I 

110TH CONGRESS 

1ST SESSION H. R. 25 

To promote freedom, fairness, and economic opportunity by repealing the 

income tax and other taxes, abolishing the Internal Revenue Service, 

and enacting a national sales tax to be administered primarily by the 

States. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 4, 2007 

Mr. LINDER (for himself, Mr. BOREN, Mrs. MYRICK, Mr. MCCAUL of Texas, 

Mr. WESTMORELAND, Mr. CULBERSON, Mr. MILLER of Florida, Mr. 

PENCE, Mr. CONAWAY, Mr. CRENSHAW, Mr. NORWOOD, Mr. FEENEY, 

Mr. DEAL of Georgia, Mr. PRICE of Georgia, Mr. POE, Mrs. JO ANN

DAVIS of Virginia, Mr. TANCREDO, Mr. BACHUS, Mr. GOODE, Ms. 

GRANGER, Mr. PEARCE, Mr. BRADY of Texas, Mr. NEUGEBAUER, Mr. 

BURTON of Indiana, and Mr. STEARNS) 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. 

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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Fair Tax Act of 2007’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Congressional findings. 

TITLE I—REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND 

ESTATE AND GIFT TAXES 

Sec. 101. Income taxes repealed. 

Sec. 102. Payroll taxes repealed. 

Sec. 103. Estate and gift taxes repealed. 

Sec. 104. Conforming amendments; effective date. 

TITLE II—SALES TAX ENACTED 

Sec. 201. Sales tax. 

Sec. 202. Conforming and technical amendments. 

TITLE III—OTHER MATTERS 

Sec. 301. Phase-out of administration of repealed Federal taxes. 

Sec. 302. Administration of other Federal taxes. 

Sec. 303. Sales tax inclusive Social Security benefits indexation. 

3 SEC. 2. CONGRESSIONAL FINDINGS. 

4 (a) FINDINGS RELATING TO FEDERAL INCOME

5 TAX.—Congress finds the Federal income tax— 

6 (1) retards economic growth and has reduced 

7 the standard of living of the American public; 

8 (2) impedes the international competitiveness of 

9 United States industry; 

10 (3) reduces savings and investment in the 

11 United States by taxing income multiple times; 

12 (4) slows the capital formation necessary for 

13 real wages to steadily increase; 

14 (5) lowers productivity; 


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1 (6) imposes unacceptable and unnecessary ad2 ministrative and compliance costs on individual and 

3 business taxpayers; 

4 (7) is unfair and inequitable; 

5 (8) unnecessarily intrudes upon the privacy and 

6 civil rights of United States citizens; 

7 (9) hides the true cost of government by embed8 ding taxes in the costs of everything Americans buy; 

9 (10) is not being complied with at satisfactory 

10 levels and therefore raises the tax burden on law 

11 abiding citizens; and 

12 (11) impedes upward social mobility. 

13 (b) FINDINGS RELATING TO FEDERAL PAYROLL

14 TAXES.—Congress finds further that the Social Security 

15 and Medicare payroll taxes and self-employment taxes— 

16 (1) raise the cost of employment; 

17 (2) destroy jobs and cause unemployment; and 

18 (3) have a disproportionately adverse impact on 

19 lower income Americans. 

20 (c) FINDINGS RELATING TO FEDERAL ESTATE AND

21 GIFT TAXES.—Congress finds further that the Federal es22 tate and gift taxes— 

23 (1) force family businesses and farms to be sold 

24 by the family to pay such taxes; 


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1 (2) discourage capital formation and entrepre2 neurship; 

3 (3) foster the continued dominance of large en4 terprises over small family-owned companies and 

5 farms; and 

6 (4) impose unacceptably high tax planning costs 

7 on small businesses and farms. 

8 (d) FINDINGS RELATING TO NATIONAL SALES

9 TAX.—Congress finds further that a broad-based national 

10 sales tax on goods and services purchased for final con11 sumption— 

12 (1) is similar in many respects to the sales and 

13 use taxes in place in 45 of the 50 States; 

14 (2) will promote savings and investment; 

15 (3) will promote fairness; 

16 (4) will promote economic growth; 

17 (5) will raise the standard of living; 

18 (6) will increase investment; 

19 (7) will enhance productivity and international 

20 competitiveness; 

21 (8) will reduce administrative burdens on the 

22 American taxpayer; 

23 (9) will improve upward social mobility; and 

24 (10) will respect the privacy interests and civil 

25 rights of taxpayers. 


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1 (e) FINDINGS RELATING TO ADMINISTRATION OF

2 NATIONAL SALES TAX.—Congress further finds that— 

3 (1) most of the practical experience admin4 istering sales taxes is found at the State govern5 mental level; 

6 (2) it is desirable to harmonize Federal and 

7 State collection and enforcement efforts to the max8 imum extent possible; 

9 (3) it is sound tax administration policy to fos10 ter administration and collection of the Federal sales 

11 tax at the State level in return for a reasonable ad12 ministration fee to the States; and 

13 (4) businesses that must collect and remit taxes 

14 should receive reasonable compensation for the cost 

15 of doing so. 

16 (f) FINDINGS RELATING TO REPEAL OF PRESENT

17 FEDERAL TAX SYSTEM.—Congress further finds that the 

18 16th amendment to the United States Constitution should 

19 be repealed. 


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1 TITLE I—REPEAL OF THE IN2 COME TAX, PAYROLL TAXES, 

3 AND ESTATE AND GIFT TAXES 

4 SEC. 101. INCOME TAXES REPEALED. 

5 Subtitle A of the Internal Revenue Code of 1986 (re6 lating to income taxes and self-employment taxes) is re7 pealed. 

8 SEC. 102. PAYROLL TAXES REPEALED. 

9 (a) IN GENERAL.—Subtitle C of the Internal Rev10 enue Code of 1986 (relating to payroll taxes and with11 holding of income taxes) is repealed. 

12 (b) FUNDING OF SOCIAL SECURITY.—For funding of 

13 the Social Security Trust Funds from general revenue, see 

14 section 201 of the Social Security Act (42 U.S.C. 401). 

15 SEC. 103. ESTATE AND GIFT TAXES REPEALED. 

16 Subtitle B of the Internal Revenue Code of 1986 (re17 lating to estate and gift taxes) is repealed. 

18 SEC. 104. CONFORMING AMENDMENTS; EFFECTIVE DATE. 

19 (a) CONFORMING AMENDMENTS.—The Internal Rev20 enue Code of 1986 is amended— 

21 (1) by striking subtitle H (relating to financing 

22 of Presidential election campaigns), and 

23 (2) by redesignating— 

24 (A) subtitle D (relating to miscellaneous 

25 excise taxes) as subtitle B, 


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1 (B) subtitle E (relating to alcohol, tobacco, 

2 and certain other excise taxes) as subtitle C, 

3 (C) subtitle F (relating to procedure and 

4 administration) as subtitle D, 

5 (D) subtitle G (relating to the Joint Com6 mittee on Taxation) as subtitle E, 

7 (E) subtitle I (relating to the Trust Fund 

8 Code) as subtitle F, 

9 (F) subtitle J (relating to coal industry 

10 health benefits) as subtitle G, and 

11 (G) subtitle K (relating to group health 

12 plan portability, access, and renewability re13 quirements) as subtitle H. 

14 (b) REDESIGNATION OF 1986 CODE.— 

15 (1) IN GENERAL.—The Internal Revenue Code 

16 of 1986 enacted on October 22, 1986, as heretofore, 

17 hereby, or hereafter amended, may be cited as the 

18 Internal Revenue Code of 2007. 

19 (2) REFERENCES IN LAWS, ETC.—Except when 

20 inappropriate, any reference in any law, Executive 

21 order, or other document— 

22 (A) to the Internal Revenue Code of 1986 

23 shall include a reference to the Internal Rev24 enue Code of 2007, and 


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1 (B) to the Internal Revenue Code of 2007 

2 shall include a reference to the provisions of law 

3 formerly known as the Internal Revenue Code 

4 of 1986. 

5 (c) ADDITIONAL AMENDMENTS.—For additional con6 forming amendments, see section 202 of this Act. 

7 (d) EFFECTIVE DATE.—Except as otherwise pro8 vided in this Act, the amendments made by this Act shall 

9 take effect on January 1, 2009. 

10 TITLE II—SALES TAX ENACTED 

11 SEC. 201. SALES TAX. 

12 (a) IN GENERAL.—The Internal Revenue Code of 

13 2007 is amended by inserting before subtitle B (as redes14 ignated by section 104(a)(2)(A)) the following new sub15 title: 

16 ‘‘Subtitle A—Sales Tax 

‘‘Sec. 1. Principles of interpretation. 

‘‘Sec. 2. Definitions. 

‘‘CHAPTER 1. INTERPRETATION; DEFINITIONS; IMPOSITION OF TAX; ETC. 

‘‘CHAPTER 2. CREDITS; REFUNDS

‘‘CHAPTER 3. FAMILY CONSUMPTION ALLOWANCE

‘‘CHAPTER 4. STATE AND FEDERAL COOPERATIVE TAX ADMINISTRATION

‘‘CHAPTER 5. OTHER ADMINISTRATIVE PROVISIONS

‘‘CHAPTER 6. COLLECTION; APPEALS; TAXPAYER RIGHTS

‘‘CHAPTER 7. SPECIAL RULES

‘‘CHAPTER 8. FINANCIAL INTERMEDIATION SERVICES

‘‘CHAPTER 9. ADDITIONAL MATTERS


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1 ‘‘SEC. 1. PRINCIPLES OF INTERPRETATION. 

2 ‘‘(a) IN GENERAL.—Any court, the Secretary, and 

3 any sales tax administering authority shall consider the 

4 purposes of this subtitle (as set forth in subsection (b)) 

5 as the primary aid in statutory construction. 

6 ‘‘(b) PURPOSES.—The purposes of this subtitle are 

7 as follows: 

8 ‘‘(1) To raise revenue needed by the Federal 

9 Government in a manner consistent with the other 

10 purposes of this subtitle. 

11 ‘‘(2) To tax all consumption of goods and serv12 ices in the United States once, without exception, 

13 but only once. 

14 ‘‘(3) To prevent double, multiple, or cascading 

15 taxation. 

16 ‘‘(4) To simplify the tax law and reduce the ad17 ministration costs of, and the costs of compliance 

18 with, the tax law. 

19 ‘‘(5) To provide for the administration of the 

20 tax law in a manner that respects privacy, due proc21 ess, individual rights when interacting with the gov22 ernment, the presumption of innocence in criminal 

23 proceedings, and the presumption of lawful behavior 

24 in civil proceedings. 


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1 ‘‘(6) To increase the role of State governments 

2 in Federal tax administration because of State gov3 ernment expertise in sales tax administration. 

4 ‘‘(7) To enhance generally cooperation and co5 ordination among State tax administrators; and to 

6 enhance cooperation and coordination among Fed7 eral and State tax administrators, consistent with 

8 the principle of intergovernmental tax immunity. 

9 ‘‘(c) SECONDARY AIDS TO STATUTORY CONSTRUC10 TION.—As a secondary aid in statutory construction, any 

11 court, the Secretary, and any sales tax administering au12 thority shall consider— 

13 ‘‘(1) the common law canons of statutory con14 struction; 

15 ‘‘(2) the meaning and construction of concepts 

16 and terms used in the Internal Revenue Code of 

17 1986 as in effect before the effective date of this 

18 subtitle; and 

19 ‘‘(3) construe any ambiguities in this Act in 

20 favor of reserving powers to the States respectively, 

21 or to the people. 

22 ‘‘SEC. 2. DEFINITIONS. 

23 ‘‘(a) IN GENERAL.—For purposes of this subtitle— 

24 ‘‘(1) AFFILIATED FIRMS.—A firm is affiliated 

25 with another if 1 firm owns 50 percent or more of— 


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1 ‘‘(A) the voting shares in a corporation, or 

2 ‘‘(B) the capital interests of a business 

3 firm that is not a corporation. 

4 ‘‘(2) CONFORMING STATE SALES TAX.—The 

5 term ‘conforming State sales tax’ means a sales tax 

6 imposed by a State that adopts the same definition 

7 of taxable property and services as adopted by this 

8 subtitle. 

9 ‘‘(3) DESIGNATED COMMERCIAL PRIVATE COU10 RIER SERVICE.—The term ‘designated commercial 

11 private courier service’ means a firm designated as 

12 such by the Secretary or any sales tax administering 

13 authority, upon application of the firm, if the firm— 

14 ‘‘(A) provides its services to the general 

15 public, 

16 ‘‘(B) records electronically to its data base 

17 kept in the regular course of its business the 

18 date on which an item was given to such firm 

19 for delivery, and 

20 ‘‘(C) has been operating for at least 1 

21 year. 

22 ‘‘(4) EDUCATION AND TRAINING.—The term 

23 ‘education and training’ means tuition for primary, 

24 secondary, or postsecondary level education, and job25 related training courses. Such term does not include 


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1 room, board, sports activities, recreational activities, 

2 hobbies, games, arts or crafts or cultural activities. 

3 ‘‘(5) GROSS PAYMENTS.—The term ‘gross pay4 ments’ means payments for taxable property or serv5 ices, including Federal taxes imposed by this title. 

6 ‘‘(6) INTANGIBLE PROPERTY.— 

7 ‘‘(A) IN GENERAL.—The term ‘intangible 

8 property’ includes copyrights, trademarks, pat9 ents, goodwill, financial instruments, securities, 

10 commercial paper, debts, notes and bonds, and 

11 other property deemed intangible at common 

12 law. The Secretary shall, by regulation resolve 

13 differences among the provisions of common 

14 law of the several States. 

15 ‘‘(B) CERTAIN TYPES OF PROPERTY.— 

16 Such term does not include tangible personal 

17 property (or rents or leaseholds of any term 

18 thereon), real property (or rents or leaseholds 

19 of any term thereon) and computer software. 

20 ‘‘(7) PERSON.—The term ‘person’ means any 

21 natural person, and unless the context clearly does 

22 not allow it, any corporation, partnership, limited li23 ability company, trust, estate, government, agency, 

24 administration, organization, association, or other 

25 legal entity (foreign or domestic.) 


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1 ‘‘(8) PRODUCE, PROVIDE, RENDER, OR SELL

2 TAXABLE PROPERTY OR SERVICES.— 

3 ‘‘(A) IN GENERAL.—A taxable property or 

4 service is used to produce, provide, render, or 

5 sell a taxable property or service if such prop6 erty or service is purchased by a person en7 gaged in a trade or business for the purpose of 

8 employing or using such taxable property or 

9 service in the production, provision, rendering, 

10 or sale of other taxable property or services in 

11 the ordinary course of that trade or business. 

12 ‘‘(B) RESEARCH, EXPERIMENTATION, 

13 TESTING, AND DEVELOPMENT.—Taxable prop14 erty or services used in a trade or business for 

15 the purpose of research, experimentation, test16 ing, and development shall be treated as used to 

17 produce, provide, render, or sell taxable prop18 erty or services. 

