II

106TH CONGRESS

1ST SESSION S. 1376

To amend the Internal Revenue Code of 1986 to impose a value added

tax and to use the receipts from the tax to reduce Federal debt and

to ensure the solvency of the Social Security System.

IN THE SENATE OF THE UNITED STATES

JULY 15, 1999

Mr. HOLLINGS introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to impose

a value added tax and to use the receipts from the

tax to reduce Federal debt and to ensure the solvency

of the Social Security System.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Deficit and Debt Re5 duction and Social Security Solvency Act of 1999’’.

6 SEC. 2. AMENDMENT OF 1986 CODE.

7 Except as otherwise expressly provided, whenever in

8 this Act an amendment or repeal is expressed in terms
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1 of an amendment to, or repeal of, a section or other provi2 sion, the reference shall be considered to be made to a

3 section or other provision of the Internal Revenue Code

4 of 1986.

5 TITLE I—VALUE ADDED TAX

6 SEC. 101. IMPOSITION OF TAX.

7 (a) IN GENERAL.—Subtitle D (relating to miscella8 neous excise taxes) is amended by inserting before chapter

9 31 the following new chapter:

10 ‘‘CHAPTER 30—VALUE ADDED TAX

‘‘SUBCHAPTER A. Imposition of tax.

‘‘SUBCHAPTER B. Taxable transaction.

‘‘SUBCHAPTER C. Taxable amount, rate of tax and exemption

from tax for certain transactions and certain entities; credit against tax.

‘‘SUBCHAPTER D. Administration.

‘‘SUBCHAPTER E. Definitions and special rules; treatment of certain transactions.

11 ‘‘Subchapter A—Imposition of Tax

‘‘Sec. 3901. Imposition of tax.

12 ‘‘SEC. 3901. IMPOSITION OF TAX.

13 ‘‘(a) GENERAL RULE.—A tax is hereby imposed on

14 each taxable transaction.

15 ‘‘(b) AMOUNT OF TAX.—Except as otherwise pro16 vided in this chapter, the amount of the tax shall be 5

17 percent of the taxable amount.

18 ‘‘Subchapter B—Taxable Transaction

‘‘Sec. 3903. Taxable transactions.

‘‘Sec. 3904. Nontaxable transaction.

‘‘Sec. 3905. Taxable person.

‘‘Sec. 3906. Transactions in the United States.
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‘‘Sec. 3907. Rules pertaining to sales of property and performance

of services.

1 ‘‘SEC. 3903. TAXABLE TRANSACTIONS.

2 ‘‘(a) GENERAL RULE.—Except as otherwise provided

3 in this chapter or in regulations, the term ‘‘taxable trans4 action’’ means—

5 ‘‘(1) the sale of property or services in the

6 United States by a taxable person in connection with

7 a business,

8 ‘‘(2) the import of property or services for use

9 or consumption in the United States,

10 ‘‘(3) the—

11 ‘‘(A) sale of property or services (not in12 cluded in subparagraph (B)) in the United

13 States other than in connection with business

14 for a consideration that exceeds $1,000, or

15 ‘‘(B) lease of property in the United States

16 other than in connection with a business, if the

17 fair market value of the leased property exceeds

18 $1,000, and

19 ‘‘(4) the sale of property or services exported

20 from the United States for use or consumption out21 side the United States.
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1 ‘‘(b) CROSS REFERENCES.—

‘‘For other transactions specifically treated as taxable transactions, see sections 3933, 3936, and 3937.

2 ‘‘SEC. 3904. NONTAXABLE TRANSACTION.

3 ‘‘(a) GENERAL RULE.—The term ‘nontaxable trans4 action’ includes—

5 ‘‘(1) any transfer of possession of, or transfer

6 of a security interest in, property or services by a

7 debtor to a creditor or a representative of creditors,

8 or

9 ‘‘(2) any transfer of possession, or incidents of

10 ownership, of property or services to a fiduciary who

11 represents the interests of an owner under a legal

12 disability,

13 ‘‘(3) any transfer of ownership of property or

14 services by a debtor to a trustee in bankruptcy, re15 ceiver, or other fiduciary appointed to marshal, man16 age, or liquidate a debtor’s property for the benefit

17 of creditors,

18 ‘‘(4) any import of an article that is free of

19 duty under parts 1 and 2 of schedule 8 of the Har20 monized Tariff Schedule of the United States, or

21 ‘‘(5) any sale of property located, or services

22 performed, outside the United States, unless such

23 sale constitutes an export to which section

24 3903(a)(4) applies.
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1 ‘‘(b) AUTHORIZATION TO TREAT TRANSACTION AS

2 NONTAXABLE.—The Secretary may, by regulations, treat

3 any transaction as a nontaxable transaction if such

4 classification—

5 ‘‘(1) is provided to reduce the cash flow costs

6 of the tax on the transactions, and

7 ‘‘(2) does not reduce net tax revenue.

8 ‘‘SEC. 3905. TAXABLE PERSON.

9 ‘‘(a) GENERAL RULE.—Except as otherwise provided

10 in this chapter, the term ‘taxable person’ means—

11 ‘‘(1) a person who engages in a taxable or non12 taxable transaction in connection with a business,

13 and

14 ‘‘(2) a person who engages in a transaction de15 scribed in section 3903(a)(3), but only with respect

16 to such transaction.

17 ‘‘(b) TREATMENT OF EMPLOYEES.—For purposes of

18 this chapter, an employee shall not be treated as a taxable

19 person with respect to activities engaged in as an em20 ployee.

21 ‘‘SEC. 3906. TRANSACTIONS IN THE UNITED STATES.

22 ‘‘(a) SALES OF PROPERTY.—For purposes of this

23 chapter, a sale of property shall be treated as occurring

24 in the United States if the property is located in the

25 United States at the time of the sale.
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1 ‘‘(b) SALES OF SERVICES.—For purposes of this

2 chapter, a sale of services shall be treated as occurring

3 in the United States to the extent that the services are

4 provided from a place of business in the United States.

5 ‘‘SEC. 3907. RULES PERTAINING TO SALES OF PROPERTY

6 AND PERFORMANCE OF SERVICES.

7 ‘‘(a) EXCHANGES CLASSIFIED BY CONSIDERATION

8 GIVEN.—For purposes of this chapter—

9 ‘‘(1) an exchange of property for property or

10 services shall be treated as a sale of property, and

11 ‘‘(2) an exchange of services for property or

12 services shall be treated as a sale of services,

13 regardless, in either case, of whether other consideration

14 is received.

