if the property had been sold at the 7
fair market value during the month of conversion. The 8
person using or consuming the converted property is liable 9
for and shall remit the tax. 10
‘‘(d) B
ARTERTRANSACTIONS.—If gross payment for 11
taxable property or services is made in other than money, 12
then the person responsible for collecting and remitting 13
the tax shall remit the tax to the sales tax administering 14
authority in money as if gross payment had been made 15
in money at the tax inclusive fair market value of the tax-16
able property or services purchased. 17
‘‘CHAPTER 2—CREDITS; REFUNDS 18
‘‘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. 
19
‘‘(a) I
NGENERAL.—Each person shall be allowed a 20
credit with respect to the taxes imposed by section 101 21
for each month in an amount equal to the sum of— 22
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‘‘(1) such person’s business use conversion 1
credit pursuant to section 202 for such month, 2
‘‘(2) such person’s intermediate and export 3
sales credit pursuant to section 203 for such month, 4
‘‘(3) the administration credit pursuant to sec-5
tion 204 for such month, 6
‘‘(4) the bad debt credit pursuant to section 7
205 for such month, 8
‘‘(5) the insurance proceeds credit pursuant to 9
section 206 for such month, 10
‘‘(6) the transitional inventory credit pursuant 11
to section 902, and 12
‘‘(7) any amount paid in excess of the amount 13
due. 14
‘‘(b) C
REDITSNOTADDITIVE.—Only one credit al-15
lowed by chapter 2 may be taken with respect to any par-16
ticular gross payment. 17
‘‘SEC. 202. BUSINESS USE CONVERSION CREDIT. 18
‘‘(a) I
NGENERAL.—For purposes of section 201, a 19
person’s business use conversion credit for any month is 20
the aggregate of the amounts determined under subsection 21
(b) with respect to taxable property and services— 22
‘‘(1) on which tax was imposed by section 101 23
(and actually paid), and 24
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‘‘(2) which commenced to be 95 percent or 1
more used during such month for business purposes 2
(within the meaning of section 102(b)). 3
‘‘(b) A
MOUNT OFCREDIT.—The amount determined 4
under this paragraph with respect to any taxable property 5
or service is the lesser of— 6
‘‘(1) the product of— 7
‘‘(A) the rate imposed by section 101, and 8
‘‘(B) the quotient that is— 9
‘‘(i) the fair market value of the prop-10
erty or service when its use is converted, 11
divided by 12
‘‘(ii) the quantity that is one minus 13
the tax rate imposed by section 101, or 14
‘‘(2) the amount of tax paid with respect to 15
such taxable property or service, including the 16
amount, if any, determined in accordance with sec-17
tion 705 (relating to mixed use property). 18
‘‘SEC. 203. INTERMEDIATE AND EXPORT SALES CREDIT. 19
‘‘For purposes of section 201, a person’s intermediate 20
and export sales credit is the amount of sales tax paid 21
on the purchase of any taxable property or service pur-22
chased for— 23
‘‘(1) a business purpose in a trade or business 24
(as defined in section 102(b)), or 25
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‘‘(2) export from the United States for use or 1
consumption outside the United States. 2
‘‘SEC. 204. ADMINISTRATION CREDIT. 3
‘‘(a) I
NGENERAL.—Every person filing a timely 4
monthly report (with regard to extensions) in compliance 5
with section 501 shall be entitled to a taxpayer adminis-6
trative credit equal to the greater of— 7
‘‘(1) $200, or 8
‘‘(2) one-quarter of 1 percent of the tax remit-9
ted. 10
‘‘(b) L
IMITATION.—The credit allowed under this sec-11
tion shall not exceed 20 percent of the tax due to be remit-12
ted prior to the application of any credit or credits per-13
mitted by section 201. 14
‘‘SEC. 205. BAD DEBT CREDIT. 15
‘‘(a) F
INANCIALINTERMEDIATION SERVICES.—Any 16
person who has experienced a bad debt (other than unpaid 17
invoices within the meaning of subsection (b)) shall be en-18
titled to a credit equal to the product of— 19
‘‘(1) the rate imposed by section 101, and 20
‘‘(2) the quotient that is— 21
‘‘(A) the amount of the bad debt (as de-22
fined in section 802), divided by 23
‘‘(B) the quantity that is one minus the 24
rate imposed by section 101. 25
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‘‘(b) UNPAIDINVOICES.—Any person electing the ac-1
crual method pursuant to section 503 that has with re-2
spect to a transaction— 3
‘‘(1) invoiced the tax imposed by section 101, 4
‘‘(2) remitted the invoiced tax, 5
‘‘(3) actually delivered the taxable property or 6
performed the taxable services invoiced, and 7
‘‘(4) not been paid 180 days after date the in-8
voice was due to be paid, 9
shall be entitled to a credit equal to the amount of tax 10
remitted and unpaid by the purchaser. 11
‘‘(c) S
UBSEQUENTPAYMENT.—Any payment made 12
with respect to a transaction subsequent to a section 205 13
credit being taken with respect to that transaction shall 14
be subject to tax in the month the payment was received 15
as if a tax inclusive sale of taxable property and services 16
in the amount of the payment had been made. 17
‘‘(d) P
ARTIALPAYMENTS.—Partial payments shall 18
be treated as pro rata payments of the underlying obliga-19
tion and shall be allocated proportionately— 20
‘‘(1) for fully taxable payments, between pay-21
ment for the taxable property and service and tax, 22
and 23
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‘‘(2) for partially taxable payments, among pay-1
ment for the taxable property and service, tax and 2
other payment. 3
‘‘(e) R
ELATEDPARTIES.—The credit provided by this 4
section shall not be available with respect to sales made 5
to related parties. For purposes of this section, related 6
party means affiliated firms and family members (as de-7
fined in section 302(b)). 8
‘‘SEC. 206. INSURANCE PROCEEDS CREDIT. 9
‘‘(a) I
NGENERAL.—A person receiving a payment 10
from an insurer by virtue of an insurance contract shall 11
be entitled to a credit in an amount determined by sub-12
section (b), less any amount paid to the insured by the 13
insurer pursuant to subsection (c), if the entire premium 14
(except that portion allocable to the investment account 15
of the underlying policy) for the insurance contract giving 16
rise to the insurer’s obligation to make a payment to the 17
insured was subject to the tax imposed by section 101 and 18
said tax was paid. 19
‘‘(b) C
REDITAMOUNT.—The amount of the credit 20
shall be the product of— 21
‘‘(1) the rate imposed by section 101, and 22
‘‘(2) the quotient that is— 23
‘‘(A) the amount of the payment made by 24
the insurer to the insured, divided by 25
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‘‘(B) the quantity that is one minus the 1
rate imposed by section 101. 2
‘‘(c) A
DMINISTRATIVEOPTION.—The credit deter-3
mined in accordance with subsection (b) shall be paid by 4
the insurer to the insured and the insurer shall be entitled 5
to the credit in lieu of the insured, except that the insurer 6
may elect, in a form prescribed by the Secretary, to not 7
pay the credit and require the insured to make application 8
for the credit. In the event of such election, the insurer 9
shall provide to the Secretary and the insured the name 10
and tax identification number of the insurer and of the 11
insured and indicate the proper amount of the credit. 12
‘‘(d) C
OORDINATIONWITHRESPECT TOEXEMP-13
TION.—If taxable property or services purchased by an in-14
surer on behalf of an insured are purchased free of tax 15
by virtue of section 2(a)(8)(C), then the credit provided 16
by this section shall not be available with respect to that 17
purchase. 18
‘‘(e) I
NSURANCECONTRACT.—For purposes of sub-19
section (a), the term ‘insurance contract’ shall include a 20
life insurance contract, a health insurance contract, a 21
property and casualty loss insurance contract, a general 22
liability insurance contract, a marine insurance contract, 23
a fire insurance contract, an accident insurance contract, 24
a disability insurance contract, a long-term care insurance 25
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contract, and an insurance contract that provides a com-1
bination of these types of insurance. 2
‘‘SEC. 207. REFUNDS. 3
‘‘(a) R
EGISTEREDSELLERS.—If a registered seller 4
files a monthly tax report with an overpayment, then, 5
upon application by the registered seller in a form pre-6
scribed by the sales tax administering authority, the over-7
payment shown on the report shall be refunded to the reg-8
istered seller within 60 days of receipt of said application. 9
In the absence of such application, the overpayment may 10
be carried forward, without interest, by the person entitled 11
to the credit. 12
‘‘(b) O
THERPERSONS.—If a person other than a reg-13
istered seller has an overpayment for any month, then, 14
upon application by the person in a form prescribed by 15
the sales tax administering authority, the credit balance 16
due shall be refunded to the person within 60 days of re-17
ceipt of said application. 18
‘‘(c) I
NTEREST.—No interest shall be paid on any 19
balance due from the sales tax administering authority 20
under this subsection for any month if such balance due 21
is paid within 60 days after the application for refund is 22
received. Balances due not paid within 60 days after the 23
application for refund is received shall bear interest from 24
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the date of application. Interest shall be paid at the Fed-1
eral short-term rate (as defined in section 511). 2
‘‘(d) S
USPENSION OF PERIODTOPAYREFUND 3
O
NLY IFFEDERAL ORSTATECOURTRULING.—The 60- 4
day periods under subsections (a) and (b) shall be sus-5
pended with respect to a purported overpayment (or por-6
tion thereof) only during any period that there is in effect 7
a preliminary, temporary, or final ruling from a Federal 8
or State court that there is reasonable cause to believe 9
that such overpayment may not actually be due. 10
‘‘CHAPTER 3—FAMILY CONSUMPTION 11
ALLOWANCE 12
‘‘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. 
13
‘‘Each qualified family shall be eligible to receive a 14
sales tax rebate each month. The sales tax rebate shall 15
be in an amount equal to the product of— 16
‘‘(1) the rate of tax imposed by section 101, 17
and 18
‘‘(2) the monthly poverty level. 19
‘‘SEC. 302. QUALIFIED FAMILY. 20
‘‘(a) G
ENERALRULE.—For purposes of this chapter, 21
the term ‘qualified family’ shall mean one or more family 22
members sharing a common residence. All family members 23
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sharing a common residence shall be considered as part 1
of one qualified family. 2
‘‘(b) F
AMILYSIZEDETERMINATION.— 3
‘‘(1) I
N GENERAL.—To determine the size of a 4
qualified family for purposes of this chapter, family 5
members shall mean— 6
‘‘(A) an individual, 7
‘‘(B) the individual’s spouse, 8
‘‘(C) all lineal ancestors and descendants 9
of said individual (and such individual’s 10
spouse), 11
‘‘(D) all legally adopted children of such 12
individual (and such individual’s spouse), and 13
‘‘(E) all children under legal guardianship 14
of such individual (or such individual’s spouse). 15
‘‘(2) I
DENTIFICATION REQUIREMENTS .—In 16
order for a person to be counted as a member of the 17
family for purposes of determining the size of the 18
qualified family, such person must— 19
‘‘(A) have a bona fide Social Security num-20
ber, and 21
‘‘(B) be a lawful resident of the United 22
States. 23
‘‘(c) C
HILDRENLIVINGAWAYFROMHOME.— 24
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‘‘(1) STUDENTS LIVING AWAY FROM HOME .— 1
Any person who was a registered student during not 2
fewer than 5 months in a calendar year while living 3
away from the common residence of a qualified fam-4
ily but who receives over 50 percent of such person’s 5
support during a calendar year from members of the 6
qualified family shall be included as part of the fam-7
ily unit whose members provided said support for 8
purposes of this chapter. 9
‘‘(2) C
HILDREN OF DIVORCED OR SEPARATED 10
PARENTS.—If a child’s parents are divorced or le-11
gally separated, a child for purposes of this chapter 12
shall be treated as part of the qualified family of the 13
custodial parent. In cases of joint custody, the custo-14
dial parent for purposes of this chapter shall be the 15
parent that has custody of the child for more than 16
one-half of the time during a given calendar year. A 17
parent entitled to be treated as the custodial parent 18
pursuant to this paragraph may release this claim to 19
the other parent if said release is in writing. 20
‘‘(d) A
NNUALREGISTRATION.—In order to receive 21
the family consumption allowance provided by section 301, 22
a qualified family must register with the sales tax admin-23
istering authority in a form prescribed by the Secretary. 24
The annual registration form shall provide— 25
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‘‘(1) the name of each family member who 1
shared the qualified family’s residence on the family 2
determination date, 3
‘‘(2) the Social Security number of each family 4
member on the family determination date who 5
shared the qualified family’s residence on the family 6
determination date, 7
‘‘(3) the family member or family members to 8
whom the family consumption allowance should be 9
paid, 10
‘‘(4) a certification that all listed family mem-11
bers are lawful residents of the United States, 12
‘‘(5) a certification that all family members 13
sharing the common residence are listed, 14
‘‘(6) a certification that no family members 15
were incarcerated on the family determination date 16
(within the meaning of subsection (l)), and 17
‘‘(7) the address of the qualified family. 18
Said registration shall be signed by all members of the 19
qualified family that have attained the age of 21 years 20
as of the date of filing. 21
‘‘(e) R
EGISTRATIONNOTMANDATORY.—Registra-22
tion is not mandatory for any qualified family. 23
‘‘(f) E
FFECT OFFAILURETOPROVIDEANNUAL 24
R
EGISTRATION.—Any qualified family that fails to reg-25
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ister in accordance with this section within 30 days of the 1
family determination date, shall cease receiving the 2
monthly family consumption allowance in the month be-3
ginning 90 days after the family determination date. 4
‘‘(g) E
FFECT OFCURINGFAILURETOPROVIDEAN-5
NUALREGISTRATION.—Any qualified family that failed to 6
timely make its annual registration in accordance with this 7
section but subsequently cures its failure to register, shall 8
be entitled to up to 6 months of lapsed sales tax rebate 9
payments. No interest on lapsed payment amount shall be 10
paid. 11
‘‘(h) E
FFECTIVEDATE OFANNUALREGISTRA-12
TIONS.—Annual registrations shall take effect for the 13
month beginning 90 days after the family registration 14
date. 15
‘‘(i) E
FFECTIVEDATE OFREVISEDREGISTRA-16
TIONS.—A revised registration made pursuant to section 17
305 shall take effect for the first month beginning 60 days 18
after the revised registration was filed. The existing reg-19
istration shall remain in effect until the effective date of 20
the revised registration. 21
‘‘(j) D
ETERMINATION OF REGISTRATIONFILING 22
D
ATE.—An annual or revised registration shall be deemed 23
filed when— 24
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‘‘(1) deposited in the United States mail, post-1
age prepaid, to the address of the sales tax admin-2
istering authority, 3
‘‘(2) delivered and accepted at the offices of the 4
sales tax administering authority, or 5
‘‘(3) provided to a designated commercial pri-6
vate courier service for delivery within 2 days to the 7
sales tax administering authority at the address of 8
the sales tax administering authority. 9
‘‘(k) P
ROPOSEDREGISTRATIONTOBEPROVIDED.— 10
Thirty or more days before the family registration date, 11
the sales tax administering authority shall mail to the ad-12
dress shown on the most recent rebate registration or 13
change of address notice filed pursuant to section 305(d) 14
a proposed registration that may be simply signed by the 15
appropriate family members if family circumstances have 16
not changed. 17
‘‘(l) I
NCARCERATED INDIVIDUALS.—An individual 18
shall not be eligible under this chapter to be included as 19
a member of any qualified family if that individual— 20
‘‘(1) is incarcerated in a local, State, or Federal 21
jail, prison, mental hospital, or other institution on 22
the family determination date, and 23
‘‘(2) is scheduled to be incarcerated for 6 24
months or more in the 12-month period following 25
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the effective date of the annual registration or the 1
revised registration of said qualified family. 2
‘‘(m) F
AMILYDETERMINATIONDATE.—The family 3
determination date is a date assigned to each family by 4
the Secretary for purposes of determining qualified family 5
size and other information necessary for the administra-6
tion of this chapter. The Secretary shall promulgate regu-7
lations regarding the issuance of family determination 8
dates. In the absence of any regulations, the family deter-9
mination date for all families shall be October 1. The Sec-10
retary may assign family determination dates for adminis-11
trative convenience. Permissible means of assigning family 12
determination dates include a method based on the birth 13
dates of family members. 14
‘‘(n) C
ROSSREFERENCE.—For penalty for filing 15
false rebate claim, see section 504(i). 16
‘‘SEC. 303. MONTHLY POVERTY LEVEL. 17
‘‘(a) I
NGENERAL.—The monthly poverty level for 18
any particular month shall be one-twelfth of the ‘annual 19
poverty level’. For purposes of this section the ‘annual 20
poverty level’ shall be the sum of— 21
‘‘(1) the annual level determined by the Depart-22
ment of Health and Human Services poverty guide-23
lines required by sections 652 and 673(2) of the 24
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Omnibus Reconciliation Act of 1981 for a particular 1
family size, and 2
‘‘(2) in case of families that include a married 3
couple, the ‘annual marriage penalty elimination 4
amount’. 5
‘‘(b) A
NNUALMARRIAGEPENALTYELIMINATION 6
A
MOUNT.—The annual marriage penalty elimination 7
amount shall be the amount that is— 8
‘‘(1) the amount that is two times the annual 9
level determined by the Department of Health and 10
Human Services poverty guidelines required by sec-11
tions 652 and 673(2) of the Omnibus Reconciliation 12
Act of 1981 for a family of one, less 13
‘‘(2) the annual level determined by the Depart-14
ment of Health and Human Services poverty guide-15
lines required by sections 652 and 673(2) of the 16
Omnibus Reconciliation Act of 1981 for a family of 17
two. 18
‘‘SEC. 304. REBATE MECHANISM. 19
‘‘(a) G
ENERALRULE.—The Social Security Adminis-20
tration shall provide a monthly sales tax rebate to duly 21
registered qualified families in an amount determined in 22
accordance with section 301. 23
‘‘(b) P
ERSONSRECEIVINGREBATE.—The payments 24
shall be made to the persons designated by the qualifying 25
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family in the annual or revised registration for each quali-1
fied family in effect with respect to the month for which 2
payment is being made. Payments may only be made to 3
persons 18 years or older. If more than 1 person is des-4
ignated in a registration to receive the rebate, then the 5
rebate payment shall be divided evenly between or among 6
those persons designated. 7
‘‘(c) W
HENREBATESMAILED.—Rebates shall be 8
mailed on or before the first business day of the month 9
for which the rebate is being provided. 10
‘‘(d) S
MARTCARDS ANDDIRECTELECTRONICDE-11
POSITPERMISSIBLE.—The Social Security Administration 12
may provide rebates in the form of smart cards that carry 13
cash balances in their memory for use in making pur-14
chases at retail establishments or by direct electronic de-15
posit. 16
‘‘SEC. 305. CHANGE IN FAMILY CIRCUMSTANCES. 17
‘‘(a) G
ENERALRULE.—In the absence of the filing 18
of a revised registration in accordance with this chapter, 19
the common residence of the qualified family, marital sta-20
tus and number of persons in a qualified family on the 21
family registration date shall govern determinations re-22
quired to be made under this chapter for purposes of the 23
following calendar year. 24
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‘‘(b) NODOUBLECOUNTING.—In no event shall any 1
person be considered part of more than one qualified fam-2
ily. 3
‘‘(c) R
EVISEDREGISTRATION PERMISSIBLE.—A 4
qualified family may file a revised registration for pur-5
poses of section 302(d) to reflect a change in family cir-6
cumstances. A revised registration form shall provide— 7
‘‘(1) the name of each family member who 8
shared the qualified family’s residence on the filing 9
date of the revised registration, 10
‘‘(2) the Social Security number of each family 11
member who shared the qualified family’s residence 12
on the filing date of the revised registration, 13
‘‘(3) the family member or family members to 14
whom the family consumption allowance should be 15
paid, 16
‘‘(4) a certification that all listed family mem-17
bers are lawful residents of the United States, 18
‘‘(5) a certification that all family members 19
sharing the commoner residence are listed, 20
‘‘(6) a certification that no family members 21
were incarcerated on the family determination date 22
(within the meaning of section 302(1)), and 23
‘‘(7) the address of the qualified family. 24
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Said revised registration shall be signed by all members 1
of the qualified family that have attained the age of 21 2
years as of the filing date of the revised registration. 3
‘‘(d) C
HANGE OFADDRESS.—A change of address for 4
a qualified family may be filed with the sales tax admin-5
istering authority at any time and shall not constitute a 6
revised registration. 7
‘‘(e) R
EVISEDREGISTRATIONNOTMANDATORY.— 8
Revised registrations reflecting changes in family status 9
are not mandatory. 10
‘‘CHAPTER 4—FEDERAL AND STATE 11
COOPERATIVE TAX ADMINISTRATION 12
‘‘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. 