19 ‘‘(C) INSURANCE PAYMENTS.—Taxable 

20 property or services purchased by an insurer on 

21 behalf of an insured shall be treated as used to 

22 produce, provide, render, or sell taxable prop23 erty or services if the premium for the insur24 ance contract giving rise to the insurer’s obligaVerDate Aug 31 2005 05:01 Jan 08, 2007 Jkt 059200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25

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1 tion was subject to tax pursuant to section 801 

2 (relating to financial intermediation services). 

3 ‘‘(D) EDUCATION AND TRAINING.—Edu4 cation and training shall be treated as services 

5 used to produce, provide, render, or sell taxable 

6 property or services. 

7 ‘‘(9) REGISTERED SELLER.—The term ‘reg8 istered seller’ means a person registered pursuant to 

9 section 502. 

10 ‘‘(10) SALES TAX ADMINISTERING AUTHOR11 ITY.—The term ‘sales tax administering authority’ 

12 means— 

13 ‘‘(A) the State agency designated to collect 

14 and administer the sales tax imposed by this 

15 subtitle, in an administering State, or 

16 ‘‘(B) the Secretary, in a State that is nei17 ther— 

18 ‘‘(i) an administering State, nor 

19 ‘‘(ii) a State that has elected to have 

20 its sales tax administered by an admin21 istering State. 

22 ‘‘(11) SECRETARY.—The term ‘Secretary’ 

23 means the Secretary of the Treasury. 

24 ‘‘(12) TAXABLE EMPLOYER.— 


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1 ‘‘(A) IN GENERAL.—The term ‘taxable em2 ployer’ includes— 

3 ‘‘(i) any household employing domes4 tic servants, and 

5 ‘‘(ii) any government except for gov6 ernment enterprises (as defined in section 

7 704). 

8 ‘‘(B) EXCEPTIONS.—The term ‘taxable 

9 employer’ does not include any employer which 

10 is— 

11 ‘‘(i) engaged in a trade or business, 

12 ‘‘(ii) a not-for-profit organization (as 

13 defined in section 706), or 

14 ‘‘(iii) a government enterprise (as de15 fined in section 704). 

16 ‘‘(C) CROSS REFERENCE.—For rules relat17 ing to collection and remittance of tax on wages 

18 by taxable employers, see section 103(b)(2). 

19 ‘‘(13) TAX INCLUSIVE FAIR MARKET VALUE.— 

20 The term ‘tax inclusive fair market value’ means the 

21 fair market value of taxable property or services plus 

22 the tax imposed by this subtitle. 

23 ‘‘(14) TAXABLE PROPERTY OR SERVICE.— 

24 ‘‘(A) GENERAL RULE.—The term ‘taxable 

25 property or service’ means— 


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1 ‘‘(i) any property (including leaseholds 

2 of any term or rents with respect to such 

3 property) but excluding— 

4 ‘‘(I) intangible property, and 

5 ‘‘(II) used property, and 

6 ‘‘(ii) any service (including any finan7 cial intermediation services as determined 

8 by section 801). 

9 ‘‘(B) SERVICE.—For purposes of subpara10 graph (A), the term ‘service’— 

11 ‘‘(i) shall include any service per12 formed by an employee for which the em13 ployee is paid wages or a salary by a tax14 able employer, and 

15 ‘‘(ii) shall not include any service per16 formed by an employee for which the em17 ployee is paid wages or a salary— 

18 ‘‘(I) by an employer in the reg19 ular course of the employer’s trade or 

20 business, 

21 ‘‘(II) by an employer that is a 

22 not-for-profit organization (as defined 

23 in section 706), 


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1 ‘‘(III) by an employer that is a 

2 government enterprise (as defined in 

3 section 704), and 

4 ‘‘(IV) by taxable employers to 

5 employees directly providing education 

6 and training. 

7 ‘‘(15) UNITED STATES.—The term ‘United 

8 States’, when used in the geographical sense, means 

9 each of the 50 states, the District of Columbia, and 

10 any commonwealth, territory, or possession of the 

11 United States. 

12 ‘‘(16) USED PROPERTY.—The term ‘used prop13 erty’ means— 

14 ‘‘(A) property on which the tax imposed by 

15 section 101 has been collected and for which no 

16 credit has been allowed under section 202, 203, 

17 or 205, or 

18 ‘‘(B) property that was held other than for 

19 a business purpose (as defined in section 

20 102(b)) on December 31, 2008. 

21 ‘‘(17) WAGES AND SALARY.—The terms ‘wage’ 

22 and ‘salary’ mean all compensation paid for employ23 ment service including cash compensation, employee 

24 benefits, disability insurance, or wage replacement 

25 insurance payments, unemployment compensation 


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1 insurance, workers’ compensation insurance, and the 

2 fair market value of any other consideration paid by 

3 an employer to an employee in consideration for em4 ployment services rendered. 

5 ‘‘(b) CROSS REFERENCES.— 

6 ‘‘(1) For the definition of business purposes, 

7 see section 102(b). 

8 ‘‘(2) For the definition of insurance contract, 

9 see section 206(e). 

10 ‘‘(3) For the definition of qualified family, see 

11 section 302. 

12 ‘‘(4) For the definition of monthly poverty level, 

13 see section 303. 

14 ‘‘(5) For the definition of large seller, see sec15 tion 501(e)(3). 

16 ‘‘(6) For the definition of hobby activities, see 

17 section 701. 

18 ‘‘(7) For the definition of gaming sponsor, see 

19 section 701(a). 

20 ‘‘(8) For the definition of a chance, see section 

21 701(b). 

22 ‘‘(9) For the definition of government enter23 prise, see section 704(b). 

24 ‘‘(10) For the definition of mixed use property, 

25 see section 705. 


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1 ‘‘(11) For the definition of qualified not-for2 profit organization, see section 706. 

3 ‘‘(12) For the definition of financial intermedi4 ation services, see section 801. 

5 ‘‘CHAPTER 1—INTERPRETATION; 

6 DEFINITIONS; IMPOSITION OF TAX; ETC. 

‘‘Sec. 101. Imposition of sales tax. 

‘‘Sec. 102. Intermediate and export sales. 

‘‘Sec. 103. Rules relating to collection and remittance of tax. 

7 ‘‘SEC. 101. IMPOSITION OF SALES TAX. 

8 ‘‘(a) IN GENERAL.—There is hereby imposed a tax 

9 on the use or consumption in the United States of taxable 

10 property or services. 

11 ‘‘(b) RATE.— 

12 ‘‘(1) FOR 2009.—In the calendar year 2009, the 

13 rate of tax is 23 percent of the gross payments for 

14 the taxable property or service. 

15 ‘‘(2) FOR YEARS AFTER 2009.—For years after 

16 the calendar year 2009, the rate of tax is the com17 bined Federal tax rate percentage (as defined in 

18 paragraph (3)) of the gross payments for the taxable 

19 property or service. 

20 ‘‘(3) COMBINED FEDERAL TAX RATE PERCENT21 AGE.—The combined Federal tax rate percentage is 

22 the sum of— 

23 ‘‘(A) the general revenue rate (as defined 

24 in paragraph (4), and 


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1 ‘‘(B) the old-age, survivors and disability 

2 insurance rate, and 

3 ‘‘(C) the hospital insurance rate. 

4 ‘‘(4) GENERAL REVENUE RATE.—The general 

5 revenue rate shall be 14.91 percent. 

6 ‘‘(c) COORDINATION WITH IMPORT DUTIES.—The 

7 tax imposed by this section is in addition to any import 

8 duties imposed by chapter 4 of title 19, United States 

9 Code. The Secretary shall provide by regulation that, to 

10 the maximum extent practicable, the tax imposed by this 

11 section on imported taxable property and services is col12 lected and administered in conjunction with any applicable 

13 import duties imposed by the United States. 

14 ‘‘(d) LIABILITY FOR TAX.— 

15 ‘‘(1) IN GENERAL.—The person using or con16 suming taxable property or services in the United 

17 States is liable for the tax imposed by this section, 

18 except as provided in paragraph (2) of this sub19 section. 

20 ‘‘(2) EXCEPTION WHERE TAX PAID TO SELL21 ER.—A person using or consuming a taxable prop22 erty or service in the United States is not liable for 

23 the tax imposed by this section if the person pays 

24 the tax to a person selling the taxable property or 


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1 service and receives from such person a purchaser’s 

2 receipt within the meaning of section 510. 

3 ‘‘SEC. 102. INTERMEDIATE AND EXPORT SALES. 

4 ‘‘(a) IN GENERAL.—For purposes of this subtitle— 

5 ‘‘(1) BUSINESS AND EXPORT PURPOSES.—No 

6 tax shall be imposed under section 101 on any tax7 able property or service purchased for— 

8 ‘‘(A) a business purpose in a trade or busi9 ness, or 

10 ‘‘(B) export from the United States for use 

11 or consumption outside the United States, if, 

12 the purchaser provided the seller with a reg13 istration certificate, and the seller was a whole14 sale seller. 

15 ‘‘(2) INVESTMENT PURPOSE.—No tax shall be 

16 imposed under section 101 on any taxable property 

17 or service purchased for an investment purpose and 

18 held exclusively for an investment purpose. 

19 ‘‘(3) STATE GOVERNMENT FUNCTIONS.—No tax 

20 shall be imposed under section 101 on State govern21 ment functions that do not constitute the final con22 sumption of property or services. 

23 ‘‘(b) BUSINESS PURPOSES.—For purposes of this 

24 section, the term ‘purchased for a business purpose in a 


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1 trade or business’ means purchased by a person engaged 

2 in a trade or business and used in that trade or business— 

3 ‘‘(1) for resale, 

4 ‘‘(2) to produce, provide, render, or sell taxable 

5 property or services, or 

6 ‘‘(3) in furtherance of other bona fide business 

7 purposes. 

8 ‘‘(c) INVESTMENT PURPOSES.—For purposes of this 

9 section, the term ‘purchased for an investment purpose’ 

10 means property purchased exclusively for purposes of ap11 preciation or the production of income but not entailing 

12 more than minor personal efforts. 

13 ‘‘SEC. 103. RULES RELATING TO COLLECTION AND REMIT14 TANCE OF TAX. 

15 ‘‘(a) LIABILITY FOR COLLECTION AND REMITTANCE

16 OF THE TAX.—Except as provided otherwise by this sec17 tion, any tax imposed by this subtitle shall be collected 

18 and remitted by the seller of taxable property or services 

19 (including financial intermediation services). 

20 ‘‘(b) TAX TO BE REMITTED BY PURCHASER IN CER21 TAIN CIRCUMSTANCES.— 

22 ‘‘(1) IN GENERAL.—In the case of taxable prop23 erty or services purchased outside of the United 

24 States and imported into the United States for use 


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1 or consumption in the United States, the purchaser 

2 shall remit the tax imposed by section 101. 

3 ‘‘(2) CERTAIN WAGES OR SALARY.—In the case 

4 of wages or salary paid by a taxable employer which 

5 are taxable services, the employer shall remit the tax 

6 imposed by section 101. 

7 ‘‘(c) CONVERSION OF BUSINESS OR EXPORT PROP8 ERTY OR SERVICES.—Property or services purchased for 

9 a business purpose in a trade or business or for export 

10 (sold untaxed pursuant to section 102(a)) that is subse11 quently converted to personal use shall be deemed pur12 chased at the time of conversion and shall be subject to 

13 the tax imposed by section 101 at the fair market value 

14 of the converted property as of the date of conversion. The 

15 tax shall be due as if the property had been sold at the 

16 fair market value during the month of conversion. The 

17 person using or consuming the converted property is liable 

18 for and shall remit the tax. 

19 ‘‘(d) SELLER RELIEVED OF LIABILITY IN CERTAIN

20 CASES.—In the case of any taxable property or service 

21 which is sold untaxed pursuant to section 102(a), the sell22 er shall be relieved of the duty to collect and remit the 

23 tax imposed under section 101 on such purchase if the 

24 seller— 


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1 ‘‘(1) received in good faith, and retains on file 

2 for the period set forth in section 509, a copy of a 

3 registration certificate from the purchaser, and 

4 ‘‘(2) did not, at the time of sale, have reason5 able cause to believe that the buyer was not reg6 istered pursuant to section 502. 

7 ‘‘(e) PURCHASER LIABLE TO COLLECT AND REMIT

8 IN CERTAIN CASES.—In the case of any taxable property 

9 or service which is sold untaxed pursuant to section 102, 

10 if the seller is relieved by reason of subsection (d) of the 

11 duty to collect and remit the tax imposed by section 101, 

12 then the duty to pay any tax due shall rest with the pur13 chaser. 

14 ‘‘(f) BARTER TRANSACTIONS.—If gross payment for 

15 taxable property or services is made in other than money, 

16 then the person responsible for collecting and remitting 

17 the tax shall remit the tax to the sales tax administering 

18 authority in money as if gross payment had been made 

19 in money at the tax inclusive fair market value of the tax20 able property or services purchased. 

21 ‘‘(g) INTERCOMPANY SALES.—Firms that make pur22 chases from affiliated firms that are untaxed pursuant to 

23 section 102, or make sales to affiliated firms that are 

24 untaxed pursuant to section 102, shall not need to comply 


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1 with the requirements of subsection (d) (relating to certifi2 cates) for said purchases or sales to remain untaxed. 

3 ‘‘CHAPTER 2—CREDITS; REFUNDS 

‘‘Sec. 201. Credits and refunds. 

‘‘Sec. 202. Business use conversion credit. 

‘‘Sec. 203. Intermediate and export sales credit. 

‘‘Sec. 204. Administration credit. 

‘‘Sec. 205. Bad debt credit. 

‘‘Sec. 206. Insurance proceeds credit. 

‘‘Sec. 207. Refunds. 

4 ‘‘SEC. 201. CREDITS AND REFUNDS. 

5 ‘‘(a) IN GENERAL.—Each person shall be allowed a 

6 credit with respect to the taxes imposed by section 101 

7 for each month in an amount equal to the sum of— 

8 ‘‘(1) such person’s business use conversion 

9 credit pursuant to section 202 for such month, 

10 ‘‘(2) such person’s intermediate and export 

11 sales credit pursuant to section 203 for such month, 

12 ‘‘(3) the administration credit pursuant to sec13 tion 204 for such month, 

14 ‘‘(4) the bad debt credit pursuant to section 

15 205 for such month, 

16 ‘‘(5) the insurance proceeds credit pursuant to 

17 section 206 for such month, 

18 ‘‘(6) the transitional inventory credit pursuant 

19 to section 902, and 

20 ‘‘(7) any amount paid in excess of the amount 

21 due. 


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1 ‘‘(b) CREDITS NOT ADDITIVE.—Only one credit al2 lowed by chapter 2 may be taken with respect to any par3 ticular gross payment. 

4 ‘‘SEC. 202. BUSINESS USE CONVERSION CREDIT. 

5 ‘‘(a) IN GENERAL.—For purposes of section 201, a 

6 person’s business use conversion credit for any month is 

7 the aggregate of the amounts determined under subsection 

8 (b) with respect to taxable property and services— 

9 ‘‘(1) on which tax was imposed by section 101 

10 (and actually paid), and 

11 ‘‘(2) which commenced to be 95 percent or 

12 more used during such month for business purposes 

13 (within the meaning of section 102(b)). 

