National Retail Sales Tax Act of 1997

Summary: National Retail Sales Tax Act of 1997 - Repeals the income, estate, gift, and certain excise tax provisions of the Internal Revenue Code. 
(Sec. 4) Amends the Internal Revenue Code to impose a 15 percent tax on the use, consumption or enjoyment in the U.S. of any property or service produced or rendered within or without of the United States.  Prohibits, subject to exception, imposing a tax on any property or service purchased for:  (1) a business purpose in an active trade or business; or (2) export from the U.S. for use or consumption outside of the U.S., provided that the purchaser provided the seller with either an intermediate sales certificate or an export sales certificate.  Defines "purchased for a business purpose in an active trade or business" as property or services:  (1) purchased for resale; (2) purchased to produce property or services; or (3) purchased in furtherance of other bona fide business purposes.  Sets forth rules relating to the obligation of governmental units and not-for-profit organizations to collect, remit, and pay taxes.  Sets forth provisions concerning credits and refunds. 
Allows for general credits against the tax, including:  (1) a used property credit; (2) a business use conversion credit; (3) an administration credit; (4) a compliance equipment cost credit; (5) a bad debt credit; (6) an insurance proceeds credit; and (7) a transition inventory credit.  Defines such credits. 
Provides for installment payments of the tax on the purchase of a principal residence. 
Allows an eligible family unit to receive a sales tax rebate. Requires that a family member, to be counted for the purposes of determining family unit size, must:  (1) if over two years old, have a bona fide Social Security number; and (2) be a lawful U.S. resident. Conditions that no individual shall be considered part of more than one family unit. 
Sets forth definitions and special rules concerning such things as: (1) foreign financial intermediation services; (2) financing leases; and (3) installment sales.  Impose
s a 15
 percent tax on gaming services. 
Directs an administering State to administer, collect, and remit to the U.S. treasury the tax on gross payments for the use, consumption or enjoyment of taxable property or services within the State.  Defines an administering State as one which maintains a specified conforming sales tax and enters into a specified cooperative agreement with the Secretary.  Provides for administrative support for States. 
Sets forth provisions concerning, among other things:  (1) monthly reports and payments; (2) records; (3) penalties; (4) appeals; (5) accounting; and (6) hobby activities. 
Authorizes the Secretary of the Treasury to establish an Office of Revenue Allocation to arbitrate any claims or disputes among States. 
(Sec. 5) Prohibits the authorizing of any appropriations for the Internal Revenue Service after FY 2001.  Establishes in the Treasury: (1) an Excise Tax Bureau to administer any excise taxes not repealed by this Act; and (2) a Sales Tax Bureau to administer the national sales tax. 
(Sec. 6) Authorizes the Social Security Administration to collect and administer self-employment income and employment taxes beginning in 1999. 
(Sec. 7) Sets forth provisions concerning:  (1) the self- employment tax; (2) the indexing of social security benefits; (3) compensating payments to individuals on fixed incomes; and (4) the interest rate on tax underpayments and overpayments. 
 (Sec. 11) Requires a supermajority in the House of Representatives or the Senate to raise rates.

OFFICERS.

    ``The State Administrator shall establish a Problem Resolution 
Office. Problem Resolution Officers shall have the authority to 
investigate taxpayer complaints and enjoin collection activity if, in 
the opinion of the Problem Resolution Officer, said collection activity 
is reasonably likely to not be in compliance with law. Said 
administrative injunction may only be reversed by the highest official 
in the relevant State or Federal taxing authority or by its General 
Counsel upon a finding that the collection activity is justified by 
clear and convincing evidence. The authority to reverse this 
administrative injunction may not be delegated. Problem Resolution 
Officers shall not be disciplined or adversely affected for the 
issuance of administrative injunctions unless a pattern or issuing 
injunctions that are manifestly unreasonable is proven in an 
administrative hearing. Nothing in this section shall limit the 
authority of the State Administrators or the taxpayer to pursue any 
legal remedy in any court with jurisdiction over the dispute at issue.