13
‘‘(a) I
NGENERAL.—The tax imposed by section 101 14
on gross payments for the use or consumption of taxable 15
property or services within a State shall be administered, 16
collected, and remitted to the United States Treasury by 17
such State if the State is an administering State. 18
‘‘(b) A
DMINISTERINGSTATE.—For purposes of this 19
section, the term ‘administering State’ means any State— 20
‘‘(1) which maintains a sales tax, and 21
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‘‘(2) which enters into a cooperative agreement 1
with the Secretary containing reasonable provisions 2
governing the administration by such State of the 3
taxes imposed by the subtitle and the remittance to 4
the United States in a timely manner of taxes col-5
lected under this chapter. 6
‘‘(c) C
OOPERATIVEAGREEMENTS.—The agreement 7
under subsection (b)(2) shall include provisions for the ex-8
peditious transfer of funds, contact officers, dispute reso-9
lution, information exchange, confidentiality, taxpayer 10
rights, and other matters of importance. The agreement 11
shall not contain extraneous matters. 12
‘‘(d) T
IMELYREMITTANCE OFTAX.— 13
‘‘(1) I
N GENERAL.—Administering States shall 14
remit and pay over taxes collected under this subtitle 15
on behalf of the United States (less the administra-16
tion fee allowable under paragraph (2)) not later 17
than 5 days after receipt. Interest at 150 percent of 18
the Federal short-term rate shall be paid with re-19
spect to amounts remitted after the due date. 20
‘‘(2) A
DMINISTRATION FEE.—An administering 21
State may retain an administration fee equal to one- 22
quarter of 1 percent of the amounts otherwise re-23
quired to be remitted to the United States under 24
this chapter by the administering State. 25
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‘‘(e) LIMITATION ONADMINISTRATION OF TAX BY 1
U
NITEDSTATES.—The Secretary may administer the tax 2
imposed by this subtitle in an administering State only 3
if— 4
‘‘(1)(A) such State has failed on a regular basis 5
to timely remit to the United States taxes collected 6
under this chapter on behalf of the United States, 7
or 8
‘‘(B) such State has on a regular basis other-9
wise materially breached the agreement referred to 10
in subsection (b)(2), 11
‘‘(2) the State has failed to cure such alleged 12
failures and breaches within a reasonable time, 13
‘‘(3) the Secretary provides such State with 14
written notice of such alleged failures and breaches, 15
and 16
‘‘(4) a District Court of the United States with-17
in such State, upon application of the Secretary, has 18
rendered a decision— 19
‘‘(A) making findings of fact that— 20
‘‘(i) such State has failed on a regular 21
basis to timely remit to the United States 22
taxes collected under this chapter on behalf 23
of the United States, or such State has on 24
a regular basis otherwise materially 25
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breached the agreement referred to in sub-1
section (b)(2), 2
‘‘(ii) the Secretary has provided such 3
State with written notice of such alleged 4
failures and breaches, and 5
‘‘(iii) the State has failed to cure such 6
alleged failures and breaches within a rea-7
sonable time, and 8
‘‘(B) making a determination that it is in 9
the best interest of the citizens of the United 10
States that the administering State’s authority 11
to administer the tax imposed by this subtitle 12
be revoked and said tax be administered di-13
rectly by the Secretary. 14
The order of the District Court revoking the author-15
ity of an Administering State shall contain provi-16
sions governing the orderly transfer of authority to 17
the Secretary. 18
‘‘(f) R
EINSTITUTION.—A State that has had its au-19
thority revoked pursuant to subsection (e) shall not be an 20
administering State for a period of not less than 5 years 21
after the date of the order of revocation. For the first cal-22
endar year commencing 8 years after the date of the order 23
of revocation, the State shall be regarded without preju-24
dice as eligible to become an administering State. 25
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‘‘(g) THIRDSTATEADMINISTRATION PERMIS-1
SIBLE.—It shall be permissible for a State to contract with 2
an administering State to administer the State’s sales tax 3
for an agreed fee. In this case, the agreement con-4
templated by subsection (c) shall have both the State and 5
the Federal Government as parties. 6
‘‘(h) I
NVESTIGATIONS AND AUDITS.—Administering 7
States shall not conduct investigations or audits at facili-8
ties in other administering States in connection with the 9
tax imposed by section 101 or conforming State sales tax 10
but shall instead cooperate with other administering 11
States using the mechanisms established by section 402, 12
by compact or by other agreement. 13
‘‘SEC. 402. FEDERAL ADMINISTRATIVE SUPPORT FOR 14
STATES. 15
‘‘(a) I
NGENERAL.—The Secretary shall administer 16
a program to facilitate information sharing among States. 17
‘‘(b) S
TATECOMPACTS.—The Secretary shall facili-18
tate, and may be a party to a compact among States for 19
purposes of facilitating the taxation of interstate pur-20
chases and for other purposes that may facilitate imple-21
mentation of this subtitle. 22
‘‘(c) A
GREEMENTWITHCONFORMINGSTATES.—The 23
Secretary is authorized to enter into and shall enter into 24
an agreement among conforming States enabling con-25
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forming States to collect conforming State sales tax on 1
sales made by sellers without a particular conforming 2
State to a destination within that particular conforming 3
State. 4
‘‘(d) S
ECRETARY’SAUTHORITY.—The Secretary shall 5
have the authority to promulgate regulations, to provide 6
guidelines, to assist States in administering the national 7
sales tax, to provide for uniformity in the administration 8
of the tax and to provide guidance to the public. 9
‘‘SEC. 403. FEDERAL-STATE TAX CONFERENCES. 10
‘‘Not less than once annually, the Secretary shall host 11
a conference with the sales tax administrators from the 12
various administering States to evaluate the state of the 13
national sales tax system, to address issues of mutual con-14
cern and to develop and consider legislative, regulatory, 15
and administrative proposals to improve the tax system. 16
‘‘SEC. 404. FEDERAL ADMINISTRATION IN CERTAIN STATES. 17
‘‘The Secretary shall administer the tax imposed by 18
this subtitle in any State or other United States jurisdic-19
tion that— 20
‘‘(1) is not an administering State, or 21
‘‘(2) elected to have another State administer 22
its tax in accordance with section 401(g). 23
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‘‘SEC. 405. INTERSTATE ALLOCATION AND DESTINATION 1
DETERMINATION. 2
‘‘(a) D
ESTINATIONGENERALLY.—The tax imposed 3
by this subtitle is a destination principle tax. This section 4
shall govern for purposes of determining— 5
‘‘(1) whether the destination of taxable property 6
and services is within or without the United States, 7
and 8
‘‘(2) which State or territory within the United 9
States is the destination of taxable property and 10
services. 11
‘‘(b) T
ANGIBLEPERSONALPROPERTY.—Except as 12
provided in subsection (g) (relating to certain leases), the 13
destination of tangible personal property shall be the State 14
or territory in which the property was first delivered to 15
the purchaser (including agents and authorized represent-16
atives). 17
‘‘(c) R
EALPROPERTY.—The destination of real prop-18
erty, or rents or leaseholds on real property, shall be the 19
State or territory in which the real property is located. 20
‘‘(d) O
THERPROPERTY.—The destination of any 21
other taxable property shall be the residence of the pur-22
chaser. 23
‘‘(e) S
ERVICES.— 24
‘‘(1) G
ENERAL RULE.—The destination of serv-25
ices shall be the State or territory in which the use 26
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or consumption of the services occurred. Allocation 1
of service invoices relating to more than 1 jurisdic-2
tion shall be on the basis of time or another method 3
determined by regulation. 4
‘‘(2) T
ELECOMMUNICATIONS SERVICES .—The 5
destination of telecommunications services shall be 6
the residence of the purchaser. Telecommunications 7
services include telephone, telegraph, beeper, radio, 8
cable television, satellite, and computer on-line or 9
network services. 10
‘‘(3) D
OMESTIC TRANSPORTATION SERVICES .— 11
For transportation services where all of the final 12
destinations are within the United States, the des-13
tination of transportation services shall be the final 14
destination of the trip (in the case of round or mul-15
tiple trip fares, the services amount shall be equally 16
allocated among each final destination). 17
‘‘(4) I
NTERNATIONAL TRANSPORTATION SERV -18
ICES.—For transportation services where the final 19
destination or origin of the trip is without the 20
United States, the service amount shall be deemed 21
50 percent attributable to the United States destina-22
tion or origin. 23
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‘‘(5) ELECTRICAL SERVICE.—The destination of 1
electrical services shall be the residence of the pur-2
chaser. 3
‘‘(f) F
INANCIALINTERMEDIATION SERVICES.—The 4
destination of financial intermediation services shall be the 5
residence of the purchaser. 6
‘‘(g) R
ENTSPAID FOR THE LEASE OFTANGIBLE 7
P
ROPERTY.— 8
‘‘(1) G
ENERAL RULE.—Except as provided in 9
paragraph (2), the destination of rents paid for the 10
lease of tangible property and leaseholds on such 11
property shall be where the property is located while 12
in use. 13
‘‘(2) L
AND VEHICLES ; AIRCRAFT, WATER 14
CRAFT.—The destination of rental and lease pay-15
ments on land vehicles, aircraft and water craft shall 16
be— 17
‘‘(A) in the case of rentals and leases of a 18
term of 1 month or less, the location where the 19
land vehicle, aircraft, or water craft was origi-20
nally delivered to the renter or lessee, and 21
‘‘(B) in the case of rentals and leases of a 22
term greater than 1 month, the residence of the 23
renter or lessee. 24
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‘‘(h) ALLOCATIONRULES.—For purposes of allo-1
cating revenue— 2
‘‘(1) between or among administering States 3
from taxes imposed by this subtitle or from State 4
sales taxes administered by third-party admin-5
istering States, or 6
‘‘(2) between or among States imposing con-7
forming State sales taxes, 8
the revenue shall be allocated to those States that are the 9
destination of the taxable property or service. 10
‘‘(i) F
EDERALOFFICE OFREVENUEALLOCATION.— 11
The Secretary shall establish an Office of Revenue Alloca-12
tion to arbitrate any claims or disputes among admin-13
istering States as to the destination of taxable property 14
and services for purposes of allocating revenue between or 15
among the States from taxes imposed by this subtitle. The 16
determination of the Administrator of the Office of Rev-17
enue Allocation shall be subject to judicial review in any 18
Federal court with competent jurisdiction. The standard 19
of review shall be abuse of discretion. 20
‘‘SEC. 406. GENERAL ADMINISTRATIVE MATTERS. 21
‘‘(a) I
NGENERAL.—The Secretary and each sales tax 22
administering authority may employ such persons as may 23
be necessary for the administration of this subtitle and 24
may delegate to employees the authority to conduct inter-25
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views, hearings, prescribe rules, promulgate regulations, 1
and perform such other duties as are required by this sub-2
title. 3
‘‘(b) R
ESOLUTION OF ANYINCONSISTENTRULES 4
ANDREGULATIONS.—In the event that the Secretary and 5
any sales tax administering authority have issued incon-6
sistent rules or regulations, any lawful rule or regulation 7
issued by the Secretary shall govern. 8
‘‘(c) A
DEQUATENOTICETOBEPROVIDED.—Except 9
in the case of an emergency declared by the Secretary (and 10
not his designee), no rule or regulation issued by the Sec-11
retary with respect to any internal revenue law shall take 12
effect before 90 days have elapsed after its publication in 13
the Federal Register. Upon issuance, the Secretary shall 14
provide copies of all rules or regulations issued under this 15
title to each sales tax administering authority. 16
‘‘(d) N
ORULES, RULINGS, ORREGULATIONSWITH 17
R
ETROACTIVEEFFECT.—No rule, ruling, or regulation 18
issued or promulgated by the Secretary relating to any in-19
ternal revenue law or by a sales tax administering author-20
ity shall apply to a period prior to its publication in the 21
Federal Register (or State equivalent) except that a regu-22
lation may take retroactive effect to prevent abuse. 23
‘‘(e) R
EVIEW OFIMPACT OFREGULATIONS, RULES, 24
ANDRULINGS ONSMALLBUSINESS.— 25
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‘‘(1) SUBMISSION TO SMALL BUSINESS ADMIN -1
ISTRATION.—After publication of any proposed or 2
temporary regulation by the Secretary relating to in-3
ternal revenue laws, the Secretary shall submit such 4
regulation to the Chief Counsel for Advocacy of the 5
Small Business Administration for comment on the 6
impact of such regulation on small businesses. Not 7
later than the date 30 days after the date of such 8
submission, the Chief Counsel for Advocacy of the 9
Small Business Administration shall submit com-10
ments on such regulation to the Secretary. 11
‘‘(2) C
ONSIDERATION OF COMMENTS .—In pre-12
scribing any final regulation which supersedes a pro-13
posed or temporary regulation which had been sub-14
mitted under this subsection to the Chief Counsel 15
for Advocacy of the Small Business Administration, 16
the Secretary shall— 17
‘‘(A) consider the comments of the Chief 18
Counsel for Advocacy of the Small Business 19
Administration on such proposed or temporary 20
regulation, and 21
‘‘(B) in promulgating such final regulation, 22
include a narrative that describes the response 23
to such comments. 24
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‘‘(3) SUBMISSION OF CERTAIN FINAL REGULA -1
TION.—In the case of promulgation by the Secretary 2
of any final regulations (other than a temporary reg-3
ulation) which do not supersede a proposed regula-4
tion, the requirements of paragraphs (1) and (2) 5
shall apply, except that the submission under para-6
graph (1) shall be made at least 30 days before the 7
date of such promulgation, and the consideration 8
and discussion required under paragraph (2) shall 9
be made in connection with the promulgation of such 10
final regulation. 11
‘‘(f) S
MALLBUSINESSREGULATORYSAFEGUARDS.— 12
The Small Business Regulatory Enforcement Fairness Act 13
(Public Law 104–121; 110 Stat. 857 (‘SBREFA’)) and 14
the Regulatory Flexibility Act (5 U.S.C. 601–612 15
(‘RFA’)) shall apply to regulations promulgated under this 16
subtitle. 17
‘‘SEC. 407. JURISDICTION. 18
‘‘(a) S
TATEJURISDICTION.—A sales tax admin-19
istering authority shall have jurisdiction over any gross 20
payments made which have a destination (as determined 21
in accordance with section 405) within the State of said 22
sales tax administering authority. This grant of jurisdic-23
tion is not exclusive of any other jurisdiction that such 24
sales tax administering authority may have. 25
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‘‘(b) FEDERALJURISDICTION.—The grant of juris-1
diction in subsection (a) shall not be in derogation of Fed-2
eral jurisdiction over the same matter. The Federal Gov-3
ernment shall have the right to exercise preemptive juris-4
diction over matters relating to the taxes imposed by this 5
subtitle. 6
‘‘CHAPTER 5—OTHER ADMINISTRATIVE 7
PROVISIONS 8
‘‘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. 