15 ‘‘(b) CERTAIN TRANSFERS OF PROPERTY TO EM16 PLOYEES TREATED AS SALES.—For purposes of this

17 chapter, the transfer of property to an employee as com18 pensation (other than a transfer that is excludable from

19 the employee’s gross income for purposes of chapter 1)

20 shall be treated as the sale of property.

21 ‘‘(c) SALE OF SERVICES.—For purposes of this

22 chapter—

23 ‘‘(1) CERTAIN ACTIVITIES TREATED AS SALES

24 OF SERVICES.—Activities treated as the sale of serv25 ices shall include (but shall not be limited to)—
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1 ‘‘(A) the granting of the right to use prop2 erty,

3 ‘‘(B) the granting of a right to the per4 formance of services or to reimbursement (in5 cluding the granting of warranties, insurance,

6 and similar items),

7 ‘‘(C) the making of a covenant not to com8 pete (or similar agreement to refrain from

9 doing something),

10 ‘‘(D) the supply of electricity, gas, water,

11 and other utilities, and

12 ‘‘(E) the licensing of patents, copyrights,

13 trademarks, software, and other proprietary in14 formation.

15 ‘‘(2) EMPLOYERS AND EMPLOYEES.—

16 ‘‘(A) SERVICES FOR EMPLOYER.—The per17 formance of services by an employee for an em18 ployer shall not be treated as the sale of serv19 ices.

20 ‘‘(B) SERVICES FOR EMPLOYEE.—The per21 formance of services by an employer for an em22 ployee as compensation (other than a transfer

23 of services that is excludable from the employ24 ee’s gross income for purposes of chapter 1)

25 shall be treated as the sale of services.
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1 ‘‘Subchapter C—Taxable Amount; Rate of Tax

2 and Exemption From Tax for Certain

3 Transactions and Certain Entities; Credit

4 Against Tax

‘‘Sec. 3911. Taxable amount.

‘‘Sec. 3912. Zero rated exports.

‘‘Sec. 3913. Government entities and exempt organizations.

‘‘Sec. 3914. Credit against tax.

‘‘Sec. 3915. Constructive credit for certain purchases from a consumer.

‘‘Sec. 3916. Credit for post-sale price adjustments and refunds.

‘‘Sec. 3917. Deferred credit attributable to taxable casual sales.

5 ‘‘SEC. 3911. TAXABLE AMOUNT.

6 ‘‘(a) AMOUNT CHARGED CUSTOMER.—Except as oth7 erwise provided in this chapter, if money is the only con8 sideration for any transaction, the taxable amount shall

9 be the price the seller charged the purchaser of the prop10 erty or services—

11 ‘‘(1) including all invoiced charges for transpor12 tation and other items payable to the seller with re13 spect to the transaction,

14 ‘‘(2) excluding—

15 ‘‘(A) the tax imposed by section 3901, and

16 ‘‘(B) any separately stated State and local

17 sales and use taxes with respect to the trans18 action, and

19 ‘‘(3) reduced by any—

20 ‘‘(A) discount offered for prompt payment,
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1 ‘‘(B) trade or quantity discount or other

2 price allowance granted at the time of sale, and

3 ‘‘(C) cash rebate granted at the time of the

4 sale.

5 ‘‘(b) EXCHANGES.—Except as otherwise provided in

6 this chapter, the taxable amount for any exchange of prop7 erty or services—

8 ‘‘(1) for other property or services, or

9 ‘‘(2) for a combination of money and

10 ‘‘(A) property or services, or

11 ‘‘(B) property and services,

12 shall be the fair market value of the property or services

13 sold, adjusted by the items described in subsection (a).

14 ‘‘(c) IMPORTS.—

15 ‘‘(1) IN GENERAL.—For purposes of this chap16 ter, the taxable amount in the case of any import

17 shall be—

18 ‘‘(A) the customs value plus customs du19 ties and any other duties that may be imposed,

20 or

21 ‘‘(B) if there is no such customs value, the

22 fair market value (determined as if the importer

23 had sold the property or rendered the services).

24 If the value in paragraph (1)(A) does not include the cost

25 to the importer of transporting and insuring the property
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1 or services to the point of import, the taxable amount shall

2 include such costs.

3 ‘‘(2) IMPORTS OF PREVIOUSLY EXPORTED ARTI4 CLES.—For purposes of this chapter, the taxable

5 amount for any import of an article that is returned

6 to the United States—

7 ‘‘(A) after export for repairs or alterations

8 abroad, or

9 ‘‘(B) after export to undergo assembly,

10 processing, manufacture, or other changes in

11 condition abroad,

12 shall be the net cost to the importer of such repairs,

13 alterations, assembly, processing, manufacture, or

14 other change in condition.

15 ‘‘(3) LIMITATION FOR PREVIOUSLY EXPORTED

16 ARTICLES.—Paragraph (2) shall apply only to an

17 article—

18 ‘‘(A) that the importer acquired before ex19 port, and

20 ‘‘(B) as to which there has been no trans21 fer of ownership between the time of export and

22 import.

23 ‘‘(d) CERTAIN RELATED PARTY TRANSACTIONS.—

24 For purposes of this chapter, the taxable amount for a

25 transaction conducted for no consideration or for a consid-
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1 eration that is less than fair market value shall be the

2 fair market value of the property or services sold, if—

3 ‘‘(1) the seller and the recipient—

4 ‘‘(A) are related persons, or

5 ‘‘(B) are employer and employee, and

6 ‘‘(2) the recipient is not eligible for a section

7 3914 input tax credit with respect to such purchase.

8 ‘‘(e) GAMBLING, LOTTERIES, AND OTHER GAMES OF

9 CHANCE.—For purposes of this chapter, the taxable

10 amount of proceeds from gambling, lotteries, and similar

11 games of chance shall be the gross receipts from these ac12 tivities, reduced by the amount paid to the winners.

13 ‘‘SEC. 3912. ZERO RATED EXPORTS.

14 ‘‘The rate of tax imposed by section 3901 shall be

15 zero with respect to sales of property and services exported

16 from the United States for use or consumption outside

17 the United States.

18 ‘‘SEC. 3913. GOVERNMENT ENTITIES AND EXEMPT ORGANI19 ZATIONS.

20 ‘‘(a) GENERAL RULE.—The sale of property and

21 services by a government entity or exempt organization

22 shall be a taxable transaction only if a charge or fee is

23 imposed.