``SEC. 53. JURISDICTION AND INTERSTATE ALLOCATION.

    ``(a) Allocation Rules.--For purposes of allocating revenue between 
or among administering states from taxes imposed by this subtitle, the 
revenue shall be allocated to those states that are the destination of 
the taxable property or services. The destination of the purchase of 
taxable property and services shall be determined in accordance with 
this section.
    ``(b) Federal Office of Revenue Allocation.--The Secretary shall 
establish an Office of Revenue Allocation to arbitrate any claims or 
disputes among administering states as to the destination of taxable 
property and services for purposes of allocating revenue between or 
among the states from taxes imposed by this subtitle. The determination 
of the Administrator of the Office of Revenue Allocation shall be 
subject to judicial review in any federal court with competent 
jurisdiction provided, however, that the standard of review shall be 
abuse of discretion.
    ``(c) Tangible Personal Property.--The destination of tangible 
personal property shall be the state or territory in which the property 
was first delivered to the purchaser. Tangible personal property 
shipped by means of the mail or common carrier shall be deemed 
delivered to the location of the purchaser for purposes of this 
subsection upon shipment by mail or common carrier.
    ``(d) Real Property.--The destination of real property or rents or 
leaseholds on real property shall be state or territory in which the 
real property is located.
    ``(e) Other Property.--The destination of other property shall be 
residence of the purchaser.
    ``(f) Services.--
            ``(1) General rule.--The destination of services shall be 
        state or territory in which the use, consumption or enjoyment 
        of the services occurred. Allocation of service invoices 
        relating to more than one jurisdiction shall be on the basis of 
        time.
            ``(2) Telecommunications services.--The destination of 
        telecommunications services shall be the residence of the 
        purchaser. Telecommunications services shall include telephone, 
        telegraph, cable television, satellite and computer on-line or 
        network services.
            ``(3) Domestic transportation services.--For transportation 
        services where all of the final destinations are within the 
        United States, the destination of transportation services shall 
be the final destination of the trip (in the case of round or multiple 
trip fares, the services amount shall be equally allocated among the 
final destinations).
            ``(4) International transportation services.--For 
        transportation services where the final destination or origin 
        of the trip is without the United States, the service amount 
        shall be deemed 50 percent attributable to the United States 
        destination or origin.
    ``(g) Financial Intermediation Services.--The destination of 
financial intermediation services shall be the residence of the 
purchase.
    ``(h) A State Tax Administrator shall have jurisdiction over any 
gross payments made which have a destination (as determined in 
accordance with this section) within the state of said State Tax 
Administrator. This grant of jurisdiction is not exclusive of other 
jurisdiction that said State Tax Administrator may have.
    ``(i) Rents and Royalties Paid for the Lease of Tangible 
Property.--
            ``(1) General rule.--The destination of rents and royalties 
        paid for the lease of tangible property shall be where the 
        property is located.
            ``(2) Vehicles.--The destination of rent and lease payments 
        on vehicles shall be--
                    ``(A) in the case of rentals and leases of a term 
                one month or less, the location where the vehicle was 
                originally delivered to the lessee; and
                    ``(B) in the case of rentals and leases of a term 
                greater than one month, the residence of the lessee.

``SEC. 54. TAX TO BE STATED AND CHARGED SEPARATELY.

    ``(a) In General.--For each purchase of taxable property or 
services for which a tax is imposed pursuant to section 1, the sales 
tax shall be charged separately from the purchase price by the vendor 
or seller. For purchase of taxable property or services for which a tax 
is imposed pursuant to section 1, the vendor shall provide to the 
purchaser a receipt that sets forth at least the following information:
            ``(1) The property or services price exclusive of tax.
            ``(2) The amount of tax paid.
            ``(3) The property or service price inclusive of tax.
            ``(4) The tax rate (the amount of tax paid (per 
        subparagraph 2) divided by the property or service price 
        inclusive of tax (per subparagraph 3)).
            ``(5) The date that the good or service was sold.
            ``(6) The name of the vendor.
            ``(7) The vendor registration number.
    ``(b) Vending Machine Exception.--The requirements of subsection 
(a) shall be inapplicable in the case of sales by vending machines. 
Vending machines for purposes of this subsection shall mean machines--
            ``(1) that dispense taxable property in exchange for coins, 
        one, five, ten or twenty dollar bills, and
            ``(2) that sell no single item exceeding ten dollars per 
        unit in price.