14 ‘‘(b) AMOUNT OF CREDIT.—The amount determined 

15 under this paragraph with respect to any taxable property 

16 or service is the lesser of— 

17 ‘‘(1) the product of— 

18 ‘‘(A) the rate imposed by section 101, and 

19 ‘‘(B) the quotient that is— 

20 ‘‘(i) the fair market value of the prop21 erty or service when its use is converted, 

22 divided by 

23 ‘‘(ii) the quantity that is 1 minus the 

24 tax rate imposed by section 101, or 


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1 ‘‘(2) the amount of tax paid with respect to 

2 such taxable property or service, including the 

3 amount, if any, determined in accordance with sec4 tion 705 (relating to mixed use property). 

5 ‘‘SEC. 203. INTERMEDIATE AND EXPORT SALES CREDIT. 

6 ‘‘For purposes of section 201, a person’s intermediate 

7 and export sales credit is the amount of sales tax paid 

8 on the purchase of any taxable property or service pur9 chased for— 

10 ‘‘(1) a business purpose in a trade or business 

11 (as defined in section 102(b)), or 

12 ‘‘(2) export from the United States for use or 

13 consumption outside the United States. 

14 ‘‘SEC. 204. ADMINISTRATION CREDIT. 

15 ‘‘(a) IN GENERAL.—Every person filing a timely 

16 monthly report (with regard to extensions) in compliance 

17 with section 501 shall be entitled to a taxpayer adminis18 trative credit equal to the greater of— 

19 ‘‘(1) $200, or 

20 ‘‘(2) one-quarter of 1 percent of the tax remit21 ted. 

22 ‘‘(b) LIMITATION.—The credit allowed under this sec23 tion shall not exceed 20 percent of the tax due to be remit24 ted prior to the application of any credit or credits per25 mitted by section 201. 


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1 ‘‘SEC. 205. BAD DEBT CREDIT. 

2 ‘‘(a) FINANCIAL INTERMEDIATION SERVICES.—Any 

3 person who has experienced a bad debt (other than unpaid 

4 invoices within the meaning of subsection (b)) shall be en5 titled to a credit equal to the product of— 

6 ‘‘(1) the rate imposed by section 101, and 

7 ‘‘(2) the quotient that is— 

8 ‘‘(A) the amount of the bad debt (as de9 fined in section 802), divided by 

10 ‘‘(B) the quantity that is 1 minus the rate 

11 imposed by section 101. 

12 ‘‘(b) UNPAID INVOICES.—Any person electing the ac13 crual method pursuant to section 503 that has with re14 spect to a transaction— 

15 ‘‘(1) invoiced the tax imposed by section 101, 

16 ‘‘(2) remitted the invoiced tax, 

17 ‘‘(3) actually delivered the taxable property or 

18 performed the taxable services invoiced, and 

19 ‘‘(4) not been paid 180 days after date the in20 voice was due to be paid, 

21 shall be entitled to a credit equal to the amount of tax 

22 remitted and unpaid by the purchaser. 

23 ‘‘(c) SUBSEQUENT PAYMENT.—Any payment made 

24 with respect to a transaction subsequent to a section 205 

25 credit being taken with respect to that transaction shall 

26 be subject to tax in the month the payment was received 


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1 as if a tax inclusive sale of taxable property and services 

2 in the amount of the payment had been made. 

3 ‘‘(d) PARTIAL PAYMENTS.—Partial payments shall 

4 be treated as pro rata payments of the underlying obliga5 tion and shall be allocated proportionately— 

6 ‘‘(1) for fully taxable payments, between pay7 ment for the taxable property and service and tax, 

8 and 

9 ‘‘(2) for partially taxable payments, among pay10 ment for the taxable property and service, tax and 

11 other payment. 

12 ‘‘(e) RELATED PARTIES.—The credit provided by this 

13 section shall not be available with respect to sales made 

14 to related parties. For purposes of this section, related 

15 party means affiliated firms and family members (as de16 fined in section 302(b)). 

17 ‘‘SEC. 206. INSURANCE PROCEEDS CREDIT. 

18 ‘‘(a) IN GENERAL.—A person receiving a payment 

19 from an insurer by virtue of an insurance contract shall 

20 be entitled to a credit in an amount determined by sub21 section (b), less any amount paid to the insured by the 

22 insurer pursuant to subsection (c), if the entire premium 

23 (except that portion allocable to the investment account 

24 of the underlying policy) for the insurance contract giving 

25 rise to the insurer’s obligation to make a payment to the 


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1 insured was subject to the tax imposed by section 101 and 

2 said tax was paid. 

3 ‘‘(b) CREDIT AMOUNT.—The amount of the credit 

4 shall be the product of— 

5 ‘‘(1) the rate imposed by section 101, and 

6 ‘‘(2) the quotient that is— 

7 ‘‘(A) the amount of the payment made by 

8 the insurer to the insured, divided by 

9 ‘‘(B) the quantity that is 1 minus the rate 

10 imposed by section 101. 

11 ‘‘(c) ADMINISTRATIVE OPTION.—The credit deter12 mined in accordance with subsection (b) shall be paid by 

13 the insurer to the insured and the insurer shall be entitled 

14 to the credit in lieu of the insured, except that the insurer 

15 may elect, in a form prescribed by the Secretary, to not 

16 pay the credit and require the insured to make application 

17 for the credit. In the event of such election, the insurer 

18 shall provide to the Secretary and the insured the name 

19 and tax identification number of the insurer and of the 

20 insured and indicate the proper amount of the credit. 

21 ‘‘(d) COORDINATION WITH RESPECT TO EXEMP22 TION.—If taxable property or services purchased by an in23 surer on behalf of an insured are purchased free of tax 

24 by virtue of section 2(a)(8)(C), then the credit provided 


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1 by this section shall not be available with respect to that 

2 purchase. 

3 ‘‘(e) INSURANCE CONTRACT.—For purposes of sub4 section (a), the term insurance contract’ shall include a 

5 life insurance contract, a health insurance contract, a 

6 property and casualty loss insurance contract, a general 

7 liability insurance contract, a marine insurance contract, 

8 a fire insurance contract, an accident insurance contract, 

9 a disability insurance contract, a long-term care insurance 

10 contract, and an insurance contract that provides a com11 bination of these types of insurance. 

12 ‘‘SEC. 207. REFUNDS. 

13 ‘‘(a) REGISTERED SELLERS.—If a registered seller 

14 files a monthly tax report with an overpayment, then, 

15 upon application by the registered seller in a form pre16 scribed by the sales tax administering authority, the over17 payment shown on the report shall be refunded to the reg18 istered seller within 60 days of receipt of said application. 

19 In the absence of such application, the overpayment may 

20 be carried forward, without interest, by the person entitled 

21 to the credit. 

22 ‘‘(b) OTHER PERSONS.—If a person other than a reg23 istered seller has an overpayment for any month, then, 

24 upon application by the person in a form prescribed by 

25 the sales tax administering authority, the credit balance 


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1 due shall be refunded to the person within 60 days of re2 ceipt of said application. 

3 ‘‘(c) INTEREST.—No interest shall be paid on any 

4 balance due from the sales tax administering authority 

5 under this subsection for any month if such balance due 

6 is paid within 60 days after the application for refund is 

7 received. Balances due not paid within 60 days after the 

8 application for refund is received shall bear interest from 

9 the date of application. Interest shall be paid at the Fed10 eral short-term rate (as defined in section 512). 

11 ‘‘(d) SUSPENSION OF PERIOD TO PAY REFUND

12 ONLY IF FEDERAL OR STATE COURT RULING.—The 60- 

13 day periods under subsections (a) and (b) shall be sus14 pended with respect to a purported overpayment (or por15 tion thereof) only during any period that there is in effect 

16 a preliminary, temporary, or final ruling from a Federal 

17 or State court that there is reasonable cause to believe 

18 that such overpayment may not actually be due. 

19 ‘‘CHAPTER 3—FAMILY CONSUMPTION 

20 ALLOWANCE 

‘‘Sec. 301. Family consumption allowance. 

‘‘Sec. 302. Qualified family. 

‘‘Sec. 303. Monthly poverty level. 

‘‘Sec. 304. Rebate mechanism. 

‘‘Sec. 305. Change in family circumstances. 


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1 ‘‘SEC. 301. FAMILY CONSUMPTION ALLOWANCE. 

2 ‘‘Each qualified family shall be eligible to receive a 

3 sales tax rebate each month. The sales tax rebate shall 

4 be in an amount equal to the product of— 

5 ‘‘(1) the rate of tax imposed by section 101, 

6 and 

7 ‘‘(2) the monthly poverty level. 

8 ‘‘SEC. 302. QUALIFIED FAMILY. 

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

10 the term ‘qualified family’ shall mean 1 or more family 

11 members sharing a common residence. All family members 

12 sharing a common residence shall be considered as part 

13 of 1 qualified family. 

14 ‘‘(b) FAMILY SIZE DETERMINATION.— 

15 ‘‘(1) IN GENERAL.—To determine the size of a 

16 qualified family for purposes of this chapter, family 

17 members shall mean— 

18 ‘‘(A) an individual, 

19 ‘‘(B) the individual’s spouse, 

20 ‘‘(C) all lineal ancestors and descendants 

21 of said individual (and such individual’s 

22 spouse), 

23 ‘‘(D) all legally adopted children of such 

24 individual (and such individual’s spouse), and 

25 ‘‘(E) all children under legal guardianship 

26 of such individual (or such individual’s spouse). 


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1 ‘‘(2) IDENTIFICATION REQUIREMENTS.—In 

2 order for a person to be counted as a member of the 

3 family for purposes of determining the size of the 

4 qualified family, such person must— 

5 ‘‘(A) have a bona fide Social Security num6 ber; and 

7 ‘‘(B) be a lawful resident of the United 

8 States. 

9 ‘‘(c) CHILDREN LIVING AWAY FROM HOME.— 

10 ‘‘(1) STUDENTS LIVING AWAY FROM HOME.— 

11 Any person who was a registered student during not 

12 fewer than 5 months in a calendar year while living 

13 away from the common residence of a qualified fam14 ily but who receives over 50 percent of such person’s 

15 support during a calendar year from members of the 

16 qualified family shall be included as part of the fam17 ily unit whose members provided said support for 

18 purposes of this chapter. 

19 ‘‘(2) CHILDREN OF DIVORCED OR SEPARATED

20 PARENTS.—If a child’s parents are divorced or le21 gally separated, a child for purposes of this chapter 

22 shall be treated as part of the qualified family of the 

23 custodial parent. In cases of joint custody, the custo24 dial parent for purposes of this chapter shall be the 

25 parent that has custody of the child for more than 


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1 one-half of the time during a given calendar year. A 

2 parent entitled to be treated as the custodial parent 

3 pursuant to this paragraph may release this claim to 

4 the other parent if said release is in writing. 

5 ‘‘(d) ANNUAL REGISTRATION.—In order to receive 

6 the family consumption allowance provided by section 301, 

7 a qualified family must register with the sales tax admin8 istering authority in a form prescribed by the Secretary. 

9 The annual registration form shall provide— 

10 ‘‘(1) the name of each family member who 

11 shared the qualified family’s residence on the family 

12 determination date, 

13 ‘‘(2) the Social Security number of each family 

14 member on the family determination date who 

15 shared the qualified family’s residence on the family 

16 determination date, 

17 ‘‘(3) the family member or family members to 

18 whom the family consumption allowance should be 

19 paid, 

20 ‘‘(4) a certification that all listed family mem21 bers are lawful residents of the United States, 

22 ‘‘(5) a certification that all family members 

23 sharing the common residence are listed, 


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1 ‘‘(6) a certification that no family members 

2 were incarcerated on the family determination date 

3 (within the meaning of subsection (l)), and 

4 ‘‘(7) the address of the qualified family. 

5 Said registration shall be signed by all members of the 

6 qualified family that have attained the age of 21 years 

7 as of the date of filing. 

8 ‘‘(e) REGISTRATION NOT MANDATORY.—Registra9 tion is not mandatory for any qualified family. 

10 ‘‘(f) EFFECT OF FAILURE TO PROVIDE ANNUAL

11 REGISTRATION.—Any qualified family that fails to reg12 ister in accordance with this section within 30 days of the 

13 family determination date, shall cease receiving the 

14 monthly family consumption allowance in the month be15 ginning 90 days after the family determination date. 

16 ‘‘(g) EFFECT OF CURING FAILURE TO PROVIDE AN17 NUAL REGISTRATION.—Any qualified family that failed to 

18 timely make its annual registration in accordance with this 

19 section but subsequently cures its failure to register, shall 

20 be entitled to up to 6 months of lapsed sales tax rebate 

21 payments. No interest on lapsed payment amount shall be 

22 paid. 

23 ‘‘(h) EFFECTIVE DATE OF ANNUAL REGISTRA24 TIONS.—Annual registrations shall take effect for the 


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1 month beginning 90 days after the family registration 

2 date. 

3 ‘‘(i) EFFECTIVE DATE OF REVISED REGISTRA4 TIONS.—A revised registration made pursuant to section 

5 305 shall take effect for the first month beginning 60 days 

6 after the revised registration was filed. The existing reg7 istration shall remain in effect until the effective date of 

8 the revised registration. 

9 ‘‘(j) DETERMINATION OF REGISTRATION FILING

10 DATE.—An annual or revised registration shall be deemed 

11 filed when— 

12 ‘‘(1) deposited in the United States mail, post13 age prepaid, to the address of the sales tax admin14 istering authority; 

15 ‘‘(2) delivered and accepted at the offices of the 

16 sales tax administering authority; or 

17 ‘‘(3) provided to a designated commercial pri18 vate courier service for delivery within 2 days to the 

19 sales tax administering authority at the address of 

20 the sales tax administering authority. 

21 ‘‘(k) PROPOSED REGISTRATION TO BE PROVIDED.— 

22 30 or more days before the family registration date, the 

23 sales tax administering authority shall mail to the address 

24 shown on the most recent rebate registration or change 

25 of address notice filed pursuant to section 305(d) a proVerDate Aug 31 2005 05:01 Jan 08, 2007 Jkt 059200 PO 00000 Frm 00037 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25

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1 posed registration that may be simply signed by the appro2 priate family members if family circumstances have not 

3 changed. 

4 ‘‘(l) INCARCERATED INDIVIDUALS.—An individual 

5 shall not be eligible under this chapter to be included as 

6 a member of any qualified family if that individual— 

7 ‘‘(1) is incarcerated in a local, State, or Federal 

8 jail, prison, mental hospital, or other institution on 

9 the family determination date, and 

10 ‘‘(2) is scheduled to be incarcerated for 6 

11 months or more in the 12-month period following 

12 the effective date of the annual registration or the 

13 revised registration of said qualified family. 

14 ‘‘(m) FAMILY DETERMINATION DATE.—The family 

15 determination date is a date assigned to each family by 

16 the Secretary for purposes of determining qualified family 

17 size and other information necessary for the administra18 tion of this chapter. The Secretary shall promulgate regu19 lations regarding the issuance of family determination 

20 dates. In the absence of any regulations, the family deter21 mination date for all families shall be October 1. The Sec22 retary may assign family determination dates for adminis23 trative convenience. Permissible means of assigning family 

24 determination dates include a method based on the 

25 birthdates of family members. 