9
‘‘(a) T
AXREPORTS ANDFILINGDATES.— 10
‘‘(1) I
N GENERAL.—On or before the 15th day 11
of each month, each person who is— 12
‘‘(A) liable to collect and remit the tax im-13
posed by this subtitle by reason of section 14
103(a), or 15
‘‘(B) liable to pay tax imposed by this sub-16
title which is not collected pursuant to section 17
103(a), 18
shall submit to the appropriate sales tax admin-19
istering authority (in a form prescribed by the Sec-20
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retary) a report relating to the previous calendar 1
month. 2
‘‘(2) C
ONTENTS OF REPORT .—The report re-3
quired under paragraph (1) shall set forth— 4
‘‘(A) the gross payments referred to in sec-5
tion 101, 6
‘‘(B) the tax collected under chapter 4 in 7
connection with such payments, 8
‘‘(C) the amount and type of any credit 9
claimed, and 10
‘‘(D) other information reasonably required 11
by the Secretary or the sales tax administering 12
authority for the administration, collection, and 13
remittance of the tax imposed by this subtitle. 14
‘‘(b) T
AXPAYMENTSDATE.— 15
‘‘(1) G
ENERAL RULE.—The tax imposed by this 16
subtitle during any calendar month is due and shall 17
be paid to the appropriate sales tax administering 18
authority on or before the 15th day of the suc-19
ceeding month. Both Federal tax imposed by this 20
subtitle and conforming State sales tax (if any) shall 21
be paid in 1 aggregate payment. 22
‘‘(2) C
ROSS REFERENCE .—See subsection (e) 23
relating to remitting of separate segregated funds 24
for sellers that are not small sellers. 25
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‘‘(c) EXTENSIONS FORFILINGREPORTS.— 1
‘‘(1) A
UTOMATIC EXTENSIONS FOR NOT MORE 2
THAN 30 DAYS.—On application, an extension of not 3
more than 30 days to file reports under subsection 4
(a) shall be automatically granted. 5
‘‘(2) O
THER EXTENSIONS.—On application, ex-6
tensions of 30 to 60 days to file such reports shall 7
be liberally granted by the sales tax administering 8
authority for reasonable cause. Extensions greater 9
than 60 days may be granted by the sales tax ad-10
ministering authority to avoid hardship. 11
‘‘(3) N
O EXTENSION FOR PAYMENT OF 12
TAXES.—Notwithstanding paragraphs (1) and (2), 13
no extension shall be granted with respect to the 14
time for paying or remitting the taxes under this 15
subtitle. 16
‘‘(d) T
ELEPHONEREPORTING OFVIOLATIONS.—The 17
Secretary shall establish a system under which a violation 18
of this subtitle can be brought to the attention of the sales 19
tax administering authority for investigation through the 20
use of a toll-free telephone number and otherwise. 21
‘‘(e) S
EPARATESEGREGATEDACCOUNTS.— 22
‘‘(1) I
N GENERAL.—Any registered seller that 23
is not a small seller shall deposit all sales taxes col-24
lected pursuant to section 103 in a particular week 25
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in a separate segregated account maintained at a 1
bank or other financial institution within 3 business 2
days of the end of such week. Said registered seller 3
shall also maintain in that account sufficient funds 4
to meet the bank or financial institution minimum 5
balance requirements, if any, and to pay account 6
fees and costs. 7
‘‘(2) S
MALL SELLER.—For purposes of this 8
subsection, a small seller is any person that has not 9
collected $20,000 or more of the taxes imposed by 10
this subtitle in any of the previous 12 months. 11
‘‘(3) L
ARGE SELLERS.—Any seller that has col-12
lected $100,000 or more of the taxes imposed by 13
this subtitle in any of the previous 12 months is a 14
large seller. A large seller shall remit to the sales tax 15
administering authority the entire balance of depos-16
ited taxes in its separate segregated account on the 17
first business day following the end of the calendar 18
week. The Secretary may by regulation require the 19
electronic transfer of funds due from large sellers. 20
‘‘(4) W
EEK.—For purposes of this subsection, 21
the term ‘week’ shall mean the 7-day period ending 22
on a Friday. 23
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‘‘(f) DETERMINATION OF REPORTFILINGDATE.— 1
A report filed pursuant to subsection (a) shall be deemed 2
filed when— 3
‘‘(1) deposited in the United States mail, post-4
age prepaid, addressed to the sales tax administering 5
authority, 6
‘‘(2) delivered and accepted at the offices of the 7
sales tax administering authority, 8
‘‘(3) provided to a designated commercial pri-9
vate courier service for delivery within 2 days to the 10
sales tax administering authority at the address of 11
the sales tax administering authority, or 12
‘‘(4) by other means permitted by the Sec-13
retary. 14
‘‘(g) S
ECURITYREQUIREMENTS.—A large seller 15
(within the meaning of subsection (e)(3)) shall be required 16
to provide security in an amount equal to the greater of 17
$100,000 or one and one-half times the seller’s average 18
monthly tax liability during the previous 6 calendar 19
months. Security may be a cash bond, a bond from a sur-20
ety company approved by the Secretary, a certificate of 21
deposit, or a State or United States Treasury bond. A 22
bond qualifying under this subsection must be a con-23
tinuing instrument for each calendar year (or portion 24
thereof) that the bond is in effect. The bond must remain 25
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in effect until the surety or sureties are released and dis-1
charged. Failure to provide security in accordance with 2
this section shall result in revocation of the seller’s section 3
502 registration. If a person who has provided security 4
pursuant to this subsection— 5
‘‘(1) fails to pay an amount indicated in a final 6
notice of amount due under this subtitle (within the 7
meaning of section 605(d)), 8
‘‘(2) no Taxpayer Assistance Order is in effect 9
relating to the amount due, 10
‘‘(3) either the time for filing an appeal pursu-11
ant to section 604 has passed or the appeal was de-12
nied, and 13
‘‘(4) the amount due is not being litigated in 14
any judicial forum, 15
then the security or part of the security, as the case may 16
be, may be forfeited in favor of the Secretary to the extent 17
of such tax due (plus interest if any). 18
‘‘(h) R
EWARDSPROGRAM.—The Secretary is author-19
ized to maintain a program of awards wherein individuals 20
that assist the Secretary or sales tax administering au-21
thorities in discovering or prosecuting tax fraud may be 22
remunerated. 23
‘‘(i) C
ROSSREFERENCE.—For interest due on taxes 24
remitted late, see section 6601. 25
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‘‘SEC. 502. REGISTRATION. 1
‘‘(a) I
NGENERAL.—Any person liable to collect and 2
remit taxes pursuant to section 103(a) who is engaged in 3
a trade or business shall register as a seller with the sales 4
tax administering authority administering the taxes im-5
posed by this subtitle. 6
‘‘(b) A
FFILIATEDFIRMS.—Affiliated firms shall be 7
treated as 1 person for purposes of this section. Affiliated 8
firms may elect, upon giving notice to the Secretary in 9
a form prescribed by the Secretary, to treat separate firms 10
as separate persons for purposes of this subtitle. 11
‘‘(c) D
ESIGNATION OF TAXMATTERSPERSON.— 12
Every person registered pursuant to subsection (a) shall 13
designate a tax matters person who shall be an individual 14
whom the sales tax administering authority may contact 15
regarding tax matters. Each person registered must pro-16
vide notice of a change in the identity of the tax matters 17
person within 30 days of said change. 18
‘‘(d) E
FFECT OFFAILURETOREGISTER.—Any per-19
son that is required to register and who fails to do so is 20
prohibited from selling taxable property or services. The 21
Secretary or a sales tax administering authority may bring 22
an action seeking a temporary restraining order, an in-23
junction, or such other order as may be appropriate to 24
enforce this section. 25
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‘‘SEC. 503. ACCOUNTING. 1
‘‘(a) C
ASHMETHODTOBEUSEDGENERALLY.— 2
Registered sellers and other persons shall report trans-3
actions using the cash method of accounting unless an 4
election to use the accrual method of accounting is made 5
pursuant to subsection (b). 6
‘‘(b) E
LECTIONTOUSEACCRUALMETHOD.—A per-7
son may elect with respect to a calender year to remit 8
taxes and report transactions with respect to the month 9
where a sale was invoiced and accrued. 10
‘‘(c) C
ROSSREFERENCE.—See section 205 for rules 11
relating to bad debts for sellers electing the accrual meth-12
od. 13
‘‘SEC. 504. PENALTIES. 14
‘‘(a) F
AILURETOREGISTER.—Each person who is 15
required to register pursuant to section 502 but fails to 16
do so prior to notification by the sales tax administering 17
authority shall be liable for a penalty of $500. 18
‘‘(b) R
ECKLESS ORWILLFULFAILURETOCOLLECT 19
T
AX.— 20
‘‘(1) C
IVIL PENALTY; FRAUD.—Each person 21
who is required to and recklessly or willfully fails to 22
collect taxes imposed by this subtitle shall be liable 23
for a penalty equal to the greater of $500 or 20 per-24
cent of tax not collected. 25
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‘‘(2) CRIMINAL PENALTY.—Each person who is 1
required to and willfully fails as part of a trade or 2
business to collect taxes imposed by this subtitle 3
may be fined an amount up to the amount deter-4
mined in accordance with paragraph (1) or impris-5
oned for a period of not more than 1 year or both. 6
‘‘(c) R
ECKLESS ORWILLFULASSERTION OFINVALID 7
E
XEMPTION.— 8
‘‘(1) C
IVIL PENALTY; FRAUD.—Each person 9
who recklessly or willfully asserts an invalid inter-10
mediate or export sales exemption from the taxes 11
imposed by this subtitle shall be liable for a penalty 12
equal to the greater of $500 or 20 percent of the tax 13
not collected or remitted. 14
‘‘(2) C
RIMINAL PENALTY.—Each person who 15
willfully asserts an invalid intermediate or export 16
sales exemption from the taxes imposed by this sub-17
title may be fined an amount up to the amount de-18
termined in accordance with paragraph (1) or im-19
prisoned for a period of not more than 1 year or 20
both. 21
‘‘(d) R
ECKLESS ORWILLFULFAILURETOREMIT 22
T
AXCOLLECTED.— 23
‘‘(1) C
IVIL PENALTY; FRAUD.—Each person 24
who is required to and recklessly or willfully fails to 25
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remit taxes imposed by this subtitle and collected 1
from purchasers shall be liable for a penalty equal 2
to the greater of $1,000 or 50 percent of the tax not 3
remitted. 4
‘‘(2) C
RIMINAL PENALTY.—Each person who 5
willfully fails to remit taxes imposed by this subtitle 6
and collected from purchasers may be fined an 7
amount up to the amount determined in accordance 8
with paragraph (1) or imprisoned for a period of not 9
more than 2 years or both. 10
‘‘(e) R
ECKLESS OR WILLFULFAILURETOPAY 11
T
AX.—Each person who is required to and recklessly or 12
willfully fails to pay taxes imposed by this subtitle shall 13
be liable for a penalty equal to the greater of $500 or 14
20 percent of the tax not paid. 15
‘‘(f) P
ENALTY FORLATEFILING.— 16
‘‘(1) I
N GENERAL.—In the case of a failure by 17
any person who is required to and fails to file a re-18
port required by section 501 on or before the due 19
date (determined with regard to any extension) for 20
such report, such person shall pay a penalty for each 21
month or fraction thereof that said report is late 22
equal to the greater of— 23
‘‘(A) $50, or 24
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‘‘(B) 0.5 percent of the gross payments re-1
quired to be shown on the report. 2
‘‘(2) I
NCREASED PENALTY ON RETURNS FILED 3
AFTER WRITTEN INQUIRY .—The amount of the pen-4
alty under paragraph (1) shall be doubled with re-5
spect to any report filed after a written inquiry with 6
respect to such report is received by the taxpayer 7
from the sales tax administering authority. 8
‘‘(3) L
IMITATION.—The penalty imposed under 9
this subsection shall not exceed 12 percent. 10
‘‘(4) E
XCEPTIONS.— 11
‘‘(A) R
EASONABLE CAUSE .—No penalty 12
shall be imposed under this subsection with re-13
spect to any failure if it is shown that such fail-14
ure is due to reasonable cause. 15
‘‘(B) O
THER WAIVER AUTHORITY .—In ad-16
dition to penalties not imposed by reason of 17
subparagraph (A), the sales tax administering 18
authority, on application, shall waive the pen-19
alty imposed by paragraph (1) once per reg-20
istered person per 24-month period. The pre-21
ceding sentence shall not apply to a penalty de-22
termined under paragraph (2). 23
‘‘(g) P
ENALTY FORWILLFULLY ORRECKLESSLYAC-24
CEPTING AFALSEINTERMEDIATE OR EXPORTSALES 25
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CERTIFICATE.—A person who willingly or recklessly ac-1
cepts a false intermediate or export sales certificate shall 2
pay a penalty equal to 20 percent of the tax not collected 3
by reason of said acceptance. 4
‘‘(h) P
ENALTY FORLATEREMITTANCE OFTAXES.— 5
‘‘(1) I
N GENERAL.—A person who is required 6
to timely remit taxes imposed by this subtitle and 7
remits taxes more than 1 month after such taxes are 8
due shall pay a penalty equal to 1 percent per month 9
(or fraction thereof) from the due date. 10
‘‘(2) L
IMITATION.—The penalty imposed under 11
this subsection shall not exceed 24 percent. 12
‘‘(3) E
XCEPTIONS FOR REASONABLE CAUSE .— 13
No penalty shall be imposed under paragraph (1) 14