``SEC. 55. INSTALLMENT AGREEMENTS; COMPROMISES.

    ``The State Administrator or the Secretary, as the case may be, is 
authorized to enter into written agreements with any person under which 
the person is allowed to satisfy liability for payment of any tax in 
installment payments if he determines that such agreement will 
facilitate the collection of such liability. The agreement shall remain 
in effect for the term of the agreement unless the information that the 
person provided to the Secretary or the State Administrator was 
materially inaccurate or incomplete. The Secretary and the State 
Administrator may compromise any amounts alleged to be due.

``SEC. 56. ACCOUNTING.

    ``(a) Cash Method To Be Used Generally.--Vendors and other persons 
shall remit taxes and report transactions with respect to the month for 
which payment was received or the tax imposed by this chapter otherwise 
becomes due.
    ``(b) Election To Use Accrual Method.--A person may elect with 
respect to a calendar year, in a form prescribed by the Secretary, to 
remit taxes and report transactions with respect to the month where a 
sale was invoiced and accrued.
    ``(c) Cross Reference.--

                                ``For rules relating to bad debts for 
vendors electing the accrual method, see section 11(g).

``SEC. 57. HOBBY ACTIVITIES.

    ``(a) The exemption afforded by section 2(a)(1) shall not be 
available for any taxable property or service used by a trade or 
business if that trade or business is not engaged in for profit.
    ``(b) If the trade or business has received gross payments for the 
sale of taxable property or services that exceed the sum of--
            ``(1) taxable property and services purchased,
            ``(2) wages paid, and
            ``(3) taxes paid,
in 2 or more of the most recent 4 calendar years during which it 
operated, then the business activity shall be conclusively deemed to be 
engaged in for profit.''

SEC. 5. PHASE-OUT OF THE INTERNAL REVENUE SERVICE.

    (a) Appropriations for any expenses of the Internal Revenue Service 
including processing income tax returns for years prior to the repeal 
of the income tax, revenue accounting, management, transfer of payroll 
tax data to the Social Security Administration and otherwise for years 
after fiscal year 2001 are not authorized.
    (b) Section 7801 is amended by adding the following new 
subsections:
    ``(d) Excise Tax Bureau.--There shall be in the Department of 
Treasury an Excise Tax Bureau to administer those excise taxes not 
repealed by this Act.
    ``(e) Sales Tax Bureau.--There shall be in the Department of 
Treasury a Sales Tax Bureau to administer the national sales tax in 
those States where it is required pursuant to section 31(g), and to 
discharge other Federal duties and powers relating to the national 
sales tax (including those required by sections 32, 33, and 53(b)). The 
Office of Revenue Allocation shall be within the Sales Tax Bureau.''.
    (c) Section 7801(b)(2) is amended to read as follows:
            ``(2) Assistant general counsels.--The Secretary of the 
        Treasury may appoint, without regard to the provisions of the 
        civil service laws, and fix the duties of not more than 5 
        Assistant General Counsel.''.
    (d) Short Year.--
            (1) For purposes of the Federal income tax, the tax imposed 
        by section 1 and section 11 for taxable years ending June 30, 
        1999, shall be modified as set forth in this subsection.
            (2) For calendar year taxpayers, the dollar figures in 
        section 1 and section 11 shall be reduced by dividing by 2 all 
        dollar figures that would be applicable but for this 
        subsection.
            (3) For fiscal year taxpayers, the dollar figures in 
        section 1 and section 11 shall be equal to the product of--
                    (A) the dollar amount that would be applicable but 
                for this subsection, and
                    (B) the ratio that has as its numerator the number 
                of months in the taxpayer's taxable year ending June 
                30, 1999, and as its denominator 12.
            (4) The Secretary shall publish tax rate schedules in 
        accordance with this subsection.