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1 ‘‘(n) CROSS REFERENCE.—For penalty for filing 

2 false rebate claim, see section 505(i). 

3 ‘‘SEC. 303. MONTHLY POVERTY LEVEL. 

4 ‘‘(a) IN GENERAL.—The monthly poverty level for 

5 any particular month shall be one-twelfth of the ‘annual 

6 poverty level.’ For purposes of this section the ‘annual 

7 poverty level’ shall be the sum of— 

8 ‘‘(1) the annual level determined by the Depart9 ment of Health and Human Services poverty guide10 lines required by sections 652 and 673(2) of the 

11 Omnibus Reconciliation Act of 1981 for a particular 

12 family size, and 

13 ‘‘(2) in case of families that include a married 

14 couple, the ‘annual marriage penalty elimination 

15 amount’. 

16 ‘‘(b) ANNUAL MARRIAGE PENALTY ELIMINATION

17 AMOUNT.—The annual marriage penalty elimination 

18 amount shall be the amount that is— 

19 ‘‘(1) the amount that is two times the annual 

20 level determined by the Department of Health and 

21 Human Services poverty guidelines required by sec22 tions 652 and 673(2) of the Omnibus Reconciliation 

23 Act of 1981 for a family of one, less 

24 ‘‘(2) the annual level determined by the Depart25 ment of Health and Human Services poverty guideVerDate Aug 31 2005 05:01 Jan 08, 2007 Jkt 059200 PO 00000 Frm 00039 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25

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1 lines required by sections 652 and 673(2) of the 

2 Omnibus Reconciliation Act of 1981 for a family of 

3 two. 

4 ‘‘SEC. 304. REBATE MECHANISM. 

5 ‘‘(a) GENERAL RULE.—The Social Security Adminis6 tration shall provide a monthly sales tax rebate to duly 

7 registered qualified families in an amount determined in 

8 accordance with section 301. 

9 ‘‘(b) PERSONS RECEIVING REBATE.—The payments 

10 shall be made to the persons designated by the qualifying 

11 family in the annual or revised registration for each quali12 fied family in effect with respect to the month for which 

13 payment is being made. Payments may only be made to 

14 persons 18 years or older. If more than 1 person is des15 ignated in a registration to receive the rebate, then the 

16 rebate payment shall be divided evenly between or among 

17 those persons designated. 

18 ‘‘(c) WHEN REBATES MAILED.—Rebates shall be 

19 mailed on or before the first business day of the month 

20 for which the rebate is being provided. 

21 ‘‘(d) SMARTCARDS AND DIRECT ELECTRONIC DE22 POSIT PERMISSIBLE.—The Social Security Administration 

23 may provide rebates in the form of smartcards that carry 

24 cash balances in their memory for use in making purVerDate Aug 31 2005 05:01 Jan 08, 2007 Jkt 059200 PO 00000 Frm 00040 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25

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1 chases at retail establishments or by direct electronic de2 posit. 

3 ‘‘SEC. 305. CHANGE IN FAMILY CIRCUMSTANCES. 

4 ‘‘(a) GENERAL RULE.—In the absence of the filing 

5 of a revised registration in accordance with this chapter, 

6 the common residence of the qualified family, marital sta7 tus and number of persons in a qualified family on the 

8 family registration date shall govern determinations re9 quired to be made under this chapter for purposes of the 

10 following calendar year. 

11 ‘‘(b) NO DOUBLE COUNTING.—In no event shall any 

12 person be considered part of more than 1 qualified family. 

13 ‘‘(c) REVISED REGISTRATION PERMISSIBLE.—A 

14 qualified family may file a revised registration for pur15 poses of section 302(d) to reflect a change in family cir16 cumstances. A revised registration form shall provide— 

17 ‘‘(1) the name of each family member who 

18 shared the qualified family’s residence on the filing 

19 date of the revised registration, 

20 ‘‘(2) the Social Security number of each family 

21 member 2 years of age or older who shared the 

22 qualified family’s residence on the filing date of the 

23 revised registration, 


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1 ‘‘(3) the family member or family members to 

2 whom the family consumption allowance should be 

3 paid, 

4 ‘‘(4) a certification that all listed family mem5 bers are lawful residents of the United States, 

6 ‘‘(5) a certification that all family members 

7 sharing the commoner residence are listed, 

8 ‘‘(6) a certification that no family members 

9 were incarcerated on the family determination date 

10 (within the meaning of section 302(1)), and 

11 ‘‘(7) the address of the qualified family. 

12 Said revised registration shall be signed by all members 

13 of the qualified family that have attained the age of 21 

14 years as of the filing date of the revised registration. 

15 ‘‘(d) CHANGE OF ADDRESS.—A change of address for 

16 a qualified family may be filed with the sales tax admin17 istering authority at any time and shall not constitute a 

18 revised registration. 

19 ‘‘(e) REVISED REGISTRATION NOT MANDATORY.— 

20 Revised registrations reflecting changes in family status 

21 are not mandatory. 

22 ‘‘CHAPTER 4—FEDERAL AND STATE 

23 COOPERATIVE TAX ADMINISTRATION 

‘‘Sec. 401. Authority for States to collect tax. 

‘‘Sec. 402. Federal administrative support for States. 

‘‘Sec. 403. Federal-State tax conferences. 

‘‘Sec. 404. Federal administration in certain States. 

‘‘Sec. 405. Interstate allocation and destination determination. 


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‘‘Sec. 406. General administrative matters. 

‘‘Sec. 407. Jurisdiction. 

1 ‘‘SEC. 401 AUTHORITY FOR STATES TO COLLECT TAX. 

2 ‘‘(a) IN GENERAL.—The tax imposed by section 101 

3 on gross payments for the use or consumption of taxable 

4 property or services within a State shall be administered, 

5 collected, and remitted to the United States Treasury by 

6 such State if the State is an administering State. 

7 ‘‘(b) ADMINISTERING STATE.—For purposes of this 

8 section, the term ‘administering State’ means any State— 

9 ‘‘(1) which maintains a sales tax, and 

10 ‘‘(2) which enters into a cooperative agreement 

11 with the Secretary containing reasonable provisions 

12 governing the administration by such State of the 

13 taxes imposed by the subtitle and the remittance to 

14 the United States in a timely manner of taxes col15 lected under this chapter. 

16 ‘‘(c) COOPERATIVE AGREEMENTS.—The agreement 

17 under subsection (b)(2) shall include provisions for the ex18 peditious transfer of funds, contact officers, dispute reso19 lution, information exchange, confidentiality, taxpayer 

20 rights, and other matters of importance. The agreement 

21 shall not contain extraneous matters. 

22 ‘‘(d) TIMELY REMITTANCE OF TAX.— 

23 ‘‘(1) IN GENERAL.—Administering States shall 

24 remit and pay over taxes collected under this subtitle 


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1 on behalf of the United States (less the administra2 tion fee allowable under paragraph (2)) not later 

3 than 5 days after receipt. Interest at 150 percent of 

4 the Federal short-term rate shall be paid with re5 spect to amounts remitted after the due date. 

6 ‘‘(2) ADMINISTRATION FEE.—An administering 

7 State may retain an administration fee equal to one8 quarter of 1 percent of the amounts otherwise re9 quired to be remitted to the United States under 

10 this chapter by the administering State. 

11 ‘‘(e) LIMITATION ON ADMINISTRATION OF TAX BY

12 UNITED STATES.—The Secretary may administer the tax 

13 imposed by this subtitle in an administering State only 

14 if— 

15 ‘‘(1)(A) such State has failed on a regular basis 

16 to timely remit to the United States taxes collected 

17 under this chapter on behalf of the United States, 

18 or 

19 ‘‘(B) such State has on a regular basis other20 wise materially breached the agreement referred to 

21 in subsection (b)(2); 

22 ‘‘(2) the State has failed to cure such alleged 

23 failures and breaches within a reasonable time; 


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1 ‘‘(3) the Secretary provides such State with 

2 written notice of such alleged failures and breaches; 

3 and 

4 ‘‘(4) a District Court of the United States with5 in such State, upon application of the Secretary, has 

6 rendered a decision— 

7 ‘‘(A) making findings of fact that— 

8 ‘‘(i) such State has failed on a regular 

9 basis to timely remit to the United States 

10 taxes collected under this chapter on behalf 

11 of the United States, or such State has on 

12 a regular basis otherwise materially 

13 breached the agreement referred to in sub14 section (b)(2); 

15 ‘‘(ii) the Secretary has provided such 

16 State with written notice of such alleged 

17 failures and breaches; and 

18 ‘‘(iii) the State has failed to cure such 

19 alleged failures and breaches within a rea20 sonable time; and 

21 ‘‘(B) making a determination that it is in 

22 the best interest of the citizens of the United 

23 States that the administering State’s authority 

24 to administer the tax imposed by this subtitle 


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1 be revoked and said tax be administered di2 rectly by the Secretary. 

3 The order of the District Court revoking the author4 ity of an Administering State shall contain provi5 sions governing the orderly transfer of authority to 

6 the Secretary. 

7 ‘‘(f) REINSTITUTION.—A State that has had its au8 thority revoked pursuant to subsection (e) shall not be an 

9 administering State for a period of not less than 5 years 

10 after the date of the order of revocation. For the first cal11 endar year commencing 8 years after the date of the order 

12 of revocation, the State shall be regarded without preju13 dice as eligible to become an administering State. 

14 ‘‘(g) THIRD STATE ADMINISTRATION PERMIS15 SIBLE.—It shall be permissible for a State to contract with 

16 an administering State to administer the State’s sales tax 

17 for an agreed fee. In this case, the agreement con18 templated by subsection (c) shall have both the State and 

19 the Federal Government as parties. 

20 ‘‘(h) INVESTIGATIONS AND AUDITS.—Administering 

21 States shall not conduct investigations or audits at facili22 ties in other administering States in connection with the 

23 tax imposed by section 101 or conforming State sales tax 

24 but shall instead cooperate with other administering 


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1 States using the mechanisms established by section 402, 

2 by compact or by other agreement. 

3 ‘‘SEC. 402. FEDERAL ADMINISTRATIVE SUPPORT FOR 

4 STATES. 

5 ‘‘(a) IN GENERAL.—The Secretary shall administer 

6 a program to facilitate information sharing among States. 

7 ‘‘(b) STATE COMPACTS.—The Secretary shall facili8 tate, and may be a party to a compact among States for 

9 purposes of facilitating the taxation of interstate pur10 chases and for other purposes that may facilitate imple11 mentation of this subtitle. 

12 ‘‘(c) AGREEMENT WITH CONFORMING STATES.—The 

13 Secretary is authorized to enter into and shall enter into 

14 an agreement among conforming States enabling con15 forming States to collect conforming State sales tax on 

16 sales made by sellers without a particular conforming 

17 State to a destination within that particular conforming 

18 State. 

19 ‘‘(d) SECRETARY’S AUTHORITY.—The Secretary shall 

20 have the authority to promulgate regulations, to provide 

21 guidelines, to assist States in administering the national 

22 sales tax, to provide for uniformity in the administration 

23 of the tax and to provide guidance to the public. 


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1 ‘‘SEC. 403. FEDERAL-STATE TAX CONFERENCES. 

2 ‘‘Not less than once annually, the Secretary shall host 

3 a conference with the sales tax administrators from the 

4 various administering States to evaluate the state of the 

5 national sales tax system, to address issues of mutual con6 cern and to develop and consider legislative, regulatory, 

7 and administrative proposals to improve the tax system. 

8 ‘‘SEC. 404. FEDERAL ADMINISTRATION IN CERTAIN STATES. 

9 ‘‘The Secretary shall administer the tax imposed by 

10 this subtitle in any State or other United States jurisdic11 tion that— 

12 ‘‘(1) is not an administering State, or 

13 ‘‘(2) elected to have another State administer 

14 its tax in accordance with section 401(g). 

15 ‘‘SEC. 405. INTERSTATE ALLOCATION AND DESTINATION 

16 DETERMINATION. 

17 ‘‘(a) DESTINATION GENERALLY.—The tax imposed 

18 by this subtitle is a destination principle tax. This section 

19 shall govern for purposes of determining— 

20 ‘‘(1) whether the destination of taxable property 

21 and services is within or without the United States, 

22 and 

23 ‘‘(2) which State or territory within the United 

24 States is the destination of taxable property and 

25 services. 


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1 ‘‘(b) TANGIBLE PERSONAL PROPERTY.—Except as 

2 provided in subsection (f) (relating to certain leases), the 

3 destination of tangible personal property shall be the State 

4 or territory in which the property was first delivered to 

5 the purchaser (including agents and authorized represent6 atives). 

7 ‘‘(c) REAL PROPERTY.—The destination of real prop8 erty, or rents or leaseholds on real property, shall be the 

9 State or territory in which the real property is located. 

10 ‘‘(d) OTHER PROPERTY.—The destination of any 

11 other taxable property shall be the residence of the pur12 chaser. 

13 ‘‘(e) SERVICES.— 

14 ‘‘(1) GENERAL RULE.—The destination of serv15 ices shall be the State or territory in which the use 

16 or consumption of the services occurred. Allocation 

17 of service invoices relating to more than 1 jurisdic18 tion shall be on the basis of time or another method 

19 determined by regulation. 

20 ‘‘(2) TELECOMMUNICATIONS SERVICES.—The 

21 destination of telecommunications services shall be 

22 the residence of the purchaser. Telecommunications 

23 services include telephone, telegraph, beeper, radio, 

24 cable television, satellite, and computer on-line or 

25 network services. 


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1 ‘‘(3) DOMESTIC TRANSPORTATION SERVICES.— 

2 For transportation services where all of the final 

3 destinations are within the United States, the des4 tination of transportation services shall be the final 

5 destination of the trip (in the case of round or mul6 tiple trip fares, the services amount shall be equally 

7 allocated among each final destination). 

8 ‘‘(4) INTERNATIONAL TRANSPORTATION SERV9 ICES.—For transportation services where the final 

10 destination or origin of the trip is without the 

11 United States, the service amount shall be deemed 

12 50 percent attributable to the United States destina13 tion or origin. 

14 ‘‘(5) ELECTRICAL SERVICE.—The destination of 

15 electrical services shall be the residence of the pur16 chaser. 

17 ‘‘(f) FINANCIAL INTERMEDIATION SERVICES.—The 

18 destination of financial intermediation services shall be the 

19 residence of the purchaser. 

20 ‘‘(g) RENTS PAID FOR THE LEASE OF TANGIBLE

21 PROPERTY.— 

22 ‘‘(1) GENERAL RULE.—Except as provided in 

23 paragraph (2), the destination of rents paid for the 

24 lease of tangible property and leaseholds on such 


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1 property shall be where the property is located while 

2 in use. 

3 ‘‘(2) LAND VEHICLES; AIRCRAFT, WATER

4 CRAFT.—The destination of rental and lease pay5 ments on land vehicles, aircraft and water craft shall 

6 be— 

7 ‘‘(A) in the case of rentals and leases of a 

8 term of 1 month or less, the location where the 

9 land vehicle, aircraft, or water craft was origi10 nally delivered to the renter or lessee; and 

11 ‘‘(B) in the case of rentals and leases of a 

12 term greater than 1 month, the residence of the 

13 renter or lessee. 