24 ‘‘(b) EXEMPT TRANSACTIONS.—For purposes of this

25 chapter, the supply of property or services by a govern-
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1 ment entity or exempt organization without consideration

2 shall be exempt from the tax imposed by section 3901.

3 ‘‘(c) AUTHORITY TO TREAT SALES FOR NOMINAL

4 CONSIDERATION AS EXEMPT TRANSACTIONS.—To the ex5 tent provided in regulations, a sale of property or services

6 under subsection (a) shall be treated as an exempt trans7 action under subsection (b) if a government entity or ex8 empt organization imposes a nominal charge or fee for

9 such property or services.

10 ‘‘(d) DEFINITIONS.—For purposes of this chapter—

11 ‘‘(1) GOVERNMENT ENTITY.—The term ‘gov12 ernment entity’ means the United States, any State

13 or political subdivision thereof, the District of Co14 lumbia, a Commonwealth or possession of the

15 United States, or any agency or instrumentality of

16 any of the foregoing.

17 ‘‘(2) EXEMPT ORGANIZATION.—The term ‘ex18 empt organization’ means any organization which is

19 exempt from tax under chapter 1.

20 ‘‘SEC. 3914. CREDIT AGAINST TAX.

21 ‘‘(a) GENERAL RULE.—There shall be allowed to a

22 taxable person as a credit against the tax imposed by sec23 tion 3901 the aggregate amount of tax imposed by section

24 3901 which—
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1 ‘‘(1) is payable by sellers to the taxable person

2 of property or services that the taxable person uses

3 in the business to which the transaction relates, or

4 ‘‘(2) has been reported by the taxable person as

5 importer of property or services that the taxable per6 son uses in the business to which the transaction re7 lates.

8 ‘‘(b) EXEMPT TRANSACTIONS, ETC.—If property or

9 services are used partly in the business and partly for

10 other purposes, the credit shall not be allowable with re11 spect to the property or services used for other purposes.

12 If property or services are used in the business partly for

13 taxable and nontaxable transactions and partly for exempt

14 transactions, the credit shall not be allowable with respect

15 to the property and services used for exempt transactions.

16 ‘‘(c) BAD DEBTS.—

17 ‘‘(1) GENERAL RULE.—If—

18 ‘‘(A) a taxable person issues a tax invoice

19 and reports tax under section 3901 on a sale of

20 property or services,

21 ‘‘(B) the purchaser fails to pay all or a

22 portion of the taxable amount of the sale plus

23 tax imposed under section 3901, and
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1 ‘‘(C) the debt becomes deductible as a

2 wholly or partially worthless debt under section

3 166(a),

4 there shall be allowed as a credit under subsection

5 (a) the portion of the tax imposed by section 3901

6 that is attributable to the deductible worthless debt.

7 ‘‘(2) AMOUNT OF CREDIT.—For purposes of

8 this subsection, the tax attributable to the worthless

9 debt shall be an amount equal to the deductible

10 worthless debt described in paragraph (1), multiplied

11 by a fraction, the numerator of which is the tax rate

12 provided in section 3901(b) at the time of sale and

13 the denominator of which is 100 plus the tax rate

14 provided in section 3901(b) at the time of the sale.

15 ‘‘(3) SUBSTANTIATION REQUIRED.—For pur16 poses of this chapter, the credit authorized under

17 subsection (a) shall be allowable only if supported by

18 a statement by the purchaser that any credit allow19 able to the purchaser under subsection (a) will be re20 duced by the amount specified in paragraph (2).

21 ‘‘(d) EXCESS CREDIT TREATED AS OVERPAY22 MENT.—

23 ‘‘(1) IN GENERAL.—If for any taxable period

24 the aggregate amount of the credits allowable by

25 subsection (a) exceeds the aggregate amount of the
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1 tax imposed by section 3901 for such period, such

2 excess shall be treated as an overpayment of the tax

3 imposed by section 3901.

4 ‘‘(2) TIME WHEN OVERPAYMENT ARISES.—Any

5 overpayment under paragraph (1) for any taxable

6 period shall be treated as arising on the later of—

7 ‘‘(A) the due date for the return for such

8 period, or

9 ‘‘(B) the date on which the return is filed.

10 ‘‘SEC. 3915. CONSTRUCTIVE CREDIT FOR CERTAIN PUR11 CHASES FROM A CONSUMER.

12 ‘‘(a) GENERAL RULE.—For purposes of this chapter,

13 if a taxable person acquires property from a consumer in

14 a sale that is not subject to the tax imposed by section

15 3901, the purchaser shall be allowed as a credit under sec16 tion 3914(a) the amount of tax deemed charged under

17 subsection (b). This section applies only to property that

18 was subject to the tax imposed by section 3901 when it

19 was acquired by such consumer.

20 ‘‘(b) AMOUNT OF TAX INCLUDED IN PURCHASE

21 PRICE.—For purposes of this section, the seller to the tax22 able person shall be deemed to have charged as tax an

23 amount equal to the selling price of the property multi24 plied by a fraction—
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1 ‘‘(1) the numerator of which is the tax rate pro2 vided in section 3901(b) at the time of sale, and

3 ‘‘(2) the denominator of which is 100 plus the

4 tax rate provided in section 3901(b) at the time of

5 the sale.

6 ‘‘(c) TIME WHEN CREDIT IS AVAILABLE.—For pur7 poses of this chapter, the credit authorized under sub8 section (a) shall be allowed for the tax period in which

9 the taxable person purchased the property.

10 ‘‘SEC. 3916. CREDIT FOR POST-SALE PRICE ADJUSTMENTS

11 AND REFUNDS.

12 ‘‘(a) GENERAL RULE.—For purposes of this chapter,

13 if a taxable person issues a sales refund, rebate, or price

14 allowance attributable to a sale taxable under section 3901

15 and previously reported under section 3924, the taxable

16 person shall be allowed as a credit under section 3914(a)

17 the amount of the tax deemed allocable to the refund, re18 bate, or price allowance under subsection (b).

19 ‘‘(b) AMOUNT OF CREDIT.—For purposes of this sec20 tion, the amount of tax deemed allocable to the refund,

21 rebate, or price allowance described in subsection (a) shall

22 be an amount equal to the refund, rebate, or price allow23 ance multiplied by a fraction—

24 ‘‘(1) the numerator of which is the tax rate pro25 vided in section 3901(b) at the time of the sale, and
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1 ‘‘(2) the denominator of which is 100 plus the

2 tax rate provided in section 3901(b) at the time of

3 the sale.