SEC. 6. SOCIAL SECURITY ADMINISTRATION TO COLLECT PAYROLL TAXES.

    (a) Commencing January 1, 1999, the Social Security Administration 
shall collect and administer the taxes imposed pursuant to chapter 2 of 
subtitle A (relating to self employment income taxes) and subtitle C 
(relating to employment taxes) of the Internal Revenue Code of 1986.
    (b) Cross References.--

                                For revised rules relating to the self-
employment tax, see section 7 of this Act.
                                For rules relating to revised 
withholding tax schedules and family consumption refund, see section 
13.

SEC. 7. SELF-EMPLOYMENT TAX.

    (a) Subsection 1402(a) of the Internal Revenue Code of 1986 is 
amended to read as follows:
    ``(a) In General.--`Self employment income' shall mean gross 
payments received in a calendar year from the sale of taxable property 
or services (without regard to exemption) less the sum in a calendar 
year of--
            ``(1) purchases of taxable property or services (without 
        regard to exemption) in furtherance of a business purpose,
            ``(2) any wages paid (whether to the self-employed person 
        or others) in furtherance of a business purpose,
            ``(3) unused transition amounts, and
            ``(4) undeducted negative self employment income amounts 
        from prior periods.
    ``(b) Transition Amounts.--
            ``(1) General rule.--The transition amount for the ten 
        calendar years commencing in 1999 shall be the unrecovered 
        basis amount as of the end of December 31, 1998 divided by ten.
            ``(2) Unrecovered basis amount.--The unrecovered basis 
        amount shall be remaining income tax basis relating to--
                    ``(A) prior law section 167 property placed in 
                service prior to January 1, 1999, and
                    ``(B) inventory held as of the end of 1998 
                (including any amounts capitalized in accordance with 
                prior law section 263A).''
    (b) Conforming Amendments.--Subsections 1402(b) and 1402(c) are 
hereby repealed. Subsections 1402(d) et seq. are hereby renumbered as 
subsections 1402(b) et seq.

SEC. 8. SOCIAL SECURITY BENEFITS INDEXED ON SALES TAX INCLUSIVE BASIS.

    Subparagraph (D) of paragraph (1) of subsection (i) of section 215 
of the Social Security Act (42 U.S.C. 415) (relating to cost-of-living 
increases in Social Security benefits) is amended to read as follows:
            ``(D)(i) the term `CPI increase percentage', with respect 
        to a base quarter or cost-of-living quarter in any calendar 
        year, means the percentage (rounded to the nearest one-tenth of 
        1 percent) by which the Consumer Price Index for that quarter 
        (as prepared by the Department of Labor) exceeds such index for 
        the most recent prior calendar quarter which was a base quarter 
        under subparagraph (A)(ii) or, if later, the most recent cost-
        of-living computation quarter under subparagraph (B);
            ``(ii) if the Consumer Price Index (as prepared by the 
        Department of Labor) does not include the national sales tax 
        paid, then the term `CPI increase percentage' with respect to a 
        base quarter or cost-of-living quarter in any calendar year, 
        means the percentage (rounded to the nearest one-tenth of 1 
        percent) by which the product of--
                    ``(I) the Consumer Price Index for that quarter (as 
                prepared by the Department of Labor); and
                    ``(II) the national sales tax factor,
        exceeds such index for the most recent prior calendar quarter 
        which was a base quarter under subparagraph (A)(ii) or, if 
        later, the most recent cost-of-living computation quarter under 
        subparagraph (B); and
            ``(iii) for purposes of clause (ii), the `national sales 
        tax factor' is equal to one plus the quotient that is--
                    ``(I) the sales tax rate (as defined in section 1 
                of title 26), divided by
                    ``(II) the quantity that is one minus the sales tax 
                rate.''