14 ‘‘(h) ALLOCATION RULES.—For purposes of allo15 cating revenue— 

16 ‘‘(1) between or among administering States 

17 from taxes imposed by this subtitle or from State 

18 sales taxes administered by third-party admin19 istering States, or 

20 ‘‘(2) between or among States imposing con21 forming State sales taxes, 

22 the revenue shall be allocated to those States that are the 

23 destination of the taxable property or service. 

24 ‘‘(i) FEDERAL OFFICE OF REVENUE ALLOCATION.— 

25 The Secretary shall establish an Office of Revenue AllocaVerDate Aug 31 2005 05:01 Jan 08, 2007 Jkt 059200 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25

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1 tion to arbitrate any claims or disputes among admin2 istering States as to the destination of taxable property 

3 and services for purposes of allocating revenue between or 

4 among the States from taxes imposed by this subtitle. The 

5 determination of the Administrator of the Office of Rev6 enue Allocation shall be subject to judicial review in any 

7 Federal court with competent jurisdiction. The standard 

8 of review shall be abuse of discretion. 

9 ‘‘SEC. 406. GENERAL ADMINISTRATIVE MATTERS. 

10 ‘‘(a) IN GENERAL.—The Secretary and each sales tax 

11 administering authority may employ such persons as may 

12 be necessary for the administration of this subtitle and 

13 may delegate to employees the authority to conduct inter14 views, hearings, prescribe rules, promulgate regulations, 

15 and perform such other duties as are required by this sub16 title. 

17 ‘‘(b) RESOLUTION OF ANY INCONSISTENT RULES

18 AND REGULATIONS.—In the event that the Secretary and 

19 any sales tax administering authority have issued incon20 sistent rules or regulations, any lawful rule or regulation 

21 issued by the Secretary shall govern. 

22 ‘‘(c) ADEQUATE NOTICE TO BE PROVIDED.—Except 

23 in the case of an emergency declared by the Secretary (and 

24 not his designee), no rule or regulation issued by the Sec25 retary with respect to any internal revenue law shall take 


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1 effect before 90 days have elapsed after its publication in 

2 the Federal Register. Upon issuance, the Secretary shall 

3 provide copies of all rules or regulations issued under this 

4 title to each sales tax administering authority. 

5 ‘‘(d) NO RULES, RULINGS, OR REGULATIONS WITH

6 RETROACTIVE EFFECT.—No rule, ruling, or regulation 

7 issued or promulgated by the Secretary relating to any in8 ternal revenue law or by a sales tax administering author9 ity shall apply to a period prior to its publication in the 

10 Federal Register (or State equivalent) except that a regu11 lation may take retroactive effect to prevent abuse. 

12 ‘‘(e) REVIEW OF IMPACT OF REGULATIONS, RULES, 

13 AND RULINGS ON SMALL BUSINESS.— 

14 ‘‘(1) SUBMISSION TO SMALL BUSINESS ADMIN15 ISTRATION.—After publication of any proposed or 

16 temporary regulation by the Secretary relating to in17 ternal revenue laws, the Secretary shall submit such 

18 regulation to the Chief Counsel for Advocacy of the 

19 Small Business Administration for comment on the 

20 impact of such regulation on small businesses. Not 

21 later than the date 30 days after the date of such 

22 submission, the Chief Counsel for Advocacy of the 

23 Small Business Administration shall submit com24 ments on such regulation to the Secretary. 


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1 ‘‘(2) CONSIDERATION OF COMMENTS.—In pre2 scribing any final regulation which supersedes a pro3 posed or temporary regulation which had been sub4 mitted under this subsection to the Chief Counsel 

5 for Advocacy of the Small Business Administration, 

6 the Secretary shall— 

7 ‘‘(A) consider the comments of the Chief 

8 Counsel for Advocacy of the Small Business 

9 Administration on such proposed or temporary 

10 regulation, and 

11 ‘‘(B) in promulgating such final regulation, 

12 include a narrative that describes the response 

13 to such comments. 

14 ‘‘(3) SUBMISSION OF CERTAIN FINAL REGULA15 TION.—In the case of promulgation by the Secretary 

16 of any final regulations (other than a temporary reg17 ulation) which do not supersede a proposed regula18 tion, the requirements of paragraphs (1) and (2) 

19 shall apply, except that the submission under para20 graph (1) shall be made at least 30 days before the 

21 date of such promulgation, and the consideration 

22 and discussion required under paragraph (2) shall 

23 be made in connection with the promulgation of such 

24 final regulation. 


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1 ‘‘(f) SMALL BUSINESS REGULATORY SAFEGUARDS.— 

2 The Small Business Regulatory Enforcement Fairness Act 

3 (Public Law 104–121; 110 Stat. 857 (‘SBREFA’)) and 

4 the Regulatory Flexibility Act (5 U.S.C. 601–612 

5 (‘RFA’)) shall apply to regulations promulgated under this 

6 subtitle. 

7 ‘‘SEC. 407. JURISDICTION. 

8 ‘‘(a) STATE JURISDICTION.—A sales tax admin9 istering authority shall have jurisdiction over any gross 

10 payments made which have a destination (as determined 

11 in accordance with section 405) within the State of said 

12 sales tax administering authority. This grant of jurisdic13 tion is not exclusive of any other jurisdiction that such 

14 sales tax administering authority may have. 

15 ‘‘(b) FEDERAL JURISDICTION.—The grant of juris16 diction in subsection (a) shall not be in derogation of Fed17 eral jurisdiction over the same matter. The Federal Gov18 ernment shall have the right to exercise preemptive juris19 diction over matters relating to the taxes imposed by this 

20 subtitle. 

21 ‘‘CHAPTER 5—OTHER ADMINISTRATIVE 

22 PROVISIONS 

‘‘Sec. 501. Monthly reports and payments. 

‘‘Sec. 502. Registration. 

‘‘Sec. 503. Accounting. 

‘‘Sec. 504. Registration certificates. 

‘‘Sec. 505. Penalties. 

‘‘Sec. 506. Burden of persuasion and burden of production. 

‘‘Sec. 507. Attorneys’ and accountancy fees. 


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‘‘Sec. 508. Summons, examinations, audits, etc. 

‘‘Sec. 509. Records. 

‘‘Sec. 510. Tax to be separately stated and charged. 

‘‘Sec. 511. Coordination with title 11. 

‘‘Sec. 512. Applicable interest rate. 

1 ‘‘SEC. 501. MONTHLY REPORTS AND PAYMENTS. 

2 ‘‘(a) TAX REPORTS AND FILING DATES.— 

3 ‘‘(1) IN GENERAL.—On or before the 15th day 

4 of each month, each person who is— 

5 ‘‘(A) liable to collect and remit the tax im6 posed by this subtitle by reason of section 

7 103(a), or 

8 ‘‘(B) liable to pay tax imposed by this sub9 title which is not collected pursuant to section 

10 103(a), 

11 shall submit to the appropriate sales tax admin12 istering authority (in a form prescribed by the Sec13 retary) a report relating to the previous calendar 

14 month. 

15 ‘‘(2) CONTENTS OF REPORT.—The report re16 quired under paragraph (1) shall set forth— 

17 ‘‘(A) the gross payments referred to in sec18 tion 101, 

19 ‘‘(B) the tax collected under chapter 4 in 

20 connection with such payments, 

21 ‘‘(C) the amount and type of any credit 

22 claimed, and 


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1 ‘‘(D) other information reasonably required 

2 by the Secretary or the sales tax administering 

3 authority for the administration, collection, and 

4 remittance of the tax imposed by this subtitle. 

5 ‘‘(b) TAX PAYMENTS DATE.— 

6 ‘‘(1) GENERAL RULE.—The tax imposed by this 

7 subtitle during any calendar month is due and shall 

8 be paid to the appropriate sales tax administering 

9 authority on or before the 15th day of the suc10 ceeding month. Both Federal tax imposed by this 

11 subtitle and confirming State sales tax (if any) shall 

12 be paid in 1 aggregate payment. 

13 ‘‘(2) CROSS REFERENCE.—See subsection (e) 

14 relating to remitting of separate segregated funds 

15 for sellers that are not small sellers. 

16 ‘‘(c) EXTENSIONS FOR FILING REPORTS.— 

17 ‘‘(1) AUTOMATIC EXTENSIONS FOR NOT MORE

18 THAN 30 DAYS.—On application, an extension of not 

19 more than 30 days to file reports under subsection 

20 (a) shall be automatically granted. 

21 ‘‘(2) OTHER EXTENSIONS.—On application, ex22 tensions of 30 to 60 days to file such reports shall 

23 be liberally granted by the sales tax administering 

24 authority for reasonable cause. Extensions greater 


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1 than 60 days may be granted by the sales tax ad2 ministering authority to avoid hardship. 

3 ‘‘(3) NO EXTENSION FOR PAYMENT OF

4 TAXES.—Notwithstanding paragraphs (1) and (2), 

5 no extension shall be granted with respect to the 

6 time for paying or remitting the taxes under this 

7 subtitle. 

8 ‘‘(d) TELEPHONE REPORTING OF VIOLATIONS.—The 

9 Secretary shall establish a system under which a violation 

10 of this subtitle can be brought to the attention of the sales 

11 tax administering authority for investigation through the 

12 use of a toll-free telephone number and otherwise. 

13 ‘‘(e) SEPARATE SEGREGATED ACCOUNTS.— 

14 ‘‘(1) IN GENERAL.—Any registered seller that 

15 is not a small seller shall deposit all sales taxes col16 lected pursuant to section 103 in a particular week 

17 in a separate segregated account maintained at a 

18 bank or other financial institution within 3 business 

19 days of the end of such week. Said registered seller 

20 shall also maintain in that account sufficient funds 

21 to meet the bank or financial institution minimum 

22 balance requirements, if any, and to pay account 

23 fees and costs. 

24 ‘‘(2) SMALL SELLER.—For purposes of this 

25 subsection, a small seller is any person that has not 


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1 collected $20,000 or more of the taxes imposed by 

2 this subtitle in any of the previous 12 months. 

3 ‘‘(3) LARGE SELLERS.—Any seller that has col4 lected $100,000 or more of the taxes imposed by 

5 this subtitle in any of the previous 12 months is a 

6 large seller. A large seller shall remit to the sales tax 

7 administering authority the entire balance of depos8 ited taxes in its separate segregated account on the 

9 first business day following the end of the calendar 

10 week. The Secretary may by regulation require the 

11 electronic transfer of funds due from large sellers. 

12 ‘‘(4) WEEK.—For purposes of this subsection, 

13 the term ‘week’ shall mean the 7-day period ending 

14 on a Friday. 

15 ‘‘(f) DETERMINATION OF REPORT FILING DATE.— 

16 A report filed pursuant to subsection (a) shall be deemed 

17 filed when— 

18 ‘‘(1) deposited in the United States mail, post19 age prepaid, addressed to the sales tax administering 

20 authority, 

21 ‘‘(2) delivered and accepted at the offices of the 

22 sales tax administering authority, 

23 ‘‘(3) provided to a designated commercial pri24 vate courier service for delivery within 2 days to the 


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1 sales tax administering authority at the address of 

2 the sales tax administering authority, or 

3 ‘‘(4) by other means permitted by the Sec4 retary. 

5 ‘‘(g) SECURITY REQUIREMENTS.—A large seller 

6 (within the meaning of subsection (e)(3)) shall be required 

7 to provide security in an amount equal to the greater of 

8 $100,000 or one and one-half times the seller’s average 

9 monthly tax liability during the previous 6 calendar 

10 months. Security may be a cash bond, a bond from a sur11 ety company approved by the Secretary, a certificate of 

12 deposit, or a State or United States Treasury bond. A 

13 bond qualifying under this subsection must be a con14 tinuing instrument for each calendar year (or portion 

15 thereof) that the bond is in effect. The bond must remain 

16 in effect until the surety or sureties are released and dis17 charged. Failure to provide security in accordance with 

18 this section shall result in revocation of the seller’s section 

19 502 registration. If a person who has provided security 

20 pursuant to this subsection— 

21 ‘‘(1) fails to pay an amount indicated in a final 

22 notice of amount due under this subtitle (within the 

23 meaning of section 605(d)), 

24 ‘‘(2) no Taxpayer Assistance Order is in effect 

25 relating to the amount due, 


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1 ‘‘(3) either the time for filing an appeal pursu2 ant to section 604 has passed or the appeal was de3 nied, and 

4 ‘‘(4) the amount due is not being litigated in 

5 any judicial forum, 

6 then the security or part of the security, as the case may 

7 be, may be forfeited in favor of the Secretary to the extent 

8 of such tax due (plus interest if any). 

9 ‘‘(h) REWARDS PROGRAM.—The Secretary is author10 ized to maintain a program of awards wherein individuals 

11 that assist the Secretary or sales tax administering au12 thorities in discovering or prosecuting tax fraud may be 

13 remunerated. 

14 ‘‘(i) CROSS REFERENCE.—For interest due on taxes 

15 remitted late, see section 6601. 

16 ‘‘SEC. 502. REGISTRATION. 

17 ‘‘(a) IN GENERAL.—Any person liable to collect and 

18 remit taxes pursuant to section 103(a) who is engaged in 

19 a trade or business shall register as a seller with the sales 

20 tax administering authority administering the taxes im21 posed by this subtitle. 

22 ‘‘(b) AFFILIATED FIRMS.—Affiliated firms shall be 

23 treated as 1 person for purposes of this section. Affiliated 

24 firms may elect, upon giving notice to the Secretary in 


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1 a form prescribed by the Secretary, to treat separate firms 

2 as separate persons for purposes of this subtitle. 

3 ‘‘(c) DESIGNATION OF TAX MATTERS PERSON.— 

4 Every person registered pursuant to subsection (a) shall 

5 designate a tax matters person who shall be an individual 

6 whom the sales tax administering authority may contact 

7 regarding tax matters. Each person registered must pro8 vide notice of a change in the identity of the tax matters 

9 person within 30 days of said change. 

10 ‘‘(d) CERTIFICATES OF REGISTRATION.—The sales 

11 tax administering authority shall provide certificates of 

12 registration to registered sellers. 

13 ‘‘(e) EFFECT OF FAILURE TO REGISTER.—Any per14 son that is required to register and who fails to do so is 

15 prohibited from selling taxable property or services. The 

16 Secretary or a sales tax administering authority may bring 

17 an action seeking a temporary restraining order, an in18 junction, or such other order as may be appropriate to 

19 enforce this section. 

20 ‘‘SEC. 503. ACCOUNTING. 

21 ‘‘(a) CASH METHOD TO BE USED GENERALLY.— 

22 Registered sellers and other persons shall report trans23 actions using the cash method of accounting unless an 

24 election to use the accrual method of accounting is made 

25 pursuant to subsection (b). 


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1 ‘‘(b) ELECTION TO USE ACCRUAL METHOD.—A per2 son may elect with respect to a calender year to remit 

3 taxes and report transactions with respect to the month 

4 where a sale was invoiced and accrued. 

5 ‘‘(c) CROSS REFERENCE.—See section 205 for rules 

6 relating to bad debts for sellers electing the accrual meth7 od 

8 ‘‘SEC. 504. REGISTRATION CERTIFICATES. 