4 ‘‘(c) TIME WHEN CREDIT IS AVAILABLE.—For pur5 poses of this chapter, the credit authorized under sub6 section (a) shall be allowed for the taxable period in which

7 the taxable person issues the refund, rebate, or price al8 lowance and is in possession of the documents required

9 under subsection (d).

10 ‘‘(d) SUBSTANTIATION REQUIRED.—For purposes of

11 this chapter, the credit authorized under subsection (a)

12 shall be allowable only if supported by—

13 ‘‘(1) proof of the refund, rebate, or price allow14 ance issued by the taxable person, and

15 ‘‘(2) a statement by the buyer receiving the re16 fund, rebate, or price allowance that any credit oth17 erwise allowable to the buyer under section 3914(a)

18 will be reduced by the amount specified in subsection

19 (b).

20 ‘‘SEC. 3917. DEFERRED CREDIT ATTRIBUTABLE TO TAX21 ABLE CASUAL SALES.

22 ‘‘(a) GENERAL RULE.—For purposes of this chapter,

23 if a person sells property or services in a taxable trans24 action under section 3903(a)(3), the seller shall be allowed
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1 as a credit under section 3914, whichever of the following

2 is smallest:

3 ‘‘(1) the amount of tax imposed by section 3901

4 that—

5 ‘‘(A) is payable by suppliers to the seller of

6 property or services that the seller uses in the

7 section 3903(a)(3) transaction, or

8 ‘‘(B) has been reported by the seller as im9 porter of property or services that the importer

10 uses in the section 3903(a)(3) transaction;

11 ‘‘(2) the tax imposed by section 3901 on the

12 sale; or

13 ‘‘(3) the amount of tax referred to in paragraph

14 (1) multiplied by a fraction—

15 ‘‘(A) the numerator of which is the taxable

16 amount of the sale, and

17 ‘‘(B) the denominator of which is the tax18 exclusive cost of the property and services de19 scribed in subparagraphs (A) and (B) of para20 graph (1).

21 In no case can the credit exceed the total amount of the

22 taxes referred to in paragraph (1) not previously claimed

23 as credits under this section.

24 ‘‘(b) TIME WHEN CREDIT IS AVAILABLE.—For pur25 poses of this chapter, the credit authorized under sub-
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1 section (a) shall be allowed for the taxable period in which

2 the sale giving rise to the credit is reportable.

3 ‘‘(c) SUBSTANTIATION REQUIRED.—For purposes of

4 this chapter, the credit authorized under subsection (a)

5 shall be allowable only if supported by a tax invoice listing

6 the tax described in subparagraph (A) of paragraph (1)

7 or a document acceptable to the Secretary listing the tax

8 described in subparagraph (B) of paragraph (1).

9 ‘‘Subchapter D—Administration

‘‘Sec. 3921. Seller liable for tax.

‘‘Sec. 3922. Tax invoices.

‘‘Sec. 3923. De minimis exception.

‘‘Sec. 3924. Time for filing return and claiming credit; taxable

period; tax point; deposits of tax.

‘‘Sec. 3925. Treatment of related businesses.

‘‘Sec. 3926. Secretary to be notified of certain events.

‘‘Sec. 3927. Regulations.

10 ‘‘SEC. 3921. SELLER LIABLE FOR TAX.

11 ‘‘(a) GENERAL RULE.—The person selling or import12 ing property or services shall be liable for the tax imposed

13 by section 3901.

14 ‘‘(b) JOINT LIABILITY ON NON-OWNER SELLER.—

15 To the extent provided in regulations, any person making

16 a sale of property or services on behalf of the owner (other

17 than as an employee), and having control of the proceeds

18 of the sale, shall be jointly and severally liable with the

19 owner for any tax on the sale, and shall be allowed as

20 a credit against such liability any amount creditable to the

21 owner under section 3917.
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1 ‘‘SEC. 3922. TAX INVOICES.

2 ‘‘(a) SELLER MUST GIVE PURCHASER TAX IN3 VOICE.—Any taxable person engaging in a taxable trans4 action shall give the purchaser a tax invoice with respect

5 to such transaction if—

6 ‘‘(1) the seller has reason to believe that the

7 purchaser is a taxable person, or

8 ‘‘(2) the purchaser requests a tax invoice.

9 ‘‘(b) CONTENT OF INVOICE.—The tax invoice re10 quired by subsection (a) with respect to any transaction

11 shall set forth—

12 ‘‘(1) the name and identification number of the

13 seller,

14 ‘‘(2) the name of the purchaser,

15 ‘‘(3) the amount of the tax imposed by section

16 3901, and

17 ‘‘(4) such other information as may be pre18 scribed by regulations.

19 ‘‘(c) NO CREDIT WITHOUT INVOICE.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graphs (2) and (3), a purchaser may claim a credit

22 with respect to a transaction only if the purchaser—

23 ‘‘(A) has received from the seller and has

24 in his possession a tax invoice that meets the

25 requirements of subsection (b), and
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1 ‘‘(B) is named as the purchaser in such in2 voice.

3 ‘‘(2) EMPLOYEES OR OTHER AGENTS NAMED IN

4 INVOICES.—To the extent provided in regulations,

5 the naming of an employee or other agent of the

6 purchaser shall be treated as the naming of the pur7 chaser.

8 ‘‘(3) WAIVER OF INVOICE REQUIREMENT IN

9 CERTAIN CASES.—To the extent provided in regula10 tions, paragraph (1) shall not apply—

11 ‘‘(A) where the purchaser without fault on

12 his part fails to receive or fails to have in his

13 possession a tax invoice, or

14 ‘‘(B) to a taxable transaction (or category

15 of transactions) where—

16 ‘‘(i) the amount involved is de mini17 mis, or

18 ‘‘(ii) the information required by sub19 section (b) can be reliably established by

20 sampling or by another method and can be

21 adequately documented.

22 ‘‘(d) TIME FOR FURNISHING INVOICE.—Any invoice

23 required to be furnished by subsection (a) with respect to

24 any transaction shall be furnished not later than the ear25 lier of—
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1 ‘‘(1) the date the taxable person bills the pur2 chaser with respect to such transaction, or

3 ‘‘(2) the date that is 15 business days after the

4 tax point for such transaction (as defined in section

5 3924(d)).

6 ‘‘(e) WAIVER OF TAX INVOICE.—The Secretary may

7 by regulations waive the requirement in subsection (a) to

8 issue a tax invoice.

9 ‘‘SEC. 3923. DE MINIMIS EXEMPTION.