with respect to any late remittance if it is shown 15
that such late remittance is due to reasonable cause. 16
‘‘(i) P
ENALTY FORFILINGFALSEREBATECLAIM.— 17
‘‘(1) C
IVIL PENALTY; FRAUD.—A person who 18
willingly or recklessly files a false claim for a family 19
consumption allowance rebate (within the meaning 20
of chapter 3) shall— 21
‘‘(A) pay a penalty equal to the greater of 22
$500 or 50 percent of the claimed annual re-23
bate amount not actually due, and 24
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‘‘(B) repay any rebates received as a result 1
of the false rebate claim (together with inter-2
est). 3
‘‘(2) C
RIMINAL PENALTY.—A person who will-4
ingly files a false claim for a family consumption al-5
lowance rebate (within the meaning of chapter 3) 6
may be fined an amount up to the amount deter-7
mined in accordance with paragraph (1) or impris-8
oned for a period not more than 1 year or both. 9
‘‘(j) P
ENALTY FORBADCHECK.—If any check or 10
money order in payment of any amount receivable under 11
this subtitle is not duly paid, in addition to other penalties 12
provided by law, the person who tendered such check shall 13
pay a penalty equal to the greater of— 14
‘‘(1) $25, or 15
‘‘(2) two percent of the amount of such check. 16
‘‘(k) P
ENALTY FORFAILURETOMAINTAIN ASEPA-17
RATESEGREGATEDACCOUNT.—Any person required to 18
maintain a separate segregated account pursuant to sec-19
tion 501(e) that fails to maintain such a separate seg-20
regated account shall pay a penalty of $1,000. 21
‘‘(l) P
ENALTY FOR FAILURETODEPOSITCOL-22
LECTEDTAXES IN A SEPARATESEGREGATED AC-23
COUNT.—Any person required to deposit collected taxes 24
into a separate segregated account maintained pursuant 25
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to section 501(e) that fails to timely deposit said taxes 1
into the separate segregated account shall pay a penalty 2
equal to 1 percent of the amount required to be deposited. 3
The penalty imposed by the previous sentence shall be tri-4
pled unless said taxes have been deposited in the separate 5
segregated account or remitted to the sales tax admin-6
istering authority within 16 days of the date said deposit 7
was due. 8
‘‘(m) J
OINT ANDSEVERALLIABILITY FORTAXMAT-9
TERSPERSON ANDRESPONSIBLEOFFICERS.—The tax 10
matters person (designated pursuant to section 502(c)) 11
and responsible officers or partners of a firm shall be 12
jointly and severally liable for the tax imposed by this sub-13
title and penalties imposed by this subtitle. 14
‘‘(n) R
IGHT OFCONTRIBUTION.—If more than 1 per-15
son is liable with respect to any tax or penalty imposed 16
by this subtitle, each person who paid such tax or penalty 17
shall be entitled to recover from other persons who are 18
liable for such tax or penalty an amount equal to the ex-19
cess of the amount paid by such person over such person’s 20
proportionate share of the tax or penalty. 21
‘‘(o) C
IVILPENALTIES ANDCRIMINALFINESNOT 22
E
XCLUSIVE.— 23
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‘‘(1) CIVIL PENALTY.—The fact that a civil 1
penalty has been imposed shall not prevent the im-2
position of a criminal fine. 3
‘‘(2) C
RIMINAL FINE.—The fact that a criminal 4
fine has been imposed shall not prevent the imposi-5
tion of a civil penalty. 6
‘‘(p) C
ONFIDENTIALITY.—Any person who violates 7
the requirements relating to confidentiality of tax informa-8
tion (as provided in section 605(e)) may be fined up to 9
$10,000 or imprisoned for a period of not more than 1 10
year, or both. 11
‘‘(q) C
ROSSREFERENCE.—For interest due on late 12
payments, see section 6601. 13
‘‘SEC. 505. BURDEN OF PERSUASION AND BURDEN OF PRO-14
DUCTION. 15
‘‘In all disputes concerning taxes imposed by this sub-16
title, the person engaged in a dispute with the sales tax 17
administering authority or the Secretary, as the case may 18
be, shall have the burden of production of documents and 19
records but the sales tax administering authority or the 20
Secretary shall have the burden of persuasion. In all dis-21
putes concerning an exemption claimed by a purchaser, 22
if the seller has on file an intermediate sale or export sale 23
certificate from the purchaser and did not have reasonable 24
cause to believe that the certificate was improperly pro-25
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vided by the purchaser with respect to such purchase 1
(within the meaning of section 103), then the burden of 2
production of documents and records relating to that ex-3
emption shall rest with the purchaser and not with the 4
seller. 5
‘‘SEC. 506. ATTORNEYS’ AND ACCOUNTANCY FEES. 6
‘‘In all disputes concerning taxes imposed by this sub-7
title, the person engaged in a dispute with the sales tax 8
administering authority or the Secretary, as the case may 9
be, shall be entitled to reasonable attorneys’ fees, account-10
ancy fees, and other reasonable professional fees incurred 11
in direct relation to the dispute unless the sales tax admin-12
istering authority or the Secretary establishes that its po-13
sition was substantially justified. 14
‘‘SEC. 507. SUMMONS, EXAMINATIONS, AUDITS, ETC. 15
‘‘(a) S
UMMONS.—Persons are subject to administra-16
tive summons by the sales tax administering authority for 17
records, documents, and testimony required by the sales 18
tax administering authority to accurately determine liabil-19
ity for tax under this subtitle. A summons shall be served 20
by the sales tax administering authority by an attested 21
copy delivered in hand to the person to whom it is directed 22
or left at his last known address. The summons shall de-23
scribe with reasonable certainty what is sought. 24
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‘‘(b) EXAMINATIONS ANDAUDITS.—The sales tax ad-1
ministering authority has the authority to conduct at a 2
reasonable time and place examinations and audits of per-3
sons who are or may be liable to collect and remit tax 4
imposed by this subtitle and to examine the books, papers, 5
records, or other data of such persons which may be rel-6
evant or material to the determination of tax due. 7
‘‘(c) L
IMITATION ONAUTHORITY INCASE OFREFER-8
RAL.—No administrative summons may be issued by the 9
sales tax administering authority and no action be com-10
menced to enforce an administrative summons with re-11
spect to any person if a Justice Department referral or 12
referral to a State Attorney General’s Office is in effect 13
with respect to such person relating to a tax imposed by 14
this subtitle. Such referral is in effect with respect to any 15
person if the sales tax administering authority or the Sec-16
retary has recommended to the Justice Department or a 17
State Attorney General’s Office a grand jury investigation 18
of such person or a criminal prosecution of such person 19
that contemplates criminal sanctions under this title. A 20
referral shall be terminated when— 21
‘‘(1) the Justice Department or a State Attor-22
ney General’s Office notifies the sales tax admin-23
istering authority or the Secretary that he will not— 24
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‘‘(A) prosecute such person for any offense 1
connected with the internal revenue laws, 2
‘‘(B) authorize a grand jury investigation 3
of such person with respect to such offense, or 4
‘‘(C) continue such a grand jury investiga-5
tion, or 6
‘‘(2) a final disposition has been made of any 7
criminal proceeding connected with the internal rev-8
enue laws, or conforming State sales tax, against 9
such person. 10
‘‘SEC. 508. RECORDS. 11
‘‘Any person liable to remit taxes pursuant to this 12
subtitle shall keep records (including a record of all section 13
509 receipts provided, complete records of intermediate 14
and export sales, including purchaser’s intermediate and 15
export sales certificates and tax number and the net of 16
tax amount of purchase) sufficient to determine the 17
amounts reported, collected, and remitted for a period of 18
6 years after the latter of the filing of the report for which 19
the records formed the basis or when the report was due 20
to be filed. Any purchaser who purchased taxable property 21
or services but did not pay tax by reason of asserting an 22
intermediate and export sales exemption shall keep records 23
sufficient to determine whether said exemption was valid 24
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for a period of 7 years after the purchase of taxable prop-1
erty or services. 2
‘‘SEC. 509. TAX TO BE SEPARATELY STATED AND CHARGED. 3
‘‘(a) I
NGENERAL.—For each purchase of taxable 4
property or services for which a tax is imposed by section 5
101, the seller shall charge the tax imposed by section 101 6
separately from the purchase. For purchase of taxable 7
property or services for which a tax is imposed by section 8
101, the seller shall provide to the purchaser a receipt for 9
each transaction that includes— 10
‘‘(1) the property or services price exclusive of 11
tax, 12
‘‘(2) the amount of tax paid, 13
‘‘(3) the property or service price inclusive of 14
tax, 15
‘‘(4) the tax rate (the amount of tax paid (per 16
paragraph (2))) divided by the property or service 17
price inclusive of tax (per paragraph (3)), 18
‘‘(5) the date that the good or service was sold, 19
‘‘(6) the name of the vendor, and 20
‘‘(7) the vendor registration number. 21
‘‘(b) V
ENDINGMACHINEEXCEPTION.—The require-22
ments of subsection (a) shall be inapplicable in the case 23
of sales by vending machines. Vending machines for pur-24
poses of this subsection are machines— 25
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‘‘(1) that dispense taxable property in exchange 1
for coins or currency, and 2
‘‘(2) that sell no single item exceeding $10 per 3
unit in price. 4
‘‘(c) F
INANCIALINTERMEDIATION SERVICESEXCEP-5
TION.—The requirements of subsection (a) shall be inap-6
plicable in the case of sales financial intermediation serv-7
ice. Receipts shall be issued when the tax is imposed (in 8
accordance with section 803 (relating to timing of tax on 9
financial intermediation services)). 10
‘‘SEC. 510. COORDINATION WITH TITLE 11. 11
‘‘No addition to tax shall be made under section 504 12
with respect to a period during which a case is pending 13
under title 11, United States Code— 14
‘‘(1) if such tax was incurred by the estate and 15
the failure occurred pursuant to an order of the 16
court finding probable insufficiency of funds of the 17
estate to pay administrative expenses, or 18
‘‘(2) if— 19
‘‘(A) such tax was incurred by the debtor 20
before the earlier of the order for relief or (in 21
the involuntary case) the appointment of a 22
trustee, and 23
‘‘(B) the petition was filed before the due 24
date prescribed by law (including extensions) 25
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for filing a return of such tax, or the date for 1
making the addition to tax occurs on or after 2
the date the petition was filed. 3
‘‘SEC. 511. APPLICABLE INTEREST RATE. 4
‘‘(a) I
NGENERAL.— 5
‘‘(1) F
EDERAL SHORT -TERM RATE.—In the 6
case of a debt instrument, investment, financing 7
lease, or account with a term of not over 3 years, 8
the applicable interest rate is the Federal short-term 9
rate. 10
‘‘(2) F
EDERAL MID-TERM RATE.—In the case 11
of a debt instrument, investment, financing lease, or 12
account with a term of over 3 years but not over 9 13
years, the applicable interest rate is the Federal 14
mid-term rate. 15
‘‘(3) F
EDERAL LONG-TERM RATE.—In the case 16
of a debt instrument, investment, financing lease, or 17
account with a term of over 9 years, the applicable 18
interest rate is the Federal long-term rate. 19
‘‘(b) F
EDERALSHORT-TERMRATE.—The Federal 20
short-term rate shall be the rate determined by the Sec-21
retary based on the average market yield (selected by the 22
Secretary and ending in the calendar month in which the 23
determination is made during any one month) on out-24
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standing marketable obligations of the United States with 1
remaining periods to maturity of 3 years or fewer. 2
‘‘(c) F
EDERALMID-TERMRATE.—The Federal mid- 3
term rate shall be the rate determined by the Secretary 4
based on the average market yield (selected by the Sec-5
retary and ending in the calendar month in which the de-6
termination is made during any 1 month) on outstanding 7
marketable obligations of the United States with remain-8
ing periods to maturity of more than 3 years and not over 9
9 years. 10
‘‘(d) F
EDERALLONG-TERMRATE.—The Federal 11
long-term rate shall be the rate determined by the Sec-12
retary based on the average market yield (selected by the 13
Secretary and ending in the calendar month in which the 14
determination is made during any 1 month) on out-15
standing marketable obligations of the United States with 16
remaining periods to maturity of over 9 years. 17
‘‘(e) D
ETERMINATION OF RATES.—During each cal-18
endar month, the Secretary shall determine the Federal 19
short-term rate, the Federal mid-term rate and the Fed-20
eral long-term rate which shall apply during the following 21
calendar month. 22
‘‘CHAPTER 6—COLLECTIONS; APPEALS; 23
TAXPAYER RIGHTS 24
‘‘Sec. 601. Collections. 
‘‘Sec. 602. Power to levy, etc. 
‘‘Sec. 603. Problem resolution offices. 
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‘‘Sec. 604. Appeals. 
‘‘Sec. 605. Taxpayer rights. 
‘‘Sec. 606. Installment agreements compromises. 
‘‘SEC. 601. COLLECTIONS. 