9 ‘‘The sales tax administering authority shall issue 

10 certificates of registration to registered sellers and such 

11 other certificates as are necessary or may prove useful in 

12 the administration of the taxes imposed by this subtitle. 

13 ‘‘SEC. 505. PENALTIES. 

14 ‘‘(a) FAILURE TO REGISTER.—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) RECKLESS OR WILLFUL FAILURE TO COLLECT

19 TAX.— 

20 ‘‘(1) CIVIL 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 per24 cent of tax not collected. 


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1 ‘‘(2) CRIMINAL PENALTY.—Each person who is 

2 required to and willfully fails as part of a trade or 

3 business to collect taxes imposed by this subtitle 

4 may be fined an amount up to the amount deter5 mined in accordance with paragraph (1) or impris6 oned for a period of not more than 1 year or both. 

7 ‘‘(c) RECKLESS OR WILLFUL ASSERTION OF INVALID

8 EXEMPTION.— 

9 ‘‘(1) CIVIL PENALTY; FRAUD.—Each person 

10 who recklessly or willfully asserts an invalid inter11 mediate or export sales exemption from the taxes 

12 imposed by this subtitle shall be liable for a penalty 

13 equal to the greater of $500 or 20 percent of the tax 

14 not collected or remitted. 

15 ‘‘(2) CRIMINAL PENALTY.—Each person who 

16 willfully asserts an invalid intermediate or export 

17 sales exemption from the taxes imposed by this sub18 title may be fined an amount up to the amount de19 termined in accordance with paragraph (1) or im20 prisoned for a period of not more than 1 year or 

21 both. 

22 ‘‘(d) RECKLESS OR WILLFUL FAILURE TO REMIT

23 TAX COLLECTED.— 

24 ‘‘(1) CIVIL PENALTY; FRAUD.—Each person 

25 who is required to and recklessly or willfully fails to 


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1 remit taxes imposed by this subtitle and collected 

2 from purchasers shall be liable for a penalty equal 

3 to the greater of $1,000 or 50 percent of the tax not 

4 remitted. 

5 ‘‘(2) CRIMINAL PENALTY.—Each person who 

6 willfully fails to remit taxes imposed by this subtitle 

7 and collected from purchasers may be fined an 

8 amount up to the amount determined in accordance 

9 with paragraph (1) or imprisoned for a period of not 

10 more than 2 years or both. 

11 ‘‘(e) RECKLESS OR WILLFUL FAILURE TO PAY

12 TAX.—Each person who is required to and recklessly or 

13 willfully fails to pay taxes imposed by this subtitle shall 

14 be liable for a penalty equal to the greater of $500 or 

15 20 percent of the tax not paid. 

16 ‘‘(f) PENALTY FOR LATE FILING.— 

17 ‘‘(1) IN GENERAL.—In the case of a failure by 

18 any person who is required to and fails to file a re19 port required by section 501 on or before the due 

20 date (determined with regard to any extension) for 

21 such report, such person shall pay a penalty for each 

22 month or fraction thereof that said report is late 

23 equal to the greater of— 

24 ‘‘(A) $50, or 


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1 ‘‘(B) 0.5 percent of the gross payments re2 quired to be shown on the report. 

3 ‘‘(2) INCREASED PENALTY ON RETURNS FILED

4 AFTER WRITTEN INQUIRY.—The amount of the pen5 alty under paragraph (1) shall be doubled with re6 spect to any report filed after a written inquiry with 

7 respect to such report is received by the taxpayer 

8 from the sales tax administering authority. 

9 ‘‘(3) LIMITATION.—The penalty imposed under 

10 this subsection shall not exceed 12 percent. 

11 ‘‘(4) EXCEPTIONS.— 

12 ‘‘(A) REASONABLE CAUSE.—No penalty 

13 shall be imposed under this subsection with re14 spect to any failure if it is shown that such fail15 ure is due to reasonable cause. 

16 ‘‘(B) OTHER WAIVER AUTHORITY.—In ad17 dition to penalties not imposed by reason of 

18 subparagraph (A), the sales tax administering 

19 authority, on application, shall waive the pen20 alty imposed by paragraph (1) once per reg21 istered person per 24-month period. The pre22 ceding sentence shall not apply to a penalty de23 termined under paragraph (2). 

24 ‘‘(g) PENALTY FOR WILLFULLY OR RECKLESSLY AC25 CEPTING A FALSE INTERMEDIATE OR EXPORT SALES


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1 CERTIFICATE.—A person who willingly or recklessly ac2 cepts a false intermediate or export sales certificate shall 

3 pay a penalty equal to 20 percent of the tax not collected 

4 by reason of said acceptance. 

5 ‘‘(h) PENALTY FOR LATE REMITTANCE OF TAXES.— 

6 ‘‘(1) IN GENERAL.—A person who is required 

7 to timely remit taxes imposed by this subtitle and 

8 remits taxes more than 1 month after such taxes are 

9 due shall pay a penalty equal to 1 percent per month 

10 (or fraction thereof) from the due date. 

11 ‘‘(2) LIMITATION.—The penalty imposed under 

12 this subsection shall not exceed 24 percent. 

13 ‘‘(3) EXCEPTIONS FOR REASONABLE CAUSE.— 

14 No penalty shall be imposed under paragraph (1) 

15 with respect to any late remittance if it is shown 

16 that such late remittance is due to reasonable cause. 

17 ‘‘(i) PENALTY FOR FILING FALSE REBATE CLAIM.— 

18 ‘‘(1) CIVIL PENALTY; FRAUD.—A person who 

19 willingly or recklessly files a false claim for a family 

20 consumption allowance rebate (within the meaning 

21 of chapter 3) shall— 

22 ‘‘(A) pay a penalty equal to the greater of 

23 $500 or 50 percent of the claimed annual re24 bate amount not actually due, and 


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1 ‘‘(B) repay any rebates received as a result 

2 of the false rebate claim (together with inter3 est). 

4 ‘‘(2) CRIMINAL PENALTY.—A person who will5 ingly files a false claim for a family consumption al6 lowance rebate (within the meaning of chapter 3) 

7 may be fined an amount up to the amount deter8 mined in accordance with paragraph (1) or impris9 oned for a period not more than 1 year or both. 

10 ‘‘(j) PENALTY FOR BAD CHECK.—If any check or 

11 money order in payment of any amount receivable under 

12 this subtitle is not duly paid, in addition to other penalties 

13 provided by law, the person who tendered such check shall 

14 pay a penalty equal to the greater of— 

15 ‘‘(1) $25, or 

16 ‘‘(2) two percent of the amount of such check. 

17 ‘‘(k) PENALTY FOR FAILURE TO MAINTAIN A SEPA18 RATE SEGREGATED ACCOUNT.—Any person required to 

19 maintain a separate segregated account pursuant to sec20 tion 501(e) that fails to maintain such a separate seg21 regated account shall pay a penalty of $1,000. 

22 ‘‘(l) PENALTY FOR FAILURE TO DEPOSIT COL23 LECTED TAXES IN A SEPARATE SEGREGATED AC24 COUNT.—Any person required to deposit collected taxes 

25 into a separate segregated account maintained pursuant 


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1 to section 501(e) that fails to timely deposit said taxes 

2 into the separate segregated account shall pay a penalty 

3 equal to 1 percent of the amount required to be deposited. 

4 The penalty imposed by the previous sentence shall be tri5 pled unless said taxes have been deposited in the separate 

6 segregated account or remitted to the sales tax admin7 istering authority within 16 days of the date said deposit 

8 was due. 

9 ‘‘(m) JOINT AND SEVERAL LIABILITY FOR TAX MAT10 TERS PERSON AND RESPONSIBLE OFFICERS.—The tax 

11 matters person (designated pursuant to section 502(c)) 

12 and responsible officers or partners of a firm shall be 

13 jointly and severally liable for the tax imposed by this sub14 title and penalties imposed by this subtitle. 

15 ‘‘(n) RIGHT OF CONTRIBUTION.—If more than 1 per16 son is liable with respect to any tax or penalty imposed 

17 by this subtitle, each person who paid such tax or penalty 

18 shall be entitled to recover from other persons who are 

19 liable for such tax or penalty an amount equal to the ex20 cess of the amount paid by such person over such person’s 

21 proportionate share of the tax or penalty. 

22 ‘‘(o) CIVIL PENALTIES AND CRIMINAL FINES NOT

23 EXCLUSIVE.— 


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1 ‘‘(1) CIVIL PENALTY.—The fact that a civil 

2 penalty has been imposed shall not prevent the im3 position of a criminal fine. 

4 ‘‘(2) CRIMINAL FINE.—The fact that a criminal 

5 fine has been imposed shall not prevent the imposi6 tion of a civil penalty. 

7 ‘‘(p) CONFIDENTIALITY.—Any person who violates 

8 the requirements relating to confidentiality of tax informa9 tion (as provided in section 605(e)) may be fined up to 

10 $10,000 or imprisoned for a period of not more than 1 

11 year, or both. 

12 ‘‘(q) CROSS REFERENCE.—For interest due on late 

13 payments, see section 6601. 

14 ‘‘SEC. 506. BURDEN OF PERSUASION AND BURDEN OF PRO15 DUCTION. 

16 ‘‘In all disputes concerning taxes imposed by this sub17 title, the person engaged in a dispute with the sales tax 

18 administering authority or the Secretary, as the case may 

19 be, shall have the burden of production of documents and 

20 records but the sales tax administering authority or the 

21 Secretary shall have the burden of persuasion. In all dis22 putes concerning an exemption claimed by a purchaser, 

23 if the seller has on file an intermediate sale or export sale 

24 certificate from the purchaser and did not have reasonable 

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1 vided by the purchaser with respect to such purchase 

2 (within the meaning of section 103), then the burden of 

3 production of documents and records relating to that ex4 emption shall rest with the purchaser and not with the 

5 seller. 

6 ‘‘SEC. 507. ATTORNEYS’ AND ACCOUNTANCY FEES. 

7 ‘‘In all disputes concerning taxes imposed by this sub8 title, the person engaged in a dispute with the sales tax 

9 administering authority or the Secretary, as the case may 

10 be, shall be entitled to reasonable attorneys’ fees, account11 ancy fees, and other reasonable professional fees incurred 

12 in direct relation to the dispute unless the sales tax admin13 istering authority or the Secretary establishes that its po14 sition was substantially justified. 

15 ‘‘SEC. 508. SUMMONS, EXAMINATIONS, AUDITS, ETC. 

16 ‘‘(a) SUMMONS.—Persons are subject to administra17 tive summons by the sales tax administering authority for 

18 records, documents, and testimony required by the sales 

19 tax administering authority to accurately determine liabil20 ity for tax under this subtitle. A summons shall be served 

21 by the sales tax administering authority by an attested 

22 copy delivered in hand to the person to whom it is directed 

23 or left at his last known address. The summons shall de24 scribe with reasonable certainty what is sought. 


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1 ‘‘(b) EXAMINATIONS AND AUDITS.—The sales tax ad2 ministering authority has the authority to conduct at a 

3 reasonable time and place examinations and audits of per4 sons who are or may be liable to collect and remit tax 

5 imposed by this subtitle and to examine the books, papers, 

6 records, or other data of such persons which may be rel7 evant or material to the determination of tax due. 

8 ‘‘(c) LIMITATION ON AUTHORITY IN CASE OF REFER9 RAL.—No administrative summons may be issued by the 

10 sales tax administering authority and no action be com11 menced to enforce an administrative summons with re12 spect to any person if a Justice Department referral or 

13 referral to a State Attorney General’s Office is in effect 

14 with respect to such person relating to a tax imposed by 

15 this subtitle. Such referral is in effect with respect to any 

16 person if the sales tax administering authority or the Sec17 retary has recommended to the Justice Department or a 

18 State Attorney General’s Office a grand jury investigation 

19 of such person or a criminal prosecution of such person 

20 that contemplates criminal sanctions under this title. A 

21 referral shall be terminated when— 

22 ‘‘(1) the Justice Department or a State Attor23 ney General’s Office notifies the sales tax admin24 istering authority or the Secretary that he will not— 


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1 ‘‘(A) prosecute such person for any offense 

2 connected with the internal revenue laws, 

3 ‘‘(B) authorize a grand jury investigation 

4 of such person with respect to such offense, or 

5 ‘‘(C) continue such a grand jury investiga6 tion, or 

7 ‘‘(2) a final disposition has been made of any 

8 criminal proceeding connected with the internal rev9 enue laws, or conforming State sales tax, against 

10 such person. 

11 ‘‘SEC. 509. RECORDS. 

12 ‘‘Any person liable to remit taxes pursuant to this 

13 subtitle shall keep records (including a record of all section 

14 510 receipts provided, complete records of intermediate 

15 and export sales, including purchaser’s intermediate and 

16 export sales certificates and tax number and the net of 

17 tax amount of purchase) sufficient to determine the 

18 amounts reported, collected, and remitted for a period of 

19 6 years after the latter of the filing of the report for which 

20 the records formed the basis or when the report was due 

21 to be filed. Any purchaser who purchased taxable property 

22 or services but did not pay tax by reason of asserting an 

23 intermediate and export sales exemption shall keep records 

24 sufficient to determine whether said exemption was valid 


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1 for a period of 7 years after the purchase of taxable prop2 erty or services. 

3 ‘‘SEC. 510. TAX TO BE SEPARATELY STATED AND CHARGED. 

4 ‘‘(a) IN GENERAL.—For each purchase of taxable 

5 property or services for which a tax is imposed by section 

6 101, the seller shall charge the tax imposed by section 101 

7 separately from the purchase. For purchase of taxable 

8 property or services for which a tax is imposed by section 

9 101, the seller shall provide to the purchaser a receipt for 

10 each transaction that includes— 

11 ‘‘(1) the property or services price exclusive of 

12 tax; 

13 ‘‘(2) the amount of tax paid; 

14 ‘‘(3) the property or service price inclusive of 

15 tax; 

16 ‘‘(4) the tax rate (the amount of tax paid (per 

17 paragraph (2)) divided by the property or service 

18 price inclusive of tax (per paragraph (3)); 

19 ‘‘(5) the date that the good or service was sold; 

20 ‘‘(6) the name of the vendor; and 

21 ‘‘(7) the vendor registration number. 

22 ‘‘(b) VENDING MACHINE EXCEPTION.—The require23 ments of subsection (a) shall be inapplicable in the case 

24 of sales by vending machines. Vending machines for pur25 poses of this subsection are machines— 


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1 ‘‘(1) that dispense taxable property in exchange 

2 for coins or currency; and 

3 ‘‘(2) that sell no single item exceeding $10 per 

4 unit in price. 

5 ‘‘(c) FINANCIAL INTERMEDIATION SERVICES EXCEP6 TION.—The requirements of subsection (a) shall be inap7 plicable in the case of sales financial intermediation serv8 ice. Receipts shall be issued when the tax is imposed (in 

9 accordance with section 803 (relating to timing of tax on 

10 financial intermediation services)). 

11 ‘‘SEC. 511. COORDINATION WITH TITLE 11. 