10 ‘‘(a) IN GENERAL.—A person whose aggregate tax11 able transactions—

12 ‘‘(1) do not exceed $5,000 for the calendar

13 year, and

14 ‘‘(2) can reasonably be expected not to exceed

15 such amount for the next calendar year,

16 may elect to be treated as a person who is not a taxable

17 person for the next calendar year,

18 ‘‘(b) EXCEPTIONS.—Subsection (a) does not apply—

19 ‘‘(1) to taxable transactions described in section

20 5903(a)(3), or

21 ‘‘(2) to any import of property or services.

22 ‘‘(c) TERMINATION OF ELECTION.—An election

23 under subsection (a) shall be terminated on the last day

24 of—
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1 ‘‘(1) the first calendar quarter of any year for

2 which such election is made if the aggregate taxable

3 transactions for such quarter exceed $2,500,

4 ‘‘(2) the second of any 2 consecutive calendar

5 quarters of any such year if the aggregate taxable

6 transactions for such quarters exceed $3,000, or

7 ‘‘(3) the third of any 3 consecutive calendar

8 quarters of any such year if the aggregate taxable

9 transactions for such quarters exceed $4,000.

10 ‘‘(d) CALCULATION OF TAXABLE TRANSACTIONS.—

11 For purposes of this section—

12 ‘‘(1) the taxable amount of any zero-rated

13 transaction shall be treated as zero, and

14 ‘‘(2) the term ‘taxable transaction’ does not in15 clude a transaction which is treated as a taxable

16 transaction solely by reason of paragraph (3) of sec17 tion 5903(a).

18 ‘‘(e) INFLATION ADJUSTMENT.—

19 ‘‘(1) IN GENERAL.—For calendar years begin20 ning after 2001, the dollar amounts set forth in sub21 sections (a) and (b) shall be increased by an amount

22 equal to—

23 ‘‘(A) such dollar amount, multiplied by

24 ‘‘(B) the cost-of-living adjustment for the

25 calendar year.
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1 ‘‘(2) COMPUTATIONAL RULES.—The cost-of-liv2 ing adjustment is the percentage (if any) by which

3 the consumer price index determined under section

4 1(f)(5) for the preceding calendar year exceeds the

5 Consumer Price Index for the second preceding cal6 endar year. If the amount determined under para7 graph (1) is not a multiple of $100, then such in8 crease shall be rounded to the nearest multiple of

9 $100.

10 ‘‘SEC. 3924. TIME FOR FILING RETURN AND CLAIMING

11 CREDIT; TAXABLE PERIOD; TAX POINT; DE12 POSITS OF TAX.

13 ‘‘(a) FILING RETURN.—Before the first day of the

14 second calendar month beginning after the close of each

15 taxable period, each taxable person shall file a return of

16 the tax imposed by section 3901 on taxable transactions

17 having a tax point within such taxable period.

18 ‘‘(b) CREDIT ALLOWED FOR TAXABLE PERIOD IN

19 WHICH PURCHASER RECEIVES INVOICE.—

20 ‘‘(1) IN GENERAL.—Except as provided in para21 graph (2), a credit allowable by section 3914 with

22 respect to a transaction may be allowed only for the

23 first taxable period by the close of which the taxable

24 person—
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1 ‘‘(A) has paid or accrued amounts properly

2 allocable to the tax imposed by section 3901

3 with respect to such transaction, and

4 ‘‘(B) has a tax invoice (or equivalent) with

5 respect to such transaction.

6 ‘‘(2) USE FOR LATER PERIOD.—To the extent

7 provided in regulations, at the taxable person’s elec8 tion, a credit allowable by section 3914 may be al9 lowed for a period after the period set forth in para10 graph (1).

11 ‘‘(c) TAXABLE PERIOD.—For purposes of this

12 chapter—

13 ‘‘(1) IN GENERAL.—The term ‘taxable period’

14 means each calendar quarter.

15 ‘‘(2) EXCEPTIONS.—

16 ‘‘(A) ELECTION OF MONTHLY TAXABLE

17 PERIOD.—If the taxable person so elects, the

18 term ‘taxable period’ means each month.

19 ‘‘(B) OTHER PERIODS.—To the extent pro20 vided in regulations, the term ‘taxable period’

21 includes a period selected by the taxable person,

22 other than the period provided in paragraph (1)

23 or subparagraph (A).

24 ‘‘(3) AUTHORITY TO ALTER LENGTH OF TAX

25 PERIOD.—The Secretary, to the extent the Secretary
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•S 1376 IS

1 deems such action necessary to protect the revenue,

2 may shorten the length of a taxable person’s tax pe3 riod under this subsection.

4 ‘‘(d) TAX POINT.—For purposes of this chapter—

5 ‘‘(1) CHAPTER 1 RULES WITH RESPECT TO

6 SELLER GOVERN.—Except as provided in para7 graphs (2) and (3), the tax point for any sale of

8 property or services occurs at the earliest of—

9 ‘‘(A) the time (or times) when any income

10 from the sale should be treated by the seller as

11 received or accrued (or any loss should be taken

12 into account by the seller) for purposes of chap13 ter 1,

14 ‘‘(B) the time (or times) when the seller

15 receives payment for the sale, or

16 ‘‘(C) the time when the seller issues a tax

17 invoice covering the sale.

18 ‘‘(2) EXCEPTION TO CHAPTER 1 RULES.—To

19 the extent permitted by regulations, if the taxable

20 person so elects, the tax point for any sale of prop21 erty or services occurs when the taxable person re22 ceives payment for the sale.

23 ‘‘(3) IMPORTS.—The tax point for imports of

24 property occurs when property is entered, or with25 drawn from warehouse for consumption, in the
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•S 1376 IS

1 United States, as determined under the Harmonized

2 Tariff Schedule of the United States. The tax point

3 for imports of services occurs when services are en4 tered or transferred for use in the United States.

5 ‘‘(e) PERIODIC DEPOSITS REQUIRED.—

6 ‘‘(1) IN GENERAL.—To the extent provided in

7 regulations, a taxable person shall make periodic de8 posits of estimated liability for the tax imposed by

9 section 3901.

10 ‘‘(2) ESTIMATED LIABILITY.—For purposes of

11 paragraph (1), the estimated liability shall equal—

12 ‘‘(A) the tax imposed by section 3901 for

13 the period, and

14 ‘‘(B) reduced by the credit allowable under

15 section 3914 on tax invoices received during the

16 period.

17 ‘‘SEC. 3925. TREATMENT OF RELATED BUSINESSES.