1
‘‘The sales tax administering authority shall collect 2
the taxes imposed by this subtitle, except as provided in 3
section 404 (relating to Federal administration in certain 4
States). 5
‘‘SEC. 602. POWER TO LEVY, ETC. 6
‘‘(a) I
NGENERAL.—The sales tax administering au-7
thority may levy and seize property, garnish wages or sal-8
ary and file liens to collect amounts due under this sub-9
title, pursuant to enforcement of— 10
‘‘(1) a judgment duly rendered by a court of 11
law, 12
‘‘(2) an amount due if the taxpayer has failed 13
to exercise his appeals rights under section 604, or 14
‘‘(3) an amount due if the appeals process de-15
termined that an amount remained due and the tax-16
payer has failed to timely petition the Tax Court for 17
relief. 18
‘‘(b) E
XEMPTIONFROMLEVY, SEIZURE, ANDGAR-19
NISHMENTS.—There shall be exempt from levy, seizure, 20
and garnishment or penalty in connection with any tax 21
imposed by this subtitle— 22
‘‘(1) wearing apparel, school books, fuel, provi-23
sions, furniture, personal effects, tools of a trade or 24
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profession, livestock in a household up to an aggre-1
gate value of $15,000, and 2
‘‘(2) monthly money income equal to 150 per-3
cent of the monthly poverty level (as defined in sec-4
tion 303). 5
‘‘(c) L
IENSTOBETIMELYRELEASED.—Subject to 6
such reasonable regulations as the Secretary may provide, 7
any lien imposed with respect to a tax imposed by this 8
title shall be released not later than 30 days after— 9
‘‘(1) the liability was satisfied or became unen-10
forceable, or 11
‘‘(2) a bond was accepted as security. 12
‘‘SEC. 603. PROBLEM RESOLUTION OFFICES. 13
‘‘(a) P
ROBLEMRESOLUTIONOFFICETOBEESTAB-14
LISHED.—Each sales tax administering authority shall es-15
tablish an independent Problem Resolution Office and ap-16
point an adequate number of problem resolution officers. 17
The head of the problem resolution office must be ap-18
pointed by, and serve at the pleasure of either the State 19
Governor (in the case of an administering State) or the 20
President of the United States. 21
‘‘(b) A
UTHORITY OFPROBLEMRESOLUTIONOFFI-22
CERS.—Problem resolution officers shall have the author-23
ity to investigate complaints and issue a Taxpayer Assist-24
ance Order to administratively enjoin any collection activ-25
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ity if, in the opinion of the problem resolution officer, said 1
collection activity is reasonably likely to not be in compli-2
ance with law or to prevent hardship (other than by reason 3
of having to pay taxes lawfully due). Problem resolution 4
officers shall also have the authority to issue Taxpayer As-5
sistance Orders releasing or returning property that has 6
been levied upon or seized, ordering that a lien be released 7
and that garnished wages be returned. A Taxpayer Assist-8
ance Order may only be rescinded or modified by the prob-9
lem resolution officer that issued it, by the highest official 10
in the relevant sales tax administering authority or by its 11
general counsel upon a finding that the collection activity 12
is justified by clear and convincing evidence. The authority 13
to reverse this Taxpayer Assistance Order may not be del-14
egated. 15
‘‘(c) F
ORM OFREQUEST FORTAXPAYERASSISTANCE 16
O
RDER.—The Secretary shall establish a form and proce-17
dure to aid persons requesting the assistance of the Prob-18
lem Resolution Office and to aid the Problem Resolution 19
Office in understanding the needs of the person seeking 20
assistance. The use of this form, however, shall not be a 21
prerequisite to a problem resolution officer taking action, 22
including issuing a Taxpayer Assistance Order. 23
‘‘(d) C
ONTENT OFTAXPAYERASSISTANCEORDER.— 24
A Taxpayer Assistance Order shall contain the name of 25
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the problem resolution officer, any provision relating to 1
the running of any applicable period of limitation, the 2
name of the person that the Taxpayer Assistance Order 3
assists, the government office (or employee or officer of 4
said government office) to whom it is directed and the ac-5
tion or cessation of action that the Taxpayer Assistance 6
Order requires of said government officer (or employee or 7
officer of said government office). The Taxpayer Assist-8
ance Order need not contain findings of fact or its legal 9
basis; however, the problem resolution officer must provide 10
findings of fact and the legal basis for the issuance of the 11
Taxpayer Assistance Order to the sales tax administering 12
authority upon the request of an officer of said authority 13
within 2 weeks of the receipt of such request. 14
‘‘(e) I
NDEPENDENCE PROTECTED.—Problem resolu-15
tion officers shall not be disciplined or adversely affected 16
for the issuance of administrative injunctions unless a pat-17
tern of issuing injunctions that are manifestly unreason-18
able is proven in an administrative hearing by a prepon-19
derance of the evidence. 20
‘‘(f) O
THERRIGHTSNOTLIMITED.—Nothing in this 21
section shall limit the authority of the sales tax admin-22
istering authority, the registered person or other person 23
from pursuing any legal remedy in any court with jurisdic-24
tion over the dispute at issue. 25
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‘‘(g) LIMITATIONS.—The running of any applicable 1
period of limitation shall be suspended for a period of 8 2
weeks following the issuance of a Taxpayer Assistance 3
Order or, if specified, for a longer period set forth in the 4
Taxpayer Assistance Order provided the suspension does 5
not exceed 6 months. 6
‘‘SEC. 604. APPEALS. 7
‘‘(a) A
DMINISTRATIVEAPPEALS.—The sales tax ad-8
ministering authority shall establish an administrative ap-9
peals process wherein the registered person or other per-10
son in disagreement with a decision of the sales tax admin-11
istering authority asserting liability for tax is provided a 12
full and fair hearing in connection with any disputes said 13
person has with the sales tax administering authority. 14
‘‘(b) T
IMING OFADMINISTRATIVEAPPEALS.—Said 15
administrative appeal must be made within 60 days of re-16
ceiving a final notice of amount due pursuant to section 17
605(d) unless leave for an extension is granted by the ap-18
peals officer in a form prescribed by the Secretary. Leave 19
shall be granted to avoid hardship. 20
‘‘SEC. 605. TAXPAYER RIGHTS. 21
‘‘(a) R
IGHTSTOBEDISCLOSED.—The sales tax ad-22
ministering authority shall provide to any person against 23
whom it has— 24
‘‘(1) commenced an audit or investigation, 25
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‘‘(2) issued a final notice of amount due, 1
‘‘(3) filed an administrative lien, levy, or gar-2
nishment, 3
‘‘(4) commenced other collection action, 4
‘‘(5) commenced an action for civil penalties, or 5
‘‘(6) any other legal action, 6
a document setting forth in plain English the rights of 7
the person. The document shall explain the administrative 8
appeals process, the authority of the Problem Resolution 9
Office (established pursuant to section 603) and how to 10
contact that Office, the burden of production and persua-11
sion that the person and the sales tax administering au-12
thority bear (pursuant to section 505), the right of the 13
person to professional fees (pursuant to section 506), the 14
right to record interviews and such other rights as the per-15
son may possess under this subtitle. Said document will 16
also set forth the procedures for entering into an install-17
ment agreement. 18
‘‘(b) R
IGHT TOPROFESSIONALASSISTANCE.—In all 19
dealings with the sales tax administering authority, a per-20
son shall have the right to assistance, at their own ex-21
pense, of one or more professional advisors. 22
‘‘(c) R
IGHTTORECORDINTERVIEWS.—Any person 23
who is interviewed by an agent of the sales tax admin-24
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istering authority shall have the right to video or audio 1
tape the interview at the person’s own expense. 2
‘‘(d) R
IGHT TOFINALNOTICE OFAMOUNTDUE.— 3
No collection or enforcement action will be commenced 4
against a person until 30 days after they have been pro-5
vided with a final notice of amount due under this subtitle 6
by the sales tax administering authority. The final notice 7
of amount due shall set forth the amount of tax due (along 8
with any interest and penalties due) and the factual and 9
legal basis for such amounts being due with sufficient 10
specificity that such basis can be understood by a reason-11
able person who is not a tax professional reading the no-12
tice. The final notice shall be sent by certified mail, return 13
receipt requested, to— 14
‘‘(1) the address last provided by a registered 15
seller, or 16
‘‘(2) the best available address to a person who 17
is not a registered seller. 18
‘‘(e) C
ONFIDENTIALITY OFTAXINFORMATION.— 19
‘‘(1) I
N GENERAL.—All reports and report in-20
formation (related to any internal revenue law) shall 21
be confidential and except as authorized by this 22
title— 23
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‘‘(A) no officer or employee (including 1
former officers and employees) of the United 2
States, 3
‘‘(B) no officer or employee (including 4
former officers and employees) of any State or 5
local agency who has had access to returns or 6
return information, and 7
‘‘(C) no other person who has had access 8
to returns or return information, 9
shall disclose any report or report information ob-10
tained by him in any manner in connection with his 11
service as such officer or employee or otherwise. 12
‘‘(2) D
ESIGNEES.—The sales tax administering 13
authority may, subject to such requirements as the 14
Secretary may impose, disclose the report and report 15
information of a person to that person or persons as 16
that person may designate to receive said informa-17
tion or return. 18
‘‘(3) O
THER SALES TAX ADMINISTERING AU -19
THORITIES.—A sales tax administering authority 20
may impose, disclose the report and report informa-21
tion to another sales tax administering authority. 22
‘‘(4) I
NCOMPETENCY.—A sales tax admin-23
istering authority may, subject to such requirements 24
as the Secretary may impose, disclose the report and 25
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report information to the committee, trustee, or 1
guardian of a person who is incompetent. 2
‘‘(5) D
ECEASED PERSONS.—A sales tax admin-3
istering authority may, subject to such requirements 4
as the Secretary may impose, disclose the report and 5
report information to the decedent’s— 6
‘‘(A) administrator, executor, estate trust-7
ee, or 8
‘‘(B) heir at law, next of kin, or beneficiary 9
under a will who has a material interest that 10
will be affected by the information. 11
‘‘(6) B
ANKRUPTCY.—A sales tax administering 12
authority may, subject to such requirements as the 13
Secretary may impose, disclose the report and report 14
information to a person’s trustee in bankruptcy. 15
‘‘(7) C
ONGRESS.—Upon written request from 16
the Chairman of the Committee on Ways and 17
Means, the Chairman of the Committee on Finance 18
of the Senate, or the Chairman or Chief of Staff of 19
the Joint Committee on Taxation, a sales tax admin-20
istering authority shall disclose the report and report 21
information, except that any report or report infor-22
mation that can be associated with or otherwise 23
identify a particular person shall be furnished to 24
such committee only when sitting in closed executive 25
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session unless such person otherwise consents in 1
writing to such disclosure. 2
‘‘(8) W
AIVER OF PRIVACY RIGHTS .—A person 3
may waive confidentiality rights provided by this sec-4
tion. Such waiver must be in writing. 5
‘‘(9) I
NTERNAL USE.—Disclosure of the report 6
or report information by officers or employees of a 7
sales tax administering authority to other officers or 8
employees of a sales tax administering authority in 9
the ordinary course of tax administration activities 10
shall not constitute unlawful disclosure of the report 11
or report information. 12
‘‘(10) S
TATISTICAL USE.—Upon request in 13
writing by the Secretary of Commerce, the Secretary 14
shall furnish such reports and report information to 15
officers and employees of the Department of Com-16
merce as the Secretary may prescribe by regulation 17
for the purposes of, and only to the extent necessary 18
in, the structuring of censuses and national eco-19
nomic accounts and conducting related statistical ac-20
tivities authorized by law. 21
‘‘(11) D
EPARTMENT OF THE TREASURY .—Re-22
turns and return information shall be open for in-23
spection by officers and employees of the Depart-24
ment of the Treasury whose official duties require 25
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such inspection or disclosure for the purpose of, and 1
only to the extent necessary for, preparing economic 2
or financial forecasts, projections, analyses, or esti-3
mates. Such inspection or disclosure shall be per-4
mitted only upon written request that sets forth the 5
reasons why such inspection or disclosure is nec-6
essary and is signed by the head of the bureau or 7
office of the Department of the Treasury requesting 8
the inspection or disclosure. 9
‘‘SEC. 606. INSTALLMENT AGREEMENTS; COMPROMISES. 10
‘‘The sales tax administering authority is authorized 11
to enter into written agreements with any person under 12
which the person is allowed to satisfy liability for payment 13
of any tax under this subtitle (and penalties and interest 14
relating thereto) in installment payments if the sales tax 15
administering authority determines that such agreement 16
will facilitate the collection of such liability. The agree-17
ment shall remain in effect for the term of the agreement 18
unless the information that the person provided to the 19
sales tax administering authority was materially inac-20
curate or incomplete. The sales tax administering author-21
ity may compromise any amounts alleged to be due. 22
‘‘CHAPTER 7—SPECIAL RULES 23
‘‘Sec. 701. Hobby activities. 
‘‘Sec. 702. Gaming activities. 
‘‘Sec. 703. Government purchases. 
‘‘Sec. 704. Government enterprises. 
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‘‘Sec. 705. Mixed use property. 
‘‘Sec. 706. Not-for-profit organizations. 
‘‘SEC. 701. HOBBY ACTIVITIES. 
1
‘‘(a) H
OBBYACTIVITIES.—Neither the exemption af-2
forded by section 102 for intermediate sales nor the cred-3
its available pursuant to section 202 or 203 shall be avail-4
able for any taxable property or service purchased for use 5
in an activity if that activity is not engaged in for-profit. 6
‘‘(b) S
TATUSDEEMED.—If the activity has received 7
gross payments for the sale of taxable property or services 8
that exceed the sum of— 9
‘‘(1) taxable property and services purchased, 10
‘‘(2) wages and salary paid, and 11
‘‘(3) taxes (of any type) paid, 12
in two or more of the most recent 3 calendar years during 13
which it operated then the business activity shall be con-14
clusively deemed to be engaged in for profit. 15
‘‘SEC. 702. GAMING ACTIVITIES. 16
‘‘(a) R
EGISTRATION.—Any person selling one or 17
more chances is a gaming sponsor and shall register, in 18
a form prescribed by the Secretary, with the sales tax ad-19
ministering authority as a gaming sponsor. 20
‘‘(b) C
HANCEDEFINED.—For purposes of this sec-21
tion, the term ‘chance’ means a lottery ticket, a raffle tick-22
et, chips, other tokens, a bet or bets placed, a wager or 23
wagers placed, or any similar device where the purchase 24
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of the right gives rise to an obligation by the gaming spon-1
sor to pay upon the occurrence of— 2
‘‘(1) a random or unpredictable event, or 3
‘‘(2) an event over which neither the gaming 4
sponsor nor the person purchasing the chance has 5
control over the outcome. 6
‘‘(c) C
HANCESNOTTAXABLEPROPERTY ORSERV-7
ICE.—Notwithstanding any other provision in this sub-8
title, a chance is not taxable property or services for pur-9
poses of section 101. 10
‘‘(d) T
AX ONGAMINGSERVICESIMPOSED.—A 23- 11
percent tax is hereby imposed on the taxable gaming serv-12
ices of a gaming sponsor. This tax shall be paid and remit-13
ted by the gaming sponsor. The tax shall be remitted by 14
the 15th day of each month with respect to taxable gaming 15
services during the previous calendar month. 16
‘‘(e) T
AXABLEGAMINGSERVICESDEFINED.—For 17
purposes of this section, the term ‘taxable gaming services’ 18
means— 19
‘‘(1) gross receipts of the gaming sponsor from 20
the sale of chances, minus 21
‘‘(2) the sum of— 22
‘‘(A) total gaming payoffs to chance pur-23
chasers (or their designees), and 24
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‘‘(B) gaming specific taxes (other than the 1
tax imposed by this section) imposed by the 2
Federal, State, or local government. 3
‘‘SEC. 703. GOVERNMENT PURCHASES. 4
‘‘(a) G