12 ‘‘No addition to tax shall be made under section 505 

13 with respect to a period during which a case is pending 

14 under title 11, United States Code— 

15 ‘‘(1) if such tax was incurred by the estate and 

16 the failure occurred pursuant to an order of the 

17 court finding probable insufficiency of funds of the 

18 estate to pay administrative expenses; or 

19 ‘‘(2) if— 

20 ‘‘(A) such tax was incurred by the debtor 

21 before the earlier of the order for relief or (in 

22 the involuntary case) the appointment of a 

23 trustee; and 

24 ‘‘(B) the petition was filed before the due 

25 date prescribed by law (including extensions) 


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1 for filing a return of such tax, or the date for 

2 making the addition to tax occurs on or after 

3 the date the petition was filed. 

4 ‘‘SEC. 512. APPLICABLE INTEREST RATE. 

5 ‘‘(a) IN GENERAL.— 

6 ‘‘(1) FEDERAL SHORT-TERM RATE.—In the 

7 case of a debt instrument, investment, financing 

8 lease, or account with a term of not over 3 years, 

9 the applicable interest rate is the Federal short-term 

10 rate. 

11 ‘‘(2) FEDERAL MID-TERM RATE.—In the case 

12 of a debt instrument, investment, financing lease, or 

13 account with a term of over 3 years but not over 9 

14 years, the applicable interest rate is the Federal 

15 mid-term rate. 

16 ‘‘(3) FEDERAL LONG-TERM RATE.—In the case 

17 of a debt instrument, investment, financing lease, or 

18 account with a term of over 9 years, the applicable 

19 interest rate is the Federal long-term rate. 

20 ‘‘(b) FEDERAL SHORT-TERM RATE.—The Federal 

21 short-term rate shall be the rate determined by the Sec22 retary based on the average market yield (selected by the 

23 Secretary and ending in the calendar month in which the 

24 determination is made during any one month) on outVerDate Aug 31 2005 05:01 Jan 08, 2007 Jkt 059200 PO 00000 Frm 00076 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25

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1 standing marketable obligations of the United States with 

2 remaining periods to maturity of 3 years or fewer. 

3 ‘‘(c) FEDERAL MID-TERM RATE.—The Federal mid4 term rate shall be the rate determined by the Secretary 

5 based on the average market yield (selected by the Sec6 retary and ending in the calendar month in which the de7 termination is made during any 1 month) on outstanding 

8 marketable obligations of the United States with remain9 ing periods to maturity of more than 3 years and not over 

10 9 years. 

11 ‘‘(d) FEDERAL LONG-TERM RATE.—The Federal 

12 long-term rate shall be the rate determined by the Sec13 retary based on the average market yield (selected by the 

14 Secretary and ending in the calendar month in which the 

15 determination is made during any 1 month) on out16 standing marketable obligations of the United States with 

17 remaining periods to maturity of over 9 years. 

18 ‘‘(e) DETERMINATION OF RATES.—During each cal19 endar month, the Secretary shall determine the Federal 

20 short-term rate, the Federal mid-term rate and the Fed21 eral long-term rate which shall apply during the following 

22 calendar month. 

23 ‘‘CHAPTER 6—COLLECTIONS; APPEALS; 

24 TAXPAYER RIGHTS 

‘‘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. 

1 ‘‘SEC. 601. COLLECTIONS. 

2 ‘‘The sales tax administering authority shall collect 

3 the taxes imposed by this subtitle, except as provided in 

4 section 404 (relating to Federal administration in certain 

5 States). 

6 ‘‘SEC. 602. POWER TO LEVY, ETC. 

7 ‘‘(a) IN GENERAL.—The sales tax administering au8 thority may levy and seize property, garnish wages or sal9 ary and file liens to collect amounts due under this sub10 title, pursuant to enforcement of— 

11 ‘‘(1) a judgment duly rendered by a court of 

12 law; 

13 ‘‘(2) an amount due if the taxpayer has failed 

14 to exercise his appeals rights under section 604; or 

15 ‘‘(3) an amount due if the appeals process de16 termined that an amount remained due and the tax17 payer has failed to timely petition the Tax Court for 

18 relief. 

19 ‘‘(b) EXEMPTION FROM LEVY, SEIZURE, AND GAR20 NISHMENTS.—There shall be exempt from levy, seizure, 

21 and garnishment or penalty in connection with any tax 

22 imposed by this subtitle— 

23 ‘‘(1) wearing apparel, school books, fuel, provi24 sions, furniture, personal effects, tools of a trade or 


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1 profession, livestock in a household up to an aggre2 gate value of $15,000; and 

3 ‘‘(2) monthly money income equal to 150 per4 cent of the monthly poverty level (as defined in sec5 tion 303). 

6 ‘‘(c) LIENS TO BE TIMELY RELEASED.—Subject to 

7 such reasonable regulations as the Secretary may provide, 

8 any lien imposed with respect to a tax imposed by this 

9 title shall be released not later than 30 days after— 

10 ‘‘(1) the liability was satisfied or became unen11 forceable; or 

12 ‘‘(2) a bond was accepted as security. 

13 ‘‘SEC. 603. PROBLEM RESOLUTION OFFICES. 

14 ‘‘(a) PROBLEM RESOLUTION OFFICE TO BE ESTAB15 LISHED.—Each sales tax administering authority shall es16 tablish an independent Problem Resolution Office and ap17 point an adequate number of problem resolution officers. 

18 The head of the problem resolution office must be ap19 pointed by, and serve at the pleasure of either the State 

20 Governor (in the case of an administering State) or the 

21 President of the United States. 

22 ‘‘(b) AUTHORITY OF PROBLEM RESOLUTION OFFI23 CERS.—Problem resolution officers shall have the author24 ity to investigate complaints and issue a Taxpayer Assist25 ance Order to administratively enjoin any collection activVerDate Aug 31 2005 05:01 Jan 08, 2007 Jkt 059200 PO 00000 Frm 00079 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25

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1 ity if, in the opinion of the problem resolution officer, said 

2 collection activity is reasonably likely to not be in compli3 ance with law or to prevent hardship (other than by reason 

4 of having to pay taxes lawfully due). Problem resolution 

5 officers shall also have the authority to issue Taxpayer As6 sistance Orders releasing or returning property that has 

7 been levied upon or seized, ordering that a lien be released 

8 and that garnished wages be returned. A Taxpayer Assist9 ance Order may only be rescinded or modified by the prob10 lem resolution officer that issued it, by the highest official 

11 in the relevant sales tax administering authority or by its 

12 general counsel upon a finding that the collection activity 

13 is justified by clear and convincing evidence. The authority 

14 to reverse this Taxpayer Assistance Order may not be del15 egated. 

16 ‘‘(c) FORM OF REQUEST FOR TAXPAYER ASSISTANCE

17 ORDER.—The Secretary shall establish a form and proce18 dure to aid persons requesting the assistance of the Prob19 lem Resolution Office and to aid the Problem Resolution 

20 Office in understanding the needs of the person seeking 

21 assistance. The use of this form, however, shall not be a 

22 prerequisite to a problem resolution officer taking action, 

23 including issuing a Taxpayer Assistance Order. 

24 ‘‘(d) CONTENT OF TAXPAYER ASSISTANCE ORDER.— 

25 A Taxpayer Assistance Order shall contain the name of 


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1 the problem resolution officer, any provision relating to 

2 the running of any applicable period of limitation, the 

3 name of the person that the Taxpayer Assistance Order 

4 assists, the government office (or employee or officer of 

5 said government office) to whom it is directed and the ac6 tion or cessation of action that the Taxpayer Assistance 

7 Order requires of said government officer (or employee or 

8 officer of said government office). The Taxpayer Assist9 ance Order need not contain findings of fact or its legal 

10 basis; however, the problem resolution officer must provide 

11 findings of fact and the legal basis for the issuance of the 

12 Taxpayer Assistance Order to the sales tax administering 

13 authority upon the request of an officer of said authority 

14 within 2 weeks of the receipt of such request. 

15 ‘‘(e) INDEPENDENCE PROTECTED.—Problem resolu16 tion officers shall not be disciplined or adversely affected 

17 for the issuance of administrative injunctions unless a pat18 tern of issuing injunctions that are manifestly unreason19 able is proven in an administrative hearing by a prepon20 derance of the evidence. 

21 ‘‘(f) OTHER RIGHTS NOT LIMITED.—Nothing in this 

22 section shall limit the authority of the sales tax admin23 istering authority, the registered person or other person 

24 from pursuing any legal remedy in any court with jurisdic25 tion over the dispute at issue. 


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1 ‘‘(g) LIMITATIONS.—The running of any applicable 

2 period of limitation shall be suspended for a period of 8 

3 weeks following the issuance of a Taxpayer Assistance 

4 Order or, if specified, for a longer period set forth in the 

5 Taxpayer Assistance Order provided the suspension does 

6 not exceed 6 months. 

7 ‘‘SEC. 604 APPEALS. 

8 ‘‘(a) ADMINISTRATIVE APPEALS.—The sales tax ad9 ministering authority shall establish an administrative ap10 peals process wherein the registered person or other per11 son in disagreement with a decision of the sales tax admin12 istering authority asserting liability for tax is provided a 

13 full and fair hearing in connection with any disputes said 

14 person has with the sales tax administering authority. 

15 ‘‘(b) TIMING OF ADMINISTRATIVE APPEALS.—Said 

16 administrative appeal must be made within 60 days of re17 ceiving a final notice of amount due pursuant to section 

18 605(d) unless leave for an extension is granted by the ap19 peals officer in a form prescribed by the Secretary. Leave 

20 shall be granted to avoid hardship. 

21 ‘‘SEC. 605. TAXPAYER RIGHTS. 

22 ‘‘(a) RIGHTS TO BE DISCLOSED.—The sales tax ad23 ministering authority shall provide to any person against 

24 whom it has— 

25 ‘‘(1) commenced an audit or investigation; 


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1 ‘‘(2) issued a final notice of amount due; 

2 ‘‘(3) filed an administrative lien, levy, or gar3 nishment; 

4 ‘‘(4) commenced other collection action; 

5 ‘‘(5) commenced an action for civil penalties; or 

6 ‘‘(6) any other legal action, 

7 a document setting forth in plain English the rights of 

8 the person. The document shall explain the administrative 

9 appeals process, the authority of the Problem Resolution 

10 Office (established pursuant to section 603) and how to 

11 contact that Office, the burden of production and persua12 sion that the person and the sales tax administering au13 thority bear (pursuant to section 506), the right of the 

14 person to professional fees (pursuant to section 507), the 

15 right to record interviews and such other rights as the per16 son may possess under this subtitle. Said document will 

17 also set forth the procedures for entering into an install18 ment agreement. 

19 ‘‘(b) RIGHT TO PROFESSIONAL ASSISTANCE.—In all 

20 dealings with the sales tax administering authority, a per21 son shall have the right to assistance, at their own ex22 pense, of 1 or more professional advisors. 

23 ‘‘(c) RIGHT TO RECORD INTERVIEWS.—Any person 

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1 istering authority shall have the right to video or audio 

2 tape the interview at the person’s own expense. 

3 ‘‘(d) RIGHT TO FINAL NOTICE OF AMOUNT DUE.— 

4 No collection or enforcement action will be commenced 

5 against a person until 30 days after they have been pro6 vided with a final notice of amount due under this subtitle 

7 by the sales tax administering authority. The final notice 

8 of amount due shall set forth the amount of tax due (along 

9 with any interest and penalties due) and the factual and 

10 legal basis for such amounts being due with sufficient 

11 specificity that such basis can be understood by a reason12 able person who is not a tax professional reading the no13 tice. The final notice shall be sent by certified mail, return 

14 receipt requested, to— 

15 ‘‘(1) the address last provided by a registered 

16 seller; or 

17 ‘‘(2) the best available address to a person who 

18 is not a registered seller. 

19 ‘‘(e) CONFIDENTIALITY OF TAX INFORMATION.— 

20 ‘‘(1) IN GENERAL.—All reports and report in21 formation (related to any internal revenue law) shall 

22 be confidential and except as authorized by this title 

23 ‘‘(A) no officer or employee (including 

24 former officers and employees) of the United 

25 States; 


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1 ‘‘(B) no officer or employee (including 

2 former officers and employees) of any State or 

3 local agency who has had access to returns or 

4 return information; and 

5 ‘‘(C) no other person who has had access 

6 to returns or return information; 

7 shall disclose any report or report information ob8 tained by him in any manner in connection with his 

9 service as such officer or employee or otherwise. 

10 ‘‘(2) DESIGNEES.—The sales tax administering 

11 authority may, subject to such requirements as the 

12 Secretary may impose, disclose the report and report 

13 information of a person to that person or persons as 

14 that person may designate to receive said informa15 tion or return. 

16 ‘‘(3) OTHER SALES TAX ADMINISTERING AU17 THORITIES.—A sales tax administering authority 

18 may impose, disclose the report and report informa19 tion to another sales tax administering authority. 

20 ‘‘(4) INCOMPETENCY.—A sales tax admin21 istering authority may, subject to such requirements 

22 as the Secretary may impose, disclose the report and 

23 report information to the committee, trustee, or 

24 guardian of a person who is incompetent. 


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1 ‘‘(5) DECEASED PERSONS.—A sales tax admin2 istering authority may, subject to such requirements 

3 as the Secretary may impose, disclose the report and 

4 report information to the decedent’s— 

5 ‘‘(A) administrator, executor, estate trust6 ee, or 

7 ‘‘(B) heir at law, next of kin, or beneficiary 

8 under a will who has a material interest that 

9 will be affected by the information. 

10 ‘‘(6) BANKRUPTCY.—A sales tax administering 

11 authority may, subject to such requirements as the 

12 Secretary may impose, disclose the report and report 

13 information to a person’s trustee in bankruptcy. 

14 ‘‘(7) CONGRESS.—Upon written request from 

15 the Chairman of the Committee on Ways and 

16 Means, the Chairman of the Committee on Finance 

17 of the Senate, or the Chairman or Chief of Staff of 

18 the Joint Committee on Taxation, a sales tax admin19 istering authority shall disclose the report and report 

20 information, except that any report or report infor21 mation that can be associated with or otherwise 

22 identify a particular person shall be furnished to 

23 such committee only when sitting in closed executive 

24 session unless such person otherwise consents in 

25 writing to such disclosure. 


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1 ‘‘(8) WAIVER OF PRIVACY RIGHTS.—A person 

2 may waive confidentiality rights provided by this sec3 tion. Such waiver must be in writing. 

4 ‘‘(9) INTERNAL USE.—Disclosure of the report 

5 or report information by officers or employees of a 

6 sales tax administering authority to other officers or 

7 employees of a sales tax administering authority in 

8 the ordinary course of tax administration activities 

9 shall not constitute unlawful disclosure of the report 

10 or report information. 

11 ‘‘(10) STATISTICAL USE.—Upon request in 

12 writing by the Secretary of Commerce, the Secretary 

13 shall furnish such reports and report information to 

14 officers and employees of the Department of Com15 merce as the Secretary may prescribe by regulation 

16 for the purposes of, and only to the extent necessary 

17 in, the structuring of censuses and national eco18 nomic accounts and conducting related statistical ac19 tivities authorized by law. 