18 ‘‘For purposes of this chapter, to the extent provided

19 in regulations, a taxable person may elect—

20 ‘‘(1) to treat as one taxable person—

21 ‘‘(A) a controlled group of corporations

22 under section 52(a), or

23 ‘‘(B) two or more businesses (whether or

24 not incorporated) under common control under

25 section 52(b), and
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•S 1376 IS

1 ‘‘(2) to treat as separate taxable persons sepa2 rate divisions of the same business.

3 ‘‘SEC. 3926. SECRETARY TO BE NOTIFIED OF CERTAIN

4 EVENTS.

5 ‘‘To the extent provided in regulations, each person

6 engaged in a business shall notify the Secretary (at such

7 time or times as may be prescribed by such regulations)

8 of—

9 ‘‘(1) any change in the form in which the busi10 ness is conducted, and

11 ‘‘(2) any other change that might affect—

12 ‘‘(A) the liability for the tax imposed by

13 section 3901,

14 ‘‘(B) the amount of such tax or any credit

15 against such tax, or

16 ‘‘(C) the administration of such tax in the

17 case of such person.

18 ‘‘SEC. 3927. REGULATIONS.

19 ‘‘The Secretary shall prescribe such regulations as

20 may be necessary to carry out the purposes of this chap21 ter.

22 ‘‘Subchapter E—Definitions and Special

23 Rules; Treatment of Certain Transactions

‘‘Sec. 3931. Definitions.

‘‘Sec. 3932. Special rules.

‘‘Sec. 3933. Personal use by owner of business property or services.

‘‘Sec. 3934. Financial services.
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•S 1376 IS

‘‘Sec. 3935. Special rule for insurance contracts.

‘‘Sec. 3936. Self-consumption of property or services in connection with exempt transactions.

‘‘Sec. 3937. Cessation of taxable person status.

‘‘Sec. 3938. Transfer in satisfaction of debt.

1 ‘‘SEC. 3931. DEFINITIONS.

2 ‘‘(a) PROPERTY.—For purposes of this chapter, the

3 term ‘property’ means any tangible property.

4 ‘‘(b) SALE OF SERVICES.—For purposes of this chap5 ter, the term ‘sale of services’ means the performance of

6 services for a consideration.

7 ‘‘(c) SALE OF PROPERTY.—For purposes of this

8 chapter, the term ‘sale of property’ means the transfer of

9 ownership of property from a seller to a purchaser for a

10 consideration.

11 ‘‘(d) BUSINESS.—For purposes of this chapter, the

12 term ‘business’ includes any activity carried on continu13 ously or regularly, whether or not for profit, that involves

14 or is intended to involve the sale of property or services.

15 ‘‘(e) EMPLOYEE.—For purposes of this chapter, the

16 term ‘employee’ has the meaning such term has for pur17 poses of chapter 24 (relating to withholding).

18 ‘‘(f) PERSON.—For purposes of this chapter, the

19 term ‘person’ has the meaning such term has under sec20 tion 7701(a)(1), and it also includes any government enti21 ty.

22 ‘‘(g) BUSINESS DAY.—For purposes of this chapter,

23 the term ‘business day’ means any day other than Satur-
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•S 1376 IS

1 day, Sunday, or a legal holiday within the meaning of sec2 tion 7503.

3 ‘‘(h) UNITED STATES.—For purposes of this chapter,

4 the term ‘United States’, when used in a geographic sense,

5 includes the customs territory (as defined in General

6 Headnote 2 of the Harmonized Tariff Schedule of the

7 United States) and any area seaward of the States lying

8 above the outer boundaries of the outer continental shelf

9 (as defined in section 1331 of title 43, United States

10 Code).

11 ‘‘SEC. 3932. SPECIAL RULES.

12 ‘‘(a) COORDINATION WITH SUBTITLE A.—For pur13 poses of subtitle A—

14 ‘‘(1) TREATMENT OF CREDIT.—Any credit al15 lowable to a taxable person under section 3914 that

16 is attributable to any property or services shall be

17 treated as a reduction in the amount paid or in18 curred by the taxable person for such property or

19 services.

20 ‘‘(2) AMOUNT OF DEDUCTION FOR TAX.—The

21 amount allowable as a deduction for the tax imposed

22 by section 3901 shall be determined without regard

23 to any credit allowable under section 3914.

24 ‘‘(b) SPECIAL RULE WHERE SALE OF PROPERTY IN25 CLUDES INCIDENTAL SALE OF SERVICES.—For purposes
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•S 1376 IS

1 of this chapter, if in connection with the sale of any prop2 erty there is an incidental sale of services, such sale of

3 services shall be treated as part of the sale of such prop4 erty.

5 ‘‘(c) SPECIAL RULE WHERE SALE OF SERVICES IN6 CLUDES INCIDENTAL SALE OF PROPERTY.—For purposes

7 of this chapter, if in connection with the sale of any serv8 ices there is an incidental sale of property, such sale of

9 property shall be treated as part of the sale of such serv10 ices.

11 ‘‘(d) USE INCLUDES HELD FOR USE.—For purposes

12 of this chapter, property or services held for use by any

13 person shall be treated as used by the person.

14 ‘‘SEC. 3933. PERSONAL USE BY OWNER OF BUSINESS PROP15 ERTY OR SERVICES.

16 ‘‘(a) GENERAL RULE.—For purposes of this chapter,

17 if any business property or services are distributed to or

18 used by an owner of the taxable person for personal pur19 poses, and part or all of the tax imposed on the acquisition

20 of such property or services was subject to the credit avail21 able under section 3914, such distribution or use shall be

22 treated as a taxable transaction.

23 ‘‘(b) TAXABLE AMOUNT.—In the case of a distribu24 tion or use described in subsection (a), for purposes of

25 this chapter, the taxable amount shall be—
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•S 1376 IS

1 ‘‘(1) except as provided in paragraph (2), the

2 fair market value of the property or the services, or

3 ‘‘(2) if such distribution or use is only tem4 porary, the fair rental value.

5 ‘‘(c) DEFINITIONS.—For purposes of this section—

6 ‘‘(1) BUSINESS PROPERTY OR SERVICES.—The

7 term ‘business property or services’ means any prop8 erty or services if a sale of such property or services

9 by the taxable person would be a taxable trans10 action.