OVERNMENTPURCHASES.— 5
‘‘(1) P
URCHASES BY THE FEDERAL GOVERN -6
MENT.—Purchases by the Federal Government of 7
taxable property and services shall be subject to the 8
tax imposed by section 101. 9
‘‘(2) P
URCHASE BY STATE GOVERNMENTS AND 10
THEIR POLITICAL SUBDIVISIONS .—Purchases by 11
State governments and their political subdivisions of 12
taxable property and services shall be subject to the 13
tax imposed by section 101. 14
‘‘(b) C
ROSSREFERENCES.—For purchases by gov-15
ernment enterprises see section 704. 16
‘‘SEC. 704. GOVERNMENT ENTERPRISES. 17
‘‘(a) G
OVERNMENTENTERPRISESTOCOLLECT AND 18
R
EMITTAXES ONSALES.—Nothing in this subtitle shall 19
be construed to exempt any Federal, State, or local gov-20
ernmental unit or political subdivision (whether or not the 21
State is an administering State) operating a government 22
enterprise from collecting and remitting tax imposed by 23
this subtitle on any sale of taxable property or services. 24
Government enterprises shall comply with all duties im-25
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posed by this subtitle and shall be liable for penalties and 1
subject to enforcement action in the same manner as pri-2
vate persons that are not government enterprises. 3
‘‘(b) G
OVERNMENTENTERPRISE.—Any entity owned 4
or operated by a Federal, State, or local governmental unit 5
or political subdivision that receives gross payments from 6
private persons is a government enterprise, except that a 7
government-owned entity shall not become a government 8
enterprise for purposes of this section unless in any quar-9
ter it has revenues from selling taxable property or serv-10
ices that exceed $2,500. 11
‘‘(c) G
OVERNMENT ENTERPRISESINTERMEDIATE 12
S
ALES.— 13
‘‘(1) I
N GENERAL.—Government enterprises 14
shall not be subject to tax on purchases that would 15
not be subject to tax pursuant to section 102(b) if 16
the government enterprise were a private enterprise. 17
‘‘(2) E
XCEPTION.—Government enterprises 18
may not use the exemption afforded by section 19
102(b) to serve as a conduit for tax-free purchases 20
by government units that would otherwise be subject 21
to taxation on purchases pursuant to section 703. 22
Transfers of taxable property or services purchased 23
exempt from tax from a government enterprise to 24
such government unit shall be taxable. 25
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‘‘(d) SEPARATEBOOKS OFACCOUNT.—Any govern-1
ment enterprise must maintain books of account, separate 2
from the nonenterprise government accounts, maintained 3
in accordance with generally accepted accounting prin-4
ciples. 5
‘‘(e) T
RADE ORBUSINESS.—A government enterprise 6
shall be treated as a trade or business for purposes of this 7
subtitle. 8
‘‘(f) E
NTERPRISESUBSIDIESCONSTITUTETAXABLE 9
P
URCHASE.—A transfer of funds to a government enter-10
prise by a government entity without full consideration 11
shall constitute a taxable government purchase with the 12
meaning of section 703 to the extent that the transfer of 13
funds exceeds the fair market value of the consideration. 14
‘‘SEC. 705. MIXED USE PROPERTY. 15
‘‘(a) M
IXEDUSEPROPERTY ORSERVICE.— 16
‘‘(1) M
IXED USE PROPERTY OR SERVICE DE -17
FINED.—For purposes of this section, the term 18
‘mixed use property or service’ is a taxable property 19
or taxable service used for both taxable use or con-20
sumption and for a purpose that would not be sub-21
ject to tax pursuant to section 102(a)(1). 22
‘‘(2) T
AXABLE THRESHOLD .—Mixed use prop-23
erty or service shall be subject to tax notwith-24
standing section 102(a)(1) unless such property or 25
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service is used more than 95 percent for purposes 1
that would give rise to an exemption pursuant to 2
section 102(a)(1) during each calendar year (or por-3
tions thereof) it is owned. 4
‘‘(3) M
IXED USE PROPERTY OR SERVICES 5
CREDIT.—A person registered pursuant to section 6
502 is entitled to a business use conversion credit 7
(pursuant to section 202) equal to the product of— 8
‘‘(A) the mixed use property amount, 9
‘‘(B) the business use ratio, and 10
‘‘(C) the rate of tax imposed by section 11
101. 12
‘‘(4) M
IXED USE PROPERTY AMOUNT .—The 13
mixed use property amount for each month (or frac-14
tion thereof) in which the property was owned shall 15
be— 16
‘‘(A) one-three-hundred-sixtieth of the 17
gross payments for real property for 360 18
months or until the property is sold, 19
‘‘(B) one-eighty-fourth of the gross pay-20
ments for tangible personal property for 84 21
months or until the property is sold, 22
‘‘(C) one-sixtieth of the gross payments for 23
vehicles for 60 months or until the property is 24
sold, or 25
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‘‘(D) for other types of taxable property or 1
services, a reasonable amount or in accordance 2
with regulations prescribed by the Secretary. 3
‘‘(5) B
USINESS USE RATIO.—For purposes of 4
this section, the term ‘business use ratio’ means the 5
ratio of business use to total use for a particular cal-6
endar month (or portion thereof if the property was 7
owned for only part of said calendar month). For ve-8
hicles, the business use ratio will be the ratio of 9
business purpose miles to total miles in a particular 10
calendar month. For real property, the business use 11
ratio is the ratio of floor space used primarily for 12
business purposes to total floor space in a particular 13
calendar month. For tangible personal property (ex-14
cept for vehicles), the business use ratio is the ratio 15
of total time used for business purposes to total time 16
used in a particular calendar year. For other prop-17
erty or services, the business ratio shall be cal-18
culated using a reasonable method. Reasonable 19
records must be maintained to support a person’s 20
business use of the mixed use property or service. 21
‘‘(b) T
IMING OFBUSINESSUSECONVERSIONCRED-22
ITARISINGOUT OFOWNERSHIP OFMIXEDUSEPROP-23
ERTY.—A person entitled to a credit pursuant to sub-24
section (a)(3) arising out of the ownership of mixed use 25
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property must account for the mixed use on a calendar 1
year basis, and may file for the credit with respect to 2
mixed use property in any month following the calendar 3
year giving rise to the credit. 4
‘‘(c) C
ROSSREFERENCE.—For business use conver-5
sion credit, see section 202. 6
‘‘SEC. 706. NOT-FOR-PROFIT ORGANIZATIONS. 7
‘‘(a) N
OT-FOR-PROFITORGANIZATIONS.—Dues, con-8
tributions, and similar payments to qualified not-for-profit 9
organizations shall not be considered gross payments for 10
taxable property or services for purposes of this subtitle. 11
‘‘(b) D
EFINITION.—For purposes of this section, the 12
term ‘qualified not-for-profit organization’ means a not- 13
for-profit organization organized and operated exclu-14
sively— 15
‘‘(1) for religious, charitable, scientific, testing 16
for public safety, literary, or educational purposes, 17
‘‘(2) as civic leagues or social welfare organiza-18
tions, 19
‘‘(3) as labor, agricultural, or horticultural or-20
ganizations, 21
‘‘(4) as chambers of commerce, business 22
leagues, or trade associations, or 23
‘‘(5) as fraternal beneficiary societies, orders, or 24
associations, 25
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no part of the net earnings of which inures to the benefit 1
of any private shareholder or individual. 2
‘‘(c) Q
UALIFICATIONCERTIFICATES.—Upon applica-3
tion in a form prescribed by the Secretary, the sales tax 4
administering authority shall provide qualification certifi-5
cates to qualified not-for-profit organizations. 6
‘‘(d) T
AXABLETRANSACTIONS.—If a qualified not- 7
for-profit organization provides taxable property or serv-8
ices in connection with contributions, dues, or similar pay-9
ments to the organization, then it shall be required to 10
treat the provision of said taxable property or services as 11
a purchase taxable pursuant to this subtitle at the fair 12
market value of said taxable property or services. 13
‘‘(e) E
XEMPTIONS.—Taxable property and services 14
purchased by a qualified not-for-profit organization shall 15
be eligible for the exemptions provided in section 102. 16
‘‘CHAPTER 8—FINANCIAL 17
INTERMEDIATION SERVICES 18
‘‘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 INTERMEDI-
19
ATION SERVICES AMOUNT. 20
‘‘(a) F
INANCIALINTERMEDIATION SERVICES.—For 21
purposes of this subtitle— 22
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‘‘(1) IN GENERAL.—The term ‘financial inter-1
mediation services’ means the sum of— 2
‘‘(A) explicitly charged fees for financial 3
intermediation services, and 4
‘‘(B) implicitly charged fees for financial 5
intermediation services. 6
‘‘(2) E
XPLICITLY CHARGED FEES FOR FINAN -7
CIAL INTERMEDIATION SERVICES .—The term ‘explic-8
itly charged fees for financial intermediation serv-9
ices’ includes— 10
‘‘(A) brokerage fees, 11
‘‘(B) explicitly stated banking, loan origi-12
nation, processing, documentation, credit check 13
fees, or other similar fees, 14
‘‘(C) safe-deposit box fees, 15
‘‘(D) insurance premiums, to the extent 16
such premiums are not allocable to the invest-17
ment account of the underlying insurance pol-18
icy, 19
‘‘(E) trustees’ fees, and 20
‘‘(F) other financial services fees (includ-21
ing mutual fund management, sales, and exit 22
fees). 23
‘‘(3) I
MPLICITLY CHARGED FEES FOR FINAN -24
CIAL INTERMEDIATION SERVICES .— 25
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‘‘(A) IN GENERAL.—The term ‘implicitly 1
charged fees for financial intermediation serv-2
ices’ includes the gross imputed amount in rela-3
tion to any underlying interest-bearing invest-4
ment, account, or debt. 5
‘‘(B) G
ROSS IMPUTED AMOUNT .—For pur-6
poses of subparagraph (A), the term ‘gross im-7
puted amount’ means— 8
‘‘(i) with respect to any underlying in-9
terest-bearing investment or account, the 10
product of— 11
‘‘(I) the excess (if any) of the 12
basic interest rate (as defined in sec-13
tion 805) over the rate paid on such 14
investment, and 15
‘‘(II) the amount of the invest-16
ment or account, and 17
‘‘(ii) with respect to any underlying 18
interest-bearing debt, the product of— 19
‘‘(I) the excess (if any) of the 20
rate paid on such debt over the basic 21
interest rate (as defined in section 22
805), and 23
‘‘(II) the amount of the debt. 24
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‘‘(b) SELLER OFFINANCIALINTERMEDIATIONSERV-1
ICES.—For purposes of section 103(a), the seller of finan-2
cial intermediation services shall be— 3
‘‘(1) in the case of explicitly charged fees for fi-4
nancial intermediation services, the seller shall be 5
the person who receives the gross payments for the 6
charged financial intermediation services, 7
‘‘(2) in the case of implicitly charged fees for fi-8
nancial intermediation services with respect to any 9
underlying interest-bearing investment or account, 10
the person making the interest payments on the in-11
terest-bearing investment or account, and 12
‘‘(3) in the case of implicitly charged fees for fi-13
nancial intermediation services with respect to any 14
interest-bearing debt, the person receiving the inter-15
est payments on the interest-bearing debt. 16
‘‘SEC. 802. BAD DEBTS. 17
‘‘(a) I
NGENERAL.—For purposes of section 205(a), 18
a bad debt shall be a business debt that becomes wholly 19
or partially worthless to the payee. 20
‘‘(b) B
USINESSLOAN.—For purposes of subsection 21
(a), a business loan or debt is a bona fide loan or debt 22
made for a business purpose that both parties intended 23
be repaid. 24
‘‘(c) D
ETERMINATION OFWORTHLESSNESS.— 25
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‘‘(1) IN GENERAL.—No loan or debt shall be 1
considered wholly or partially worthless unless it has 2
been in arrears for 180 days or more, except that if 3
a debt is discharged wholly or partially in bank-4
ruptcy before 180 days has elapsed, then it shall be 5
deemed wholly or partially worthless on the date of 6
discharge. 7
‘‘(2) D
ETERMINATION BY HOLDER .—A loan or 8
debt that has been in arrears for 180 days or more 9
may be deemed wholly or partially worthless by the 10
holder unless a payment schedule has been entered 11
into between the debtor and the lender. 12
‘‘(d) C
ROSSREFERENCE.—See section 205(c) for tax 13
on subsequent payments. 14
‘‘SEC. 803. TIMING OF TAX ON FINANCIAL INTERMEDIATION 15
SERVICES. 16
‘‘The tax on financial intermediation services pro-17
vided by section 801 with respect to an underlying invest-18
ment account or debt shall be imposed and collected with 19
the same frequency that statements are rendered by the 20
financial institution in connection with the investment ac-21
count or debt but not less frequently than quarterly. 22
‘‘SEC. 804. FINANCING LEASES. 23
‘‘(a) D
EFINITION.—For purposes of this section, the 24
term ‘financing lease’ means any lease under which the 25
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lessee has the right to acquire the property for 50 percent 1
or less of its fair market value at the end of the lease 2
term. 3
‘‘(b) G
ENERALRULE.—Financing leases shall be 4
taxed in the method set forth in this section. 5
‘‘(c) D
ETERMINATION OF PRINCIPAL ANDINTEREST 6
C
OMPONENTS OF FINANCINGLEASE.—The Secretary 7
shall promulgate rules for disaggregating the principal 8
and interest components of a financing lease. The prin-9
cipal amount shall be determined to the extent possible 10
by examination of the contemporaneous sales price or 11
prices of property the same or similar as the leased prop-12
erty. 13
‘‘(d) A
LTERNATIVEMETHOD.—In the event that con-14
temporaneous sales prices or property the same or similar 15
as the leased property are not available, the principal and 16
interest components of a financing lease shall be 17
disaggregated using the applicable interest rate (as de-18
fined in section 511) plus 4 percent. 19
‘‘(e) P
RINCIPALCOMPONENT.—The principal compo-20
nent of the financing lease shall be subject to tax as if 21
a purchase in the amount of the principal component had 22
been made on the day on which said lease was executed. 23
‘‘(f) I
NTERESTCOMPONENT.—The financial inter-24
mediation services amount with respect to the interest 25
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component of the financing lease shall be subject to tax 1
under this subtitle. 2
‘‘(g) C
OORDINATION.—If the principal component 3
and financial intermediation services amount with respect 4
to the interest component of a lease have been taxed pur-5
suant to this section, then the gross lease or rental pay-6
ments shall not be subject to additional tax. 7
‘‘SEC. 805. BASIC INTEREST RATE. 8
‘‘For purposes of this chapter, the basic interest rate 9
with respect to a debt instrument, investment, financing 10
lease, or account shall be the applicable interest rate (as 11
determined in section 511). For debt instruments, invest-12
ments, or accounts of contractually fixed interest, the ap-13
plicable interest rate of the month of issuance shall apply. 14
For debt instruments, investments, or accounts of variable 15
interest rates and which have no reference interest rate, 16
the applicable interest shall be the Federal short-term in-17
terest rate for each month. For debt instruments, invest-18
ments, or accounts of variable interest rates and which 19
have a reference interest rate, the applicable interest shall 20
be the applicable interest rate for the reference interest 21
rate for each month. 22
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‘‘SEC. 806. FOREIGN FINANCIAL INTERMEDIATION SERV-1
ICES. 2
‘‘(a) S
PECIALRULESRELATING TOINTERNATIONAL 3
F
INANCIAL INTERMEDIATION SERVICES.—Financial 4
intermediation services shall be deemed as used or con-5
sumed within the United States if the person (or any re-6
lated party as defined in section 205(e)) purchasing the 7
services is a resident of the United States. 8
‘‘(b) D
ESIGNATION OFTAXREPRESENTATIVE.—Any 9
person that provides financial intermediation services to 10
United States residents must, as a condition of lawfully 11
providing such services, designate, in a form prescribed 12
by the Secretary, a tax representative for purposes of this 13
subtitle. The tax representative shall be responsible for en-14
suring that the taxes imposed by this subtitle are collected 15
and remitted and shall be jointly and severally liable for 16
collecting and remitting these taxes. The Secretary may 17
require reasonable bond of the tax representative. The 18
Secretary or a sales tax administering authority may bring 19
an action seeking a temporary restraining order, an in-20
junction, or such other order as may be appropriate to 21
enforce this section. 22
‘‘(c) C
ROSSREFERENCES.—For definition of person, 23
see section 901. 24
‘‘CHAPTER 9—ADDITIONAL MATTERS 25
‘‘Sec. 901. Additional matters. 
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‘‘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. 