SEC. 9. COMPENSATING PAYMENTS TO CERTAIN PERSONS ON FIXED INCOME.

    (a) Compensating Payment.--Eligible persons (as defined in 
subsection (c)) shall receive a compensating payment (as defined in 
subsection (b)) provided that they comply with subsection (g) (relating 
to applications).
    (b) Compensating Payment Defined.--The term ``compensating 
payment'' means the product of the qualified fixed income payment 
amount (as defined in subsection (e)) and the excess inflation rate (as 
defined in subsection (f)).
    (c) Eligible Person Defined.--An eligible person is any person with 
respect to any calendar year who is entitled to--
            (1) Social Security benefits; and
            (2) qualified fixed income payments (as defined in 
        subsection (d)).
    (d) Qualified Fixed Income Payment Defined.--A qualified fixed 
income payment is a payment received by--
            (1) a beneficiary under a defined benefit plan (within the 
        meaning of section 414(j) of the Internal Revenue Code as in 
        effect prior to the enactment of this Act) whether sponsored by 
        a private or Government employer; or
            (2) by an annuitant pursuant to an annuity contract between 
        the annuitant and a bona fide insurance company.
A payment pursuant to a plan or annuity contract is not a qualified 
fixed income payment if the payment varies with investment performance, 
interest rates, or inflation. Payments pursuant to an annuity contract 
entered into after June 30, 1999, shall not be qualified fixed income 
payments. Payments pursuant to a defined benefit plan to a beneficiary 
that had been a participant in said defined benefit plan (within the 
meaning of section 410 of the Internal Revenue Code as in effect prior 
to the enactment of this Act) for less than 5 years shall not be 
qualified fixed income payments.
    (e) Qualified Fixed Income Payment Amount.--The qualified fixed 
income payment amount is \1/12\ of qualified fixed income payments that 
an eligible person is entitled to receive during the calendar year 
subsequent to the year for which the compensating payment is 
calculated, provided, however, that the qualified fixed income payment 
amount shall not exceed $5,000.
    (f) Excess Inflation Rate Defined.--The term ``excess inflation 
rate'' shall mean the excess, if any, of the consumer price index (all 
urban) during the 18-month period ending December 31, 2000, over the 
increase projected for the consumer price index (all urban) in the 
Office of Management and Budget baseline reported in the Budget of the 
United States for Fiscal Year 1999 for said 18-month period. The 
baseline assumption for the 6 months in 1999 shall be \1/2\ of the 
assumed increase for the entire calendar year 1999.
    (g) Application Required.--In order to receive compensating 
payments, each eligible person must apply in a form prescribed by the 
Secretary of Health and Human Services and provide such documentation 
as the Secretary may reasonably require.
    (h) Means of Payment.--Each person entitled to a compensating 
payment shall receive the compensating payment with their Social 
Security benefit payment. The compensating payment shall be separately 
indicated but may be included in one check. The funds to make 
compensating payments shall come from the general fund.
    (i) The Secretary of Health and Human Services may require insurers 
that are parties to annuity contracts and defined benefit plan sponsors 
to issue a statement to annuitants or plan participants including such 
information as the Secretary may require to determine the qualified 
fixed income payment amount.

SEC. 10. INTEREST.

    Section 6621 of the Internal Revenue Code of 1986 is amended by 
striking the last sentence in section 6621(a)(1) and by striking ``3'' 
in section 6621(a)(2)(B) and substituting in its stead ``2''.

SEC. 11. SUPERMAJORITY REQUIRED TO RAISE RATE.

    (a) In General.--It shall not be in order in the House of 
Representatives or the Senate to consider any bill, joint resolution, 
amendment thereto, or conference report thereon that includes any 
provision that--
            (1) increases any federal sales tax rate, and
            (2) provides any exemption, deduction, credit or other 
        benefit which results in a reduction in federal revenues.
    (b) Waiver or Suspension.--This section may be waived or suspended 
in the House of Representatives or the Senate only by the affirmative 
vote of two-thirds of the Members, duly chosen and sworn.