11 ‘‘(2) OWNER.—The term ‘owner’ means—

12 ‘‘(A) in the case of a sole proprietorship,

13 the proprietor,

14 ‘‘(B) in the case of any other business en15 terprise, any holder of a beneficial interest in

16 the corporation, partnership, or other entity,

17 and

18 ‘‘(C) any member of the family (within the

19 meaning of section 267(c)(4)) of an individual

20 described in subparagraph (A) or (B).

21 ‘‘(d) SECTION 3911(d) HAS PRIORITY.—For pur22 poses of this chapter, section 3911(d) (and not subsection

23 (a)) shall apply to a transaction that is described in both

24 such provisions.
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•S 1376 IS

1 ‘‘SEC. 3934. FINANCIAL SERVICES.

2 ‘‘For purposes of this chapter, the taxable amount

3 of any financial service shall be the amount determined

4 under section 3911.

5 ‘‘SEC. 3935. SPECIAL RULE FOR INSURANCE CONTRACTS.

6 ‘‘For purposes of this chapter, the taxable amount

7 of any insurance services involving intermediation shall be

8 the excess of—

9 ‘‘(1) the portion of the premium attributable to

10 insurance coverage, over

11 ‘‘(2) the actuarial cost to the insurer of pro12 viding such insurance coverage.

13 ‘‘SEC. 3936. SELF-CONSUMPTION OF PROPERTY OR SERV14 ICES IN CONNECTION WITH EXEMPT TRANS15 ACTIONS.

16 ‘‘For purposes of this chapter, to the extent provided

17 in regulations, if any property is produced or services are

18 rendered by a government entity or exempt organization

19 for use by itself in providing property or services exempt

20 from tax under section 3913(b)—

21 ‘‘(1) the property or services supplied to itself

22 shall be deemed sold in the course of business in a

23 taxable transaction, and

24 ‘‘(2) the taxable amount shall be the fair mar25 ket value of such property or services.
34

•S 1376 IS

1 ‘‘SEC. 3937. CESSATION OF TAXABLE PERSON STATUS.

2 ‘‘(a) GENERAL RULE.—For purposes of this chapter,

3 if a person ceases to be a taxable person—

4 ‘‘(1) any property and services then forming

5 part of the assets of the business shall be deemed to

6 be sold in a taxable transaction immediately before

7 such cessation, and

8 ‘‘(2) the taxable amount shall be the lesser of

9 the cost of the property and services to the taxable

10 person or their fair market value when they are

11 treated as sold.

12 ‘‘(b) EXCEPTIONS.—Except as provided by regula13 tions, subsection (a) shall not apply—

14 ‘‘(1) with respect to any property or services de15 scribed in subsection (a), to the extent that such

16 property or services are transferred to a taxable per17 son as part of a transfer of a going concern, or

18 ‘‘(2) with respect to any property or services de19 scribed in subsection (a) for which the taxable per20 son was not allowed a credit under section 3916(a).

21 ‘‘SEC. 3938. TRANSFER IN SATISFACTION OF DEBT.

22 ‘‘For purposes of this chapter, the transfer of prop23 erty or services by a debtor to a creditor in payment of

24 reduction of debt is a sale of such property or services.’’

25 (b) CONFORMING AMENDMENTS.—
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•S 1376 IS

1 (1) TIME AND PLACE FOR PAYING TAX.—Sec2 tion 6151 (relating to time and place for paying tax

3 shown on returns) is amended by adding at the end

4 the following new subsection:

5 ‘‘(d) PAYMENT OF BUSINESS ACTIVITIES TAX BY

6 CERTIFICATE OF WAIVER OF CREDIT.—

7 ‘‘(1) GENERAL RULE.—A certificate of waiver

8 of credit issued in the form and containing the infor9 mation required by regulations shall be treated as

10 payment by the seller of the tax imposed by section

11 3901 to the extent of the qualified face amount of

12 the certificate.

13 ‘‘(2) CONDITIONS FOR ISSUANCE.—A certificate

14 of waiver of credit may be issued by a taxable person

15 with respect to business property or services if—

16 ‘‘(A) the amount of the tax imposed by

17 section 3901 and charged on a single tax in18 voice covering a transaction between the seller

19 and another taxable person exceeds $750,000,

20 ‘‘(B) the purchaser is entitled under sec21 tion 3914(a) to a credit for the amount of tax

22 payable by the seller with respect to the trans23 action in subparagraph (A),

24 ‘‘(C) the purchaser waives the right to

25 claim the credit described in subparagraph (B)
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•S 1376 IS

1 in an amount equal to the qualified face

2 amount of the certificate, and

3 ‘‘(D) the seller and the purchaser agree

4 that the certificate, to the extent of its qualified

5 face amount, will be accepted by the seller in

6 partial payment of the consideration (including

7 the tax) for the transaction described in sub8 paragraph (A).

9 ‘‘(3) QUALIFIED FACE AMOUNT.—The qualified

10 face amount of a certificate of waiver shall be the

11 excess of the tax imposed by section 3901 on the

12 transaction described in paragraph (2)(A) over

13 $750,000.

14 ‘‘(4) AUTHORITY TO ISSUE REGULATIONS.—

15 The Secretary shall prescribe by regulation the form

16 of and information required to be included in a cer17 tificate of waiver of credit under this section.’’

18 (2) COLLECTION.—

19 (A) IN GENERAL.—Subchapter B of chap20 ter 64 (relating to receipt of payment) is

21 amended by adding at the end the following

22 new section:
37

•S 1376 IS

1 ‘‘SEC. 6318. PAYMENT OF BUSINESS ACTIVITIES TAX.

2 ‘‘Periodic deposits of estimated tax liability under

3 section 3924(e) shall be considered payment on account

4 of the business activities tax imposed by chapter 30.’’

5 (B) CLERICAL AMENDMENT.—The table of

6 sections for subchapter B of chapter 64 is

7 amended by adding at the end thereof the fol8 lowing new item:

‘‘Sec. 6318. Payment of business activities tax.’’

9 (3) OVERPAYMENTS; CREDITS AND REFUNDS.—

10 (A) OVERPAYMENTS.—Subsection (b) of

11 section 6401 (relating to amounts treated as

12 overpayments) is amended by adding at the end

13 the following new paragraph:

14 ‘‘(3) SPECIAL RULE FOR CREDIT UNDER SEC15 TION 3914.—Any excess of credits treated by section

16 3914(d) as an overpayment of the tax shall be con17 sidered an overpayment.’’