1
‘‘(a) I
NTANGIBLE PROPERTY ANTIAVOIDANCE 2
R
ULE.—Notwithstanding section 2(a)(14)(a)(i), the sale 3
of a copyright or trademark shall be treated as the sale 4
of taxable services (within the meaning of section 101(a)) 5
if the substance of the sales of copyright or trademark 6
constituted the sale of the services that produced the copy-7
righted material or the trademark. 8
‘‘(b) D
EMINIMISPAYMENTS.—Up to $400 of gross 9
payments per calendar year shall be exempt from the tax 10
imposed by section 101 if— 11
‘‘(1) made by a person not in connection with 12
a trade or business at any time during such calendar 13
year prior to making said gross payments, and 14
‘‘(2) made to purchase any taxable property or 15
service which is imported into the United States by 16
such person for use or consumption by such person 17
in the United States. 18
‘‘(c) D
EMINIMISSALES.—Up to $1,200 per calendar 19
year of gross payments shall be exempt from the tax im-20
posed by section 101 if received— 21
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‘‘(1) by a person not in connection with a trade 1
or business during such calendar year prior to the 2
receipt of said gross payments, and 3
‘‘(2) in connection with a casual or isolated 4
sale. 5
‘‘(d) D
EMINIMISSALE OFFINANCIALINTERMEDI-6
ATIONSERVICES.—Up to $10,000 per calendar year of 7
gross payments received by a person from the sale of fi-8
nancial intermediation services (as determined in accord-9
ance with section 801) shall be exempt from the tax im-10
posed by section 101. The exemption provided by this sub-11
section is in addition to other exemptions afforded by this 12
chapter. The exemption provided by this subsection shall 13
not be available to large sellers (as defined in section 14
501(e)(3)). 15
‘‘(e) P
ROXYBUYINGTAXABLE.—If a registered per-16
son provides taxable property or services to a person either 17
as a gift, prize, reward, or as remuneration for employ-18
ment, and such taxable property or services were not pre-19
viously subject to tax pursuant to section 101, then the 20
provision of such taxable property or services by the reg-21
istered person shall be deemed the conversion of such tax-22
able property or services to personal use subject to tax 23
pursuant to section 103(c) at the tax inclusive fair market 24
value of such taxable property or services. 25
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‘‘(f) SUBSTANCEOVERFORM.—The substance of a 1
transaction will prevail over its form if the transaction has 2
no bona fide economic purpose and is designed to evade 3
tax imposed by this subtitle. 4
‘‘(g) C
ERTAINEMPLOYEEDISCOUNTSTAXABLE.— 5
‘‘(1) E
MPLOYEE DISCOUNT .—For purposes of 6
this subsection, the term ‘employee discount’ means 7
an employer’s offer of taxable property or services 8
for sale to its employees or their families (within the 9
meaning of section 302(b)) for less than the offer of 10
such taxable property or services to the general pub-11
lic. 12
‘‘(2) E
MPLOYEE DISCOUNT AMOUNT .—For pur-13
poses of this subsection, the employee discount 14
amount is the amount by which taxable property or 15
services are sold pursuant to an employee discount 16
below the amount for which such taxable property or 17
services would have been sold to the general public. 18
‘‘(3) T
AXABLE AMOUNT .—If the employee dis-19
count amount exceeds 20 percent of the price that 20
the taxable property or services would have been sold 21
to the general public, then the sale of such taxable 22
property or services by the employer shall be deemed 23
the conversion of such taxable property or services 24
to personal use and tax shall be imposed on the tax-25
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able employee discount amount. The taxable em-1
ployee discount amount shall be— 2
‘‘(A) the employee discount amount, minus 3
‘‘(B) 20 percent of the amount for which 4
said taxable property or services would have 5
been sold to the general public. 6
‘‘(h) S
ATURDAY, SUNDAY, ORLEGALHOLIDAY.— 7
When the last day prescribed for performing any act re-8
quired by this subtitle falls on a Saturday, Sunday, or 9
legal holiday (in the jurisdiction where the return is to 10
be filed), the performance of such act shall be considered 11
timely if it is performed on the next day which is not a 12
Saturday, Sunday, or legal holiday (in the jurisdiction 13
where the return is to be filed). 14
‘‘SEC. 902. TRANSITION MATTERS. 15
‘‘(a) I
NVENTORY.— 16
‘‘(1) Q
UALIFIED INVENTORY .—Inventory held 17
by a trade or business on the close of business on 18
December 31, 2026, shall be qualified inventory if it 19
is sold— 20
‘‘(A) before December 31, 2027, 21
‘‘(B) by a registered person, and 22
‘‘(C) subject to the tax imposed by section 23
101. 24
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‘‘(2) COSTS.—For purposes of this section, 1
qualified inventory shall have the cost that it had for 2
Federal income tax purposes for the trade or busi-3
ness as of December 31, 2026 (including any 4
amounts capitalized by reason of section 263A of the 5
Internal Revenue Code of 1986 as in effect on De-6
cember 31, 2026). 7
‘‘(3) T
RANSITIONAL INVENTORY CREDIT .—The 8
trade or business which held the qualified inventory 9
on the close of business on December 31, 2026, shall 10
be entitled to a transitional inventory credit equal to 11
the cost of the qualified inventory (determined in ac-12
cordance with paragraph (2)) times the rate of tax 13
imposed by section 101. 14
‘‘(4) T
IMING OF CREDIT.—The credit provided 15
under paragraph (3) shall be allowed with respect to 16
the month when the inventory is sold subject to the 17
tax imposed by this subtitle. Said credit shall be re-18
ported as an intermediate and export sales credit 19
and the person claiming said credit shall attach sup-20
porting schedules in the form that the Secretary 21
may prescribe. 22
‘‘(b) W
ORK-IN-PROCESS.—For purposes of this sec-23
tion, inventory shall include work-in-process. 24
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‘‘(c) QUALIFIEDINVENTORYHELD BYBUSINESSES 1
N
OTSELLINGSAIDQUALIFIEDINVENTORY AT RE-2
TAIL.— 3
‘‘(1) I
N GENERAL.—Qualified inventory held by 4
businesses that sells said qualified inventory not sub-5
ject to tax pursuant to section 102(a) shall be eligi-6
ble for the transitional inventory credit only if that 7
business (or a business that has successor rights 8
pursuant to paragraph (2)) receives certification in 9
a form satisfactory to the Secretary that the quali-10
fied inventory was subsequently sold subject to the 11
tax imposed by this subtitle. 12
‘‘(2) T
RANSITIONAL INVENTORY CREDIT RIGHT 13
MAY BE SOLD.—The business entitled to the transi-14
tional inventory credit may sell the right to receive 15
said transitional inventory credit to the purchaser of 16
the qualified inventory that gave rise to the credit 17
entitlement. Any purchaser of such qualified inven-18
tory (or property or services into which the qualified 19
inventory has been incorporated) may sell the right 20
to said transitional inventory credit to a subsequent 21
purchaser of said qualified inventory (or property or 22
services into which the qualified inventory has been 23
incorporated). 24
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‘‘SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY 1
ADMINISTRATION. 2
‘‘(a) I
NGENERAL.—Employers shall submit such in-3
formation to the Social Security Administration as is re-4
quired by the Social Security Administration to calculate 5
Social Security benefits under title II of the Social Secu-6
rity Act, including wages paid, in a form prescribed by 7
the Secretary. A copy of the employer submission to the 8
Social Security Administration relating to each employee 9
shall be provided to each employee by the employer. 10
‘‘(b) W
AGES.—For purposes of this section, the term 11
‘wages’ means all cash remuneration for employment (in-12
cluding tips to an employee by third parties provided that 13
the employer or employee maintains records documenting 14
such tips) including self-employment income; except that 15
such term shall not include— 16
‘‘(1) any insurance benefits received (including 17
death benefits), 18
‘‘(2) pension or annuity benefits received, 19
‘‘(3) tips received by an employee over $5,000 20
per year, and 21
‘‘(4) benefits received under a government enti-22
tlement program (including Social Security benefits 23
and unemployment compensation benefits). 24
‘‘(c) S
ELF-EMPLOYMENTINCOME.—For purposes of 25
subsection (b), the term ‘self-employment income’ means 26
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gross payments received for taxable property or services 1
minus the sum of— 2
‘‘(1) gross payments made for taxable property 3
or services (without regard to whether tax was paid 4
pursuant to section 101 on such taxable property or 5
services), and 6
‘‘(2) wages paid by the self-employed person to 7
employees of the self-employed person. 8
‘‘SEC. 904. TRUST FUND REVENUE. 9
‘‘(a) S
ECRETARYTOMAKEALLOCATION OFSALES 10
T
AXREVENUE.—The Secretary shall allocate the revenue 11
received by virtue of the tax imposed by section 101 in 12
accordance with this section. The revenue shall be allo-13
cated among— 14
‘‘(1) the general revenue, 15
‘‘(2) the old-age and survivors insurance trust 16
fund, 17
‘‘(3) the disability insurance trust fund, 18
‘‘(4) the hospital insurance trust fund, and 19
‘‘(5) the Federal supplementary medical insur-20
ance trust fund. 21
‘‘(b) G
ENERALRULE.— 22
‘‘(1) G
ENERAL REVENUE .—The proportion of 23
total revenue allocated to the general revenue shall 24
be the same proportion as the rate in section 25
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101(b)(4) bears to the combined Federal tax rate 1
percentage (as defined in section 101(b)(3)). 2
‘‘(2) The amount of revenue allocated to the 3
old-age and survivors insurance and disability insur-4
ance trust funds shall be the same proportion as the 5
old-age, survivors and disability insurance rate (as 6
defined in subsection (d)) bears to the combined 7
Federal tax rate percentage (as defined in section 8
101(b)(3)). 9
‘‘(3) The amount of revenue allocated to the 10
hospital insurance and Federal supplementary med-11
ical insurance trust funds shall be the same propor-12
tion as the hospital insurance rate (as defined in 13
subsection (e)) bears to the combined Federal tax 14
rate percentage (as defined in section 101(b)(3)). 15
‘‘(c) C
ALENDARYEAR2027.—Notwithstanding sub-16
section (b), the revenue allocation pursuant to subsection 17
(a) for calendar year 2027 shall be as follows: 18
‘‘(1) 64.83 percent of total revenue to general 19
revenue, 20
‘‘(2) 27.43 percent of total revenue to the old- 21
age and survivors insurance and disability insurance 22
trust funds, and 23
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‘‘(3) 7.74 percent of total revenue to the hos-1
pital insurance and Federal supplementary medical 2
insurance trust funds. 3
‘‘(d) O
LD-AGE, SURVIVORS ANDDISABILITYINSUR-4
ANCERATE.—The old-age, survivors and disability insur-5
ance rate shall be determined by the Social Security Ad-6
ministration. The old-age, survivors and disability insur-7
ance rate shall be that sales tax rate which is necessary 8
to raise the same amount of revenue that would have been 9
raised by imposing a 12.4 percent tax on the Social Secu-10
rity wage base (including self-employment income) as de-11
termined in accordance with chapter 21 of the Internal 12
Revenue Code most recently in effect prior to the enact-13
ment of this Act. The rate shall be determined using actu-14
arially sound methodology and announced at least 6 15
months prior to the beginning of the calendar year for 16
which it applies. 17
‘‘(e) H
OSPITALINSURANCERATE.—The hospital in-18
surance rate shall be determined by the Social Security 19
Administration. The hospital insurance rate shall be that 20
sales tax rate which is necessary to raise the same amount 21
of revenue that would have been raised by imposing a 2.9 22
percent tax on the Medicare wage base (including self-em-23
ployment income) as determined in accordance with chap-24
ter 21 of the Internal Revenue Code most recently in effect 25
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prior to the enactment of this Act. The rate shall be deter-1
mined using actuarially sound methodology and an-2
nounced at least 6 months prior to the beginning of the 3
calendar year for which it applies. 4
‘‘(f) A
SSISTANCE.—The Secretary shall provide such 5
technical assistance as the Social Security Administration 6
shall require to determine the old-age, survivors and dis-7
ability insurance rate and the hospital insurance rate. 8
‘‘(g) F
URTHERALLOCATIONS.— 9
‘‘(1) O
LD-AGE, SURVIVORS AND DISABILITY IN -10
SURANCE.—The Secretary shall allocate revenue re-11
ceived because of the old-age, survivors and dis-12
ability insurance rate to the old-age and survivors 13
insurance trust fund and the disability insurance 14
trust fund in accordance with law or, in the absence 15
of other statutory provision, in the same proportion 16
that the old-age and survivors insurance trust fund 17
receipts bore to the sum of the old-age and survivors 18
insurance trust fund receipts and the disability in-19
surance trust fund receipts in calendar year 2026 20
(taking into account only receipts pursuant to chap-21
ter 21 of the Internal Revenue Code). 22
‘‘(2) H
OSPITAL INSURANCE .—The Secretary 23
shall allocate revenue received because of the hos-24
pital insurance rate to the hospital insurance trust 25
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fund and the Federal supplementary medical insur-1
ance trust fund in accordance with law or, in the ab-2
sence of other statutory provision, in the same pro-3
portion that hospital insurance trust fund receipts 4
bore to the sum of the hospital insurance trust fund 5
receipts and Federal supplementary medical insur-6
ance trust fund receipts in calendar year 2026 (tak-7
ing into account only receipts pursuant to chapter 8
21 of the Internal Revenue Code). 9
‘‘SEC. 905. WITHHOLDING OF TAX ON NONRESIDENT ALIENS 10
AND FOREIGN CORPORATIONS. 11
‘‘(a) I
NGENERAL.—All persons, in whatever capacity 12
acting (including lessees or mortgagors or real or personal 13
property, fiduciaries, employers, and all officers and em-14
ployees of the United States) having control, receipt, cus-15
tody, disposal, or payment of any income to the extent 16
such income constitutes gross income from sources within 17
the United States of any nonresident alien individual, for-18
eign partnership, or foreign corporation shall deduct and 19
withhold from that income a tax equal to 23 percent there-20
of. 21
‘‘(b) E
XCEPTION.—No tax shall be required to be de-22
ducted from interest on portfolio debt investments. 23
‘‘(c) T
REATYCOUNTRIES.—In the case of payments 24
to nonresident alien individuals, foreign partnerships, or 25
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foreign corporations that have a residence in (or the na-1
tionality of a country) that has entered into a tax treaty 2
with the United States, then the rate of withholding tax 3
prescribed by the treaty shall govern.’’. 4
SEC. 202. CONFORMING AND TECHNICAL AMENDMENTS. 5
(a) R
EPEALS.—The following provisions of the Inter-6
nal Revenue Code of 1986 are repealed: 7
(1) Subchapter A of chapter 61 of subtitle D 8
(as redesignated by section 104) (relating to infor-9
mation and returns). 10
(2) Sections 6103 through 6116 of subchapter 11
B of chapter 61 of subtitle D (as so redesignated). 12
(3) Section 6157 (relating to unemployment 13
taxes). 14
(4) Section 6163 (relating to estate taxes). 15
(5) Section 6164 (relating to corporate taxes). 16
(6) Section 6166 (relating to estate taxes). 17
(7) Section 6167 (relating to foreign expropria-18
tion losses). 19
(8) Sections 6201, 6205, and 6207 (relating to 20
assessments). 21
(9) Subchapter C of chapter 63 of subtitle D 22
(as so redesignated) (relating to tax treatment of 23
partnership items). 24
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(10) Section 6305 (relating to collections of cer-1
tain liabilities). 2
(11) Sections 6314, 6315, 6316, and 6317 (re-3
lating to payments of repealed taxes). 4
(12) Sections 6324, 6324A, and 6324B (relat-5
ing to liens for estate and gift taxes). 6
(13) Section 6344 (relating to cross references). 7
(14) Section 6411 (relating to carrybacks). 8
(15) Section 6413 (relating to employment 9
taxes). 10
(16) Section 6414 (relating to withheld income 11
taxes). 12
(17) Section 6422 (relating to cross references). 13
(18) Section 6425 (relating to overpayment of 14
corporate estimated taxes). 15
(19) Section 6504 (relating to cross references). 16
(20) Section 6652 (relating to failure to file 17
certain information returns). 18
(21) Sections 6654 and 6655 (relating to fail-19
ure to payment estimated income tax). 20
(22) Section 6662 (relating to penalties). 21
(23) Sections 6677 through 6711 (relating to 22
income tax related penalties). 23
(24) Part II of subchapter B of chapter 68 (re-24
lating to certain information returns). 25
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(25) Part I of subchapter A of chapter 70 (re-1