18 (B) REFUND OR CREDIT.—Section 6402

19 (relating to authority to make credits or re20 funds) is amended by redesignating subsection

21 (i) as (j) and by inserting after subsection (h)

22 the following new subsection:

23 ‘‘(i) REPAYMENT OF BUSINESS ACTIVITIES TAX.—

24 Within 90 days after the date on which a tax return is

25 filed pursuant to section 3913 showing an overpayment,
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•S 1376 IS

1 the Secretary shall make, to the extent he deems practical,

2 a limited examination of the return to discover omissions

3 and errors of computation, and shall determine the

4 amount of the overpayment, if any, for the taxable period

5 to which the return relates and refund or credit the

6 amount of such overpayment to the taxable person who

7 filed the return.’’

8 (4) FAILURE TO FILE.—Section 6652 (relating

9 to failure to file certain information returns, reg10 istration statements, etc.) is amended by redesig11 nating subsection (m) as subsection (n) and adding

12 after subsection (l) the following new subsection:

13 ‘‘(m) FAILURE TO GIVE TAX INVOICE.—In the case

14 of each failure to give a tax invoice as required by section

15 3922(a) within the time prescribed therefore, unless it is

16 shown that such failure is due to reasonable cause and

17 not to willful neglect, there shall be paid (on notice and

18 demand by the Secretary and in the same manner as tax)

19 by the person failing to provide such tax invoice, an

20 amount equal to $1,000 for each such failure. If such fail21 ure continues for 10 days after notice and demand by the

22 purchaser for such tax invoice, unless it is shown that such

23 failure is due to reasonable cause and not to willful ne24 glect, there shall be paid (on notice and demand by the

25 Secretary and in the same manner as tax) by the person
39

•S 1376 IS

1 failing to provide such tax invoice, an additional amount

2 equal to 10 percent of the amount required to be shown

3 as tax on such tax invoice if the failure is for not more

4 than 1 month, with an additional 5 percent for each addi5 tional month or fraction thereof during which such failure

6 continues.’’

7 (5) CLERICAL AMENDMENT.—The table of

8 chapters for subtitle D (relating miscellaneous excise

9 taxes) is amended by adding before the item relating

10 to chapter 31 the following new item:

11 ‘‘CHAPTER 30—BUSINESS ACTIVITIES

12 TAX’’.

13 (d) EFFECTIVE DATE.—

14 (1) IN GENERAL.—The amendments made by

15 this section shall apply to transactions occurring on

16 or after January 1 of the 2d calendar year following

17 the date of the enactment of this Act.

18 (2) TAX ON SALES PURSUANT TO CONTRACTS

19 EXECUTED BEFORE THE EFFECTIVE DATE OF CHAP20 TER 30.—The tax imposed by section 3901 of the

21 Internal Revenue Code of 1986 shall be imposed on

22 any taxable transaction pursuant to any contract ex23 ecuted before the date referred to in paragraph (1)

24 if the transaction has a tax point on or after that

25 date. Any separately stated tax imposed by such sec-
40

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1 tion 3901 on any transaction to which this para2 graph applies shall be treated as additional consider3 ation for the item acquired and as a legal obligation

4 of the purchaser to the seller.

5 TITLE II—SURPLUS REVENUES

6 SEC. 201. REVENUES FROM VALUE ADDED TAX TO BE USED

7 TO REDUCE THE PUBLIC DEBT AND FINANCE

8 SOCIAL SECURITY SOLVENCY.

9 (a) IN GENERAL.—Subchapter I of chapter 31 of title

10 31, United States Code, is amended by adding at the end

11 the following new section:

12 ‘‘§ 3114. Certain proceeds of value added tax to re13 duce public debt and to finance social se14 curity solvency

15 ‘‘(a) There is established in the Treasury of the

16 United States a trust fund to be known as the ‘Debt Re17 duction and Social Security Solvency Trust Fund’.

18 ‘‘(b)(1) There is appropriated to the Debt Reduction

19 and Social Security Solvency Trust Fund amounts equiva20 lent to amounts received in the Treasury from the tax im21 posed under section 3901 of the Internal Revenue Code

22 of 1986 (relating to the value added tax).

23 ‘‘(2) The amounts appropriated by paragraph (1)

24 shall be transferred at least monthly from the General

25 Fund in the Treasury to the Debt Reduction and Social
41

•S 1376 IS

1 Security Solvency Trust Fund on the basis of estimates

2 made by the Secretary of the Treasury of the amounts

3 referred to in paragraph (1). Proper adjustments shall be

4 made in amounts subsequently transferred to the extent

5 prior estimates were in excess of or less than the amounts

6 required to be transferred.

7 ‘‘(c)(1) The Secretary of the Treasury shall use the

8 money in the Debt Reduction and Social Security Solvency

9 Trust Fund to pay for any administrative costs in col10 lecting the tax imposed under section 3901 of the Internal

11 Revenue Code of 1986 or in operating the Debt Reduction

12 and Social Security Solvency Trust Fund.

13 ‘‘(2) Of the moneys remaining in the Trust Fund

14 after payment of costs under paragraph (1), the Secretary

15 of the Treasury—

16 ‘‘(A) shall use such moneys solely to pay at

17 maturity, or to redeem or buy before maturity,

18 an obligation of the Government included in the

19 public debt, and

20 ‘‘(B) if any moneys remain after all obliga21 tions described in subparagraph (A) are paid,

22 redeemed, or bought, shall transfer such mon23 eys to the Federal Old-Age and Survivors In24 surance Trust Fund and the Federal Disability

25 Insurance Trust Fund.
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•S 1376 IS

1 ‘‘(d) Any obligation of the Government which is paid,

2 redeemed, or bought with money from the Debt Reduction

3 and Social Security Solvency Trust Fund shall be canceled

4 and retired and may not be reissued.

5 ‘‘(e) In calculating for any fiscal year the deficit

6 under section 3(6) of the Congressional Budget Act of

7 1974 for purposes of comparison with the maximum def8 icit amount under the Balanced Budget and Emergency

9 Deficit Control Act of 1985 (and in calculating the excess

10 deficit under sections 251 and 252 of such Act)—

11 ‘‘(1) amounts received in the Debt Reduction

12 and Social Security Solvency Trust Fund during

13 such fiscal year shall not be included in total reve14 nues, and

15 ‘‘(2) the disbursements out of such Trust Fund

16 for such fiscal year shall not be included in total

17 budget outlays.’’

18 (b) CONFORMING AMENDMENT.—The table of sec19 tions for subchapter I of chapter 31 of title 31, United

20 States Code, is amended by adding at the end the fol21 lowing new item:

‘‘3114. Proceeds of value added tax to reduce public debt and to finance social

security solvency.’’

Æ