lating to termination of taxable year). 2
(26) Section 6864 (relating to certain 3
carrybacks). 4
(27) Section 7103 (relating to cross references). 5
(28) Section 7204 (relating to withholding 6
statements). 7
(29) Section 7211 (relating certain statements). 8
(30) Section 7231 (relating to failure to obtain 9
certain licenses). 10
(31) Section 7270 (relating to insurance poli-11
cies). 12
(32) Section 7404 (relating to estate taxes). 13
(33) Section 7407 (relating to income tax pre-14
parers). 15
(34) Section 7408 (relating to income tax shel-16
ters). 17
(35) Section 7409 (relating to 501(c)(3) organi-18
zations). 19
(36) Section 7427 (relating to income tax pre-20
parers). 21
(37) Section 7428 (relating to 501(c)(3) organi-22
zations). 23
(38) Section 7476 (relating to declaratory judg-24
ments relating to retirement plans). 25
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(39) Section 7478 (relating to declaratory judg-1
ments relating to certain tax-exempt obligations). 2
(40) Section 7508 (relating to postponing time 3
for certain actions required by the income, estate, 4
and gift tax). 5
(41) Section 7509 (relating to Postal Service 6
payroll taxes). 7
(42) Section 7512 (relating to payroll taxes). 8
(43) Section 7517 (relating to estate and gift 9
tax evaluation). 10
(44) Section 7518 (relating to Merchant Marine 11
tax incentives). 12
(45) Section 7519 (relating to taxable years). 13
(46) Section 7520 (relating to insurance and 14
annuity valuation tables). 15
(47) Section 7523 (relating to reporting Fed-16
eral income and outlays on Form 1040s). 17
(48) Section 7611 (relating to church income 18
tax exemptions and church unrelated business in-19
come tax inquiries). 20
(49) Section 7654 (relating to possessions’ in-21
come taxes). 22
(50) Section 7655 (relating to cross references). 23
(51) Section 7701(a)(16). 24
(52) Section 7701(a)(19). 25
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(53) Section 7701(a)(20). 1
(54) Paragraphs (32) through (38) of section 2
7701(a). 3
(55) Paragraphs (41) through (46) of section 4
7701(a). 5
(56) Section 7701(b). 6
(57) Subsections (e) through (m) of section 7
7701. 8
(58) Section 7702 (relating to life insurance 9
contracts). 10
(59) Section 7702A (relating to modified en-11
dowment contracts). 12
(60) Section 7702B (relating to long-term care 13
insurance). 14
(61) Section 7703 (relating to the determina-15
tion of marital status). 16
(62) Section 7704 (relating to publicly traded 17
partnerships). 18
(63) Section 7805. 19
(64) Section 7851. 20
(65) Section 7872. 21
(66) Section 7873. 22
(b) O
THERCONFORMING AND TECHNICALAMEND-23
MENTS.— 24
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(1) Section 6151 of such Code is amended by 1
striking subsection (b) and by redesignating sub-2
section (c) as subsection (b). 3
(2) Section 6161 of such Code is amended to 4
read as follows: 5
‘‘SEC. 6161. EXTENSION OF TIME FOR PAYING TAX. 6
‘‘The Secretary, except as otherwise provided in this 7
title, may extend the time for payment of the amount of 8
the tax shown or required to be shown on any return, re-9
port, or declaration required under authority of this title 10
for a reasonable period not to exceed 6 months (12 months 11
in the case of a taxpayer who is abroad).’’. 12
(3) Section 6211(a) of such Code is amended— 13
(A) by striking ‘‘income, estate, and gift 14
taxes imposed by subtitles A and B and’’, 15
(B) by striking ‘‘subtitle A or B, or’’, and 16
(C) by striking ‘‘, as defined in subsection 17
(b)(2),’’ in paragraph (2). 18
(4) Section 6211(b) of such Code is amended to 19
read as follows: 20
‘‘(b) R
EBATEDEFINED.—For purposes of subsection 21
(a)(2), the term ‘rebate’ means so much of an abatement, 22
credit, refund, or other payment, as was made on the 23
ground that the tax imposed by chapter 41, 42, 43, or 24
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44 was less than the excess of the amount specified in 1
subsection (a)(1) over the rebates previously made.’’. 2
(5) Section 6212(b) of such Code is amended to 3
read as follows: 4
‘‘(b) A
DDRESS FORNOTICE OFDEFICIENCY.—In the 5
absence of notice to the Secretary under section 6903 of 6
the existence of a fiduciary relationship, notice of a defi-7
ciency in respect of a tax imposed by chapter 42, 43, or 8
44 if mailed to the taxpayer at his last known address, 9
shall be sufficient for purposes of such chapter and this 10
chapter even if such taxpayer is deceased, or is under a 11
legal disability, or, in the case of a corporation has termi-12
nated its existence.’’. 13
(6) Section 6302(b) of such Code is amended 14
by striking ‘‘21,’’. 15
(7) Section 6302 of such Code is amended by 16
striking subsections (g) and (i) and by redesignating 17
subsection (h) as subsection (g). 18
(8) Section 6325 of such Code is amended by 19
striking subsection (c) and by redesignating sub-20
sections (d) through (h) as subsections (c) through 21
(g), respectively. 22
(9) Section 6402(d) of such Code is amended 23
by striking paragraph (3). 24
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(10) Section 6402 of such Code is amended by 1
striking subsection (j) and by redesignating sub-2
section (k) as subsection (j). 3
(11) Section 6501(b) of such Code is amend-4
ed— 5
(A) by striking ‘‘except tax imposed by 6
chapter 3, 4, 21, or 24,’’ in paragraph (1), and 7
(B) by striking paragraph (2) and by re-8
designating paragraphs (3) and (4) as para-9
graphs (2) and (3), respectively. 10
(12) Section 6501(c) of such Code is amended 11
by striking paragraphs (5) through (9). 12
(13) Section 6501(e) of such Code is amended 13
by striking ‘‘subsection (c)—’’ and all that follows 14
through ‘‘subtitle D’’ in paragraph (3) and inserting 15
‘‘subsection (c), in the case of a return of a tax im-16
posed under a provision of subtitle B’’. 17
(14) Section 6501 of such Code is amended by 18
striking subsections (f) through (k) and subsections 19
(m) and (n) and by redesignating subsection (1) as 20
subsection (f). 21
(15) Section 6503(a) of such Code is amend-22
ed— 23
(A) by striking paragraph (2), 24
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(B) by striking ‘‘DEFICIENCY.—’’ and all 1
that follows through ‘‘The running’’ and insert-2
ing ‘‘D
EFICIENCY.—The running’’, and 3
(C) by striking ‘‘income, estate, gift and’’. 4
(16) Section 6503 of such Code is amended by 5
striking subsections (e), (f), (i), and (k) and by re-6
designating subsections (g), (h), and (j) as sub-7
sections (e), (f), and (g), respectively. 8
(17) Section 6511 of such Code is amended by 9
striking subsections (d) and (g) and by redesig-10
nating subsections (f) and (h) as subsections (d) and 11
(e), respectively. 12
(18) Section 6512(b)(1) of such Code is amend-13
ed by striking ‘‘of income tax for the same taxable 14
year, of gift tax for the same calendar year or cal-15
endar quarter, of estate tax in respect of the taxable 16
estate of the same decedent, or’’. 17
(19) Section 6513 of such Code is amended— 18
(A) by striking ‘‘(a) E
ARLYRETURN OR 19
A
DVANCEPAYMENT OFTAX.—’’, and 20
(B) by striking subsections (b) and (e). 21
(20) Chapter 67 of such Code is amended by 22
striking subchapters A through D and inserting the 23
following: 24
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‘‘SEC. 6601. INTEREST ON OVERPAYMENTS AND UNDER-1
PAYMENT. 2
‘‘(a) U
NDERPAYMENTS.—If any amount of tax im-3
posed by this title is not paid on or before the last date 4
prescribed for payment, interest on such amount at the 5
Federal short-term rate (as defined in section 511(b)) 6
shall be paid from such last date to the date paid. 7
‘‘(b) O
VERPAYMENTS.—Interest shall be allowed and 8
paid upon any overpayment in respect of any internal rev-9
enue tax at the Federal short-term rate (as defined in sec-10
tion 511(b)) from 60 days after the date of the overpay-11
ment until the date the overpayment is refunded.’’. 12
(21) Section 6651(a)(1) of such Code is amend-13
ed by striking ‘‘subchapter A of chapter 61 (other 14
than part III thereof),’’. 15
(22) Section 6656 of such Code is amended by 16
striking subsection (c) and by redesignating sub-17
section (d) as subsection (c). 18
(23) Section 6663 of such Code is amended by 19
striking subsection (c). 20
(24) Section 6664(c) of such Code is amend-21
ed— 22
(A) by striking ‘‘Exception.—’’ and all 23
that follows through ‘‘No penalty’’ and insert-24
ing ‘‘Exception.—No penalty’’, and 25
(B) by striking paragraphs (2) and (3). 26
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(25) Chapter 72 of such Code is amended by 1
striking all matter preceding section 7011. 2
(26) Section 7422 of such Code is amended by 3
striking subsections (h) and (i) and by redesignating 4
subsections (j) and (k) as subsections (h) and (i), re-5
spectively. 6
(27) Section 7451 of such Code is amended to 7
read as follows: 8
‘‘SEC. 7451. FEE FOR FILING PETITION. 9
‘‘The Tax Court is authorized to impose a fee in an 10
amount not in excess of $60 to be fixed by the Tax Court 11
for the filing of any petition for the redetermination of 12
a deficiency.’’. 13
(28) Section 7454 of such Code is amended by 14
striking subsection (b) and by redesignating sub-15
section (c) as subsection (b). 16
(29) Section 7463(a) of such Code is amend-17
ed— 18
(A) by striking paragraphs (2) and (3), 19
(B) by redesignating paragraph (4) as 20
paragraph (2), and 21
(C) by striking ‘‘D’’ in paragraph (2) (as 22
so redesignated) and inserting ‘‘B’’. 23
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(30) Section 7463(c) of such Code is amended 1
by striking ‘‘sections 6214(a) and’’ and inserting 2
‘‘section’’. 3
(31) Section 7463(e) of such Code is amended 4
by striking ‘‘, to the extent that the procedures de-5
scribed in subchapter B of chapter 63 apply’’. 6
(32) Section 7481 of such Code is amended by 7
striking subsection (d). 8
(33) Section 7608 of such Code is amended by 9
striking ‘‘subtitle E’’ each place it appears and in-10
serting ‘‘subtitle C’’. 11
(34) Section 7701(a)(29) of such Code is 12
amended by striking ‘‘1986’’ and inserting ‘‘2025’’. 13
(35) Section 7809(c) of such Code is amended 14
by striking paragraphs (1) and (4) and by redesig-15
nating paragraphs (2) and (3) as paragraphs (1) 16
and (2), respectively. 17
(36) Section 7871(a) of such Code is amended 18
by striking paragraphs (1) and (3) through (6) and 19
by redesignating paragraphs (2) and (7) as para-20
graphs (1) and (2), respectively. 21
(37) Section 7871 of such Code is amended by 22
striking subsection (c) and by redesignating sub-23
sections (d) and (e) as subsections (c) and (d), re-24
spectively. 25
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(38) Section 8021 of such Code is amended by 1
striking subsection (a) and by redesignating sub-2
sections (b) through (f) as subsections (a) through 3
(e), respectively. 4
(39) Section 8022(2)(A) of such Code is 5
amended by striking ‘‘, particularly the income tax’’. 6
(40) Section 8023 of such Code is amended by 7
striking ‘‘Internal Revenue Service’’ each place it ap-8
pears and inserting ‘‘Department of the Treasury’’. 9
(41) Section 9501(b)(2) of such Code is amend-10
ed by striking subparagraph (C). 11
(42) Section 9702(a) of such Code is amended 12
by striking paragraph (4). 13
(43) Section 9705(a) of such Code is amended 14
by striking paragraph (4) and by redesignating 15
paragraph (5) as paragraph (4). 16
(44) Section 9706(d)(2)(A) of such Code is 17
amended by striking ‘‘6103’’ and inserting ‘‘605(e)’’. 18
(45) Section 9707 of such Code is amended by 19
striking subsection (f). 20
(46) Section 9712(d) of such Code is amended 21
by striking paragraph (5) and by redesignating 22
paragraph (6) as paragraph (5). 23
(47) Section 9803(a) of such Code is amended 24
by striking ‘‘(as defined in section 414(f))’’. 25
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TITLE III—OTHER MATTERS 1
SEC. 301. PHASE-OUT OF ADMINISTRATION OF REPEALED 2
FEDERAL TAXES. 3
(a) A
PPROPRIATIONS.—Appropriations for any ex-4
penses of the Internal Revenue Service including proc-5
essing tax returns for years prior to the repeal of the taxes 6
repealed by title I of this Act, revenue accounting, man-7
agement, transfer of payroll and wage data to the Social 8
Security Administration for years after fiscal year 2029 9
shall not be authorized. 10
(b) R
ECORDS.—Federal records related to the admin-11
istration of taxes repealed by title I of this Act shall be 12
destroyed by the end of fiscal year 2029, except that any 13
records necessary to calculate Social Security benefits 14
shall be retained by the Social Security Administration 15
and any records necessary to support ongoing litigation 16
with respect to taxes owed or refunds due shall be retained 17
until final disposition of such litigation. 18
(c) C
ONFORMINGAMENDMENTS.—Section 7802 of 19
the Internal Revenue Code of 1986 is amended— 20
(1) by striking subsections (a) and (b) and by 21
redesignating subsections (c) and (d) as subsections 22
(a) and (b), 23
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(2) by striking ‘‘Internal Revenue Service’’ each 1
place it appears and inserting ‘‘Department of the 2
Treasury’’, and 3
(3) by striking ‘‘Commissioner’’ or ‘‘Commis-4
sioner of Internal Revenue’’ each place they appear 5
and inserting ‘‘Secretary’’. 6
(d) E
FFECTIVEDATE.—The amendments made by 7
subsection (c) shall take effect on January 1, 2029. 8
SEC. 302. ADMINISTRATION OF OTHER FEDERAL TAXES. 9
(a) I
NGENERAL.—Section 7801 of the Internal Rev-10
enue Code of 1986 (relating to the authority of the De-11
partment of the Treasury) is amended by adding at the 12
end the following: 13
‘‘(d) E
XCISETAXBUREAU.—There shall be in the 14
Department of the Treasury an Excise Tax Bureau to ad-15
minister those excise taxes not administered by the Bu-16
reau of Alcohol, Tobacco, Firearms and Explosives. 17
‘‘(e) S
ALESTAXBUREAU.—There shall be in the De-18
partment of the Treasury a Sales Tax Bureau to admin-19
ister the national sales tax in those States where it is re-20
quired pursuant to section 404, and to discharge other 21
Federal duties and powers relating to the national sales 22
tax (including those required by sections 402, 403, and 23
405). The Office of Revenue Allocation shall be within the 24
Sales Tax Bureau.’’. 25
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(b) ASSISTANTGENERAL COUNSELS.—Section 1
7801(a)(2) of such Code is amended to read as follows: 2
‘‘(2) A
SSISTANT GENERAL COUNSELS .—The 3
Secretary of the Treasury may appoint, without re-4
gard to the provisions of the civil service laws, and 5
fix the duties of not more than 5 assistant general 6
counsels.’’. 7
SEC. 303. SALES TAX INCLUSIVE SOCIAL SECURITY BENE-8
FITS INDEXATION. 9
Subparagraph (D) of section 215(i)(1) of the Social 10
Security Act (42 U.S.C. 415(i)(1)) (relating to cost-of-liv-11
ing increases in Social Security benefits) is amended to 12
read as follows: 13
‘‘(D)(i) the term ‘CPI increase percentage’, 14
with respect to a base quarter or cost-of-living quar-15
ter in any calendar year, means the percentage 16
(rounded to the nearest one-tenth of 1 percent) by 17
which the Consumer Price Index for that quarter (as 18
prepared by the Department of Labor) exceeds such 19
index for the most recent prior calendar quarter 20
which was a base quarter under subparagraph 21
(A)(ii) or, if later, the most recent cost-of-living 22
computation quarter under subparagraph (B), 23
‘‘(ii) if the Consumer Price Index (as so pre-24
pared) does not include the national sales tax paid, 25
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then the term ‘CPI increase percentage’, with re-1
spect to a base quarter or cost-of-living quarter in 2
any calendar year, means the percentage (rounded 3
to the nearest one-tenth of 1 percent) by which the 4
product of— 5
‘‘(I) the Consumer Price Index for that 6
quarter (as so prepared), and 7
‘‘(II) the national sales tax factor, 8
exceeds such index for the most recent prior cal-9
endar quarter which was a base quarter under sub-10
paragraph (A)(ii) or, if later, the most recent cost 11
of living computation quarter under subparagraph 12
(B), and 13
‘‘(iii) the national sales tax factor is equal to 14
one plus the quotient that is— 15
‘‘(I) the sales tax rate imposed by section 16
101 of the Internal Revenue Code of 2025, di-17
vided by 18
‘‘(II) the quantity that is one minus such 19
sales tax rate.’’. 20
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TITLE IV—SUNSET OF SALES 1
TAX IF SIXTEENTH AMEND-2
MENT NOT REPEALED 3
SEC. 401. ELIMINATION OF SALES TAX IF SIXTEENTH 4
AMENDMENT NOT REPEALED. 5
If the Sixteenth Amendment to the Constitution of 6
the United States is not repealed before the end of the 7
7-year period beginning on the date of the enactment of 8
this Act, then all provisions of, and amendments made by, 9
this Act shall not apply to any use or consumption in any 10
year beginning after December 31 of the calendar year 11
in which or with which such period ends, except that the 12
Sales Tax Bureau of the Department of the Treasury shall 13
not be terminated until 6 months after such December 31. 14
Æ 
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