20 ‘‘(11) DEPARTMENT OF THE TREASURY.—Re21 turns and return information shall be open for in22 spection by officers and employees of the Depart23 ment of the Treasury whose official duties require 

24 such inspection or disclosure for the purpose of, and 

25 only to the extent necessary for, preparing economic 


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1 or financial forecasts, projections, analyses, or esti2 mates. Such inspection or disclosure shall be per3 mitted only upon written request that sets forth the 

4 reasons why such inspection or disclosure is nec5 essary and is signed by the head of the bureau or 

6 office of the Department of the Treasury requesting 

7 the inspection or disclosure. 

8 ‘‘SEC. 606. INSTALLMENT AGREEMENTS; COMPROMISES. 

9 ‘‘The sales tax administering authority is authorized 

10 to enter into written agreements with any person under 

11 which the person is allowed to satisfy liability for payment 

12 of any tax under this subtitle (and penalties and interest 

13 relating thereto) in installment payments if the sales tax 

14 administering authority determines that such agreement 

15 will facilitate the collection of such liability. The agree16 ment shall remain in effect for the term of the agreement 

17 unless the information that the person provided to the 

18 sales tax administering authority was materially inac19 curate or incomplete. The sales tax administering author20 ity may compromise any amounts alleged to be due. 

21 ‘‘CHAPTER 7—SPECIAL RULES 

‘‘Sec. 701. Hobby activities. 

‘‘Sec. 702. Gaming activities. 

‘‘Sec. 703. Government purchases. 

‘‘Sec. 704. Government enterprises. 

‘‘Sec. 705. Mixed use property. 

‘‘Sec. 706. Not-for-profit organizations. 


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1 ‘‘SEC. 701. HOBBY ACTIVITIES. 

2 ‘‘(a) HOBBY ACTIVITIES.—Neither the exemption af3 forded by section 102 for intermediate sales nor the cred4 its available pursuant to section 202 or 203 shall be avail5 able for any taxable property or service purchased for use 

6 in an activity if that activity is not engaged in for-profit. 

7 ‘‘(b) STATUS DEEMED.—If the activity has received 

8 gross payments for the sale of taxable property or services 

9 that exceed the sum of— 

10 ‘‘(1) taxable property and services purchased; 

11 ‘‘(2) wages and salary paid; and 

12 ‘‘(3) taxes (of any type) paid, 

13 in 2 or more of the most recent 3 calendar years during 

14 which it operated when the business activity shall be con15 clusively deemed to be engaged in for profit. 

16 ‘‘SEC. 702. GAMING ACTIVITIES. 

17 ‘‘(a) REGISTRATION.—Any person selling 1 or more 

18 chances is a gaming sponsor and shall register, in a form 

19 prescribed by the Secretary, with the sales tax admin20 istering authority as a gaming sponsor. 

21 ‘‘(b) CHANCE DEFINED.—For purposes of this sec22 tion, the term ‘chance’ means a lottery ticket, a raffle tick23 et, chips, other tokens, a bet or bets placed, a wager or 

24 wagers placed, or any similar device where the purchase 

25 of the right gives rise to an obligation by the gaming spon26 sor to pay upon the occurrence of— 


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1 ‘‘(1) a random or unpredictable event; or 

2 ‘‘(2) an event over which neither the gaming 

3 sponsor nor the person purchasing the chance has 

4 control over the outcome. 

5 ‘‘(c) CHANCES NOT TAXABLE PROPERTY OR SERV6 ICE.—Notwithstanding any other provision in this sub7 title, a chance is not taxable property or services for pur8 poses of section 101. 

9 ‘‘(d) TAX ON GAMING SERVICES IMPOSED.—A 23- 

10 percent tax is hereby imposed on the taxable gaming serv11 ices of a gaming sponsor. This tax shall be paid and remit12 ted by the gaming sponsor. The tax shall be remitted by 

13 the 15th day of each month with respect to taxable gaming 

14 services during the previous calendar month. 

15 ‘‘(e) TAXABLE GAMING SERVICES DEFINED.—For 

16 purposes of this section, the term ‘taxable gaming services’ 

17 means— 

18 ‘‘(1) gross receipts of the gaming sponsor from 

19 the sale of chances, minus 

20 ‘‘(2) the sum of— 

21 ‘‘(A) total gaming payoffs to chance pur22 chasers (or their designees); and 

23 ‘‘(B) gaming specific taxes (other than the 

24 tax imposed by this section) imposed by the 

25 Federal, State, or local government. 


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1 ‘‘SEC. 703. GOVERNMENT PURCHASES. 

2 ‘‘(a) GOVERNMENT PURCHASES.— 

3 ‘‘(1) PURCHASES BY THE FEDERAL GOVERN4 MENT.—Purchases by the Federal Government of 

5 taxable property and services shall be subject to the 

6 tax imposed by section 101. 

7 ‘‘(2) PURCHASE BY STATE GOVERNMENTS AND

8 THEIR POLITICAL SUBDIVISIONS.—Purchases by 

9 State governments and their political subdivisions of 

10 taxable property and services shall be subject to the 

11 tax imposed by section 101. 

12 ‘‘(b) CROSS REFERENCES.—For purchases by gov13 ernment enterprises see section 704. 

14 ‘‘SEC. 704. GOVERNMENT ENTERPRISES. 

15 ‘‘(a) GOVERNMENT ENTERPRISES TO COLLECT AND

16 REMIT TAXES ON SALES.—Nothing in this subtitle shall 

17 be construed to exempt any Federal, State, or local gov18 ernmental unit or political subdivision (whether or not the 

19 State is an administering State) operating a government 

20 enterprise from collecting and remitting tax imposed by 

21 this subtitle on any sale of taxable property or services., 

22 Government enterprises shall comply with all duties im23 posed by this subtitle and shall be liable for penalties and 

24 subject to enforcement action in the same manner as pri25 vate persons that are not government enterprises. 


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1 ‘‘(b) GOVERNMENT ENTERPRISE.—Any entity owned 

2 or operated by a Federal, State, or local governmental unit 

3 or political subdivision that receives gross payments from 

4 private persons is a government enterprise, except that a 

5 government-owned entity shall not become a government 

6 enterprise for purposes of this section unless in any quar7 ter it has revenues from selling taxable property or serv8 ices that exceed $2,500. 

9 ‘‘(c) GOVERNMENT ENTERPRISES INTERMEDIATE

10 SALES.— 

11 ‘‘(1) IN GENERAL.—Government enterprises 

12 shall not be subject to tax on purchases that would 

13 not be subject to tax pursuant to section 102(b) if 

14 the government enterprise were a private enterprise. 

15 ‘‘(2) EXCEPTION.—Government enterprises 

16 may not use the exemption afforded by section 

17 102(b) to serve as a conduit for tax-free purchases 

18 by government units that would otherwise be subject 

19 to taxation on purchases pursuant to section 703. 

20 Transfers of taxable property or services purchased 

21 exempt from tax from a government enterprise to 

22 such government unit shall be taxable. 

23 ‘‘(d) SEPARATE BOOKS OF ACCOUNT.—Any govern24 ment enterprise must maintain books of account, separate 

25 from the nonenterprise government accounts, maintained 


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1 in accordance with generally accepted accounting prin2 ciples. 

3 ‘‘(e) TRADE OR BUSINESS.—A government enterprise 

4 shall be treated as a trade or business for purposes of this 

5 subtitle. 

6 ‘‘(f) ENTERPRISE SUBSIDIES CONSTITUTE TAXABLE

7 PURCHASE.—A transfer of funds to a government enter8 prise by a government entity without full consideration 

9 shall constitute a taxable government purchase with the 

10 meaning of section 703 to the extent that the transfer of 

11 funds exceeds the fair market value of the consideration. 

12 ‘‘SEC. 705. MIXED USE PROPERTY. 

13 ‘‘(a) MIXED USE PROPERTY OR SERVICE.— 

14 ‘‘(1) MIXED USE PROPERTY OR SERVICE DE15 FINED.—For purposes of this section, the term 

16 ‘mixed use property or service’ is a taxable property 

17 or taxable service used for both taxable use or con18 sumption and for a purpose that would not be sub19 ject to tax pursuant to section 102(a)(1). 

20 ‘‘(2) TAXABLE THRESHOLD.—Mixed use prop21 erty or service shall be subject to tax notwith22 standing section 102(a)(1) unless such property or 

23 service is used more than 95 percent for purposes 

24 that would give rise to an exemption pursuant to 


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1 section 102(a)(1) during each calendar year (or por2 tions thereof) it is owned. 

3 ‘‘(3) MIXED USE PROPERTY OR SERVICES

4 CREDIT.—A person registered pursuant to section 

5 502 is entitled to a business use conversion credit 

6 (pursuant to section 202) equal to the product of— 

7 ‘‘(A) the mixed use property amount; and 

8 ‘‘(B) the business use ratio; and 

9 ‘‘(C) the rate of tax imposed by section 

10 101. 

11 ‘‘(4) MIXED USE PROPERTY AMOUNT.—The 

12 mixed use property amount for each month (or frac13 tion thereof) in which the property was owned shall 

14 be— 

15 ‘‘(A) one-three-hundred-sixtieth of the 

16 gross payments for real property for 360 

17 months or until the property is sold; 

18 ‘‘(B) one-eighty-fourth of the gross pay19 ments for tangible personal property for 84 

20 months or until the property is sold; 

21 ‘‘(C) one-sixtieth of the gross payments for 

22 vehicles for 60 months or until the property is 

23 sold; or 


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1 ‘‘(D) for other types of taxable property or 

2 services, a reasonable amount or in accordance 

3 with regulations prescribed by the Secretary. 

4 ‘‘(5) BUSINESS USE RATIO.—For purposes of 

5 this section, the term ‘business use ratio’ means the 

6 ratio of business use to total use for a particular cal7 endar month (or portion thereof if the property was 

8 owned for only part of said calendar month). For ve9 hicles, the business use ratio will be the ratio of 

10 business purpose miles to total miles in a particular 

11 calendar month. For real property, the business use 

12 ratio is the ratio of floor space used primarily for 

13 business purposes to total floor space in a particular 

14 calendar month. For tangible personal property (ex15 cept for vehicles), the business use ratio is the ratio 

16 of total time used for business purposes to total time 

17 used in a particular calendar year. For other prop18 erty or services, the business ratio shall be cal19 culated using a reasonable method. Reasonable 

20 records must be maintained to support a person’s 

21 business use of the mixed use property or service. 

22 ‘‘(b) TIMING OF BUSINESS USE CONVERSION CRED23 IT ARISING OUT OF OWNERSHIP OF MIXED USE PROP24 ERTY.—A person entitled to a credit pursuant to sub25 section (a)(3) arising out of the ownership of mixed use 


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1 property must account for the mixed use on a calendar 

2 year basis, and may file for the credit with respect to 

3 mixed use property in any month following the calendar 

4 year giving rise to the credit. 

5 ‘‘(c) CROSS REFERENCE.—For business use conver6 sion credit, see section 202. 

7 ‘‘SEC. 706. NOT-FOR-PROFIT ORGANIZATIONS. 

8 ‘‘(a) NOT-FOR-PROFIT ORGANIZATIONS.—Dues, con9 tributions, and similar payments to qualified not-for-profit 

10 organizations shall not be considered gross payments for 

11 taxable property or services for purposes of this subtitle. 

12 ‘‘(b) DEFINITION.—For purposes of this section, the 

13 term ‘qualified not-for-profit organization’ means a not14 for-profit organization organized and operated exclu15 sively— 

16 ‘‘(1) for religious, charitable, scientific, testing 

17 for public safety, literary, or educational purposes; 

18 ‘‘(2) as civic leagues or social welfare organiza19 tions; 

20 ‘‘(3) as labor, agricultural, or horticultural or21 ganizations; 

22 ‘‘(4) as chambers of commerce, business 

23 leagues, or trade associations; or 

24 ‘‘(5) as fraternal beneficiary societies, orders, or 

25 associations; 


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1 no part of the net earnings of which inures to the benefit 

2 of any private shareholder or individual. 

3 ‘‘(c) QUALIFICATION CERTIFICATES.—Upon applica4 tion in a form prescribed by the Secretary, the sales tax 

5 administering authority shall provide qualification certifi6 cates to qualified not-for-profit organizations. 

7 ‘‘(d) TAXABLE TRANSACTIONS.—If a qualified not8 for-profit organization provides taxable property or serv9 ices in connection with contributions, dues, or similar pay10 ments to the organization, then it shall be required to 

11 treat the provision of said taxable property or services as 

12 a purchase taxable pursuant to this subtitle at the fair 

13 market value of said taxable property or services. 

14 ‘‘(e) EXEMPTIONS.—Taxable property and services 

15 purchased by a qualified not-for-profit organization shall 

16 be eligible for the exemptions provided in section 102. 

17 ‘‘CHAPTER 8—FINANCIAL 

18 INTERMEDIATION SERVICES 

‘‘Sec. 801. Determination of financial intermediation services amount. 

‘‘Sec. 802. Bad debts. 

‘‘Sec. 803. Timing of tax on financial intermediation services. 

‘‘Sec. 804. Financing leases. 

‘‘Sec. 805. Basic interest rate. 

‘‘Sec. 806. Foreign financial intermediation services. 

19 ‘‘SEC. 801. DETERMINATION OF FINANCIAL INTERMEDI20 ATION SERVICES AMOUNT. 

21 ‘‘(a) FINANCIAL INTERMEDIATION SERVICES.—For 

22 purposes of this subtitle— 


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1 ‘‘(1) IN GENERAL.—The term ‘financial inter2 mediation services’ means the sum of— 

3 ‘‘(A) explicitly charged fees for financial 

4 intermediation services, and 

5 ‘‘(B) implicitly charged fees for financial 

6 intermediation services. 

7 ‘‘(2) EXPLICITLY CHARGED FEES FOR FINAN8 CIAL INTERMEDIATION SERVICES.—The term ‘explic9 itly charged fees for financial intermediation serv10 ices’ includes— 

11 ‘‘(A) brokerage fees; 

12 ‘‘(B) explicitly stated banking, loan origi13 nation, processing, documentation, credit check 

14 fees, or other similar fees; 

15 ‘‘(C) safe-deposit box fees; 

16 ‘‘(D) insurance premiums, to the extent 

17 such premiums are not allocable to the invest18 ment account of the underlying insurance pol19 icy; 

20 ‘‘(E) trustees’ fees; and 

21 ‘‘(F) other financial services fees (includ22 ing mutual fund management, sales, and exit 

23 fees). 

24 ‘‘(3) IMPLICITLY CHARGED FEES FOR FINAN25 CIAL INTERMEDIATION SERVICES.— 


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1 ‘‘(A) IN GENERAL.—The term ‘implicitly 

2 charged fees for financial intermediation serv3 ices’ includes the gross imputed amount in rela4 tion to any underlying interest-bearing invest5 ment, account, or debt. 

6 ‘‘(B) GROSS IMPUTED AMOUNT.—For pur7 poses of subparagraph (A), the term ‘gross im8 puted amount’ means— 

9 ‘‘(i) with respect to any underlying in10 terest-bearing investment or account, the 

11 product of— 

12 ‘‘(I) the excess (if any) of the 

13 basic interest rate (as defined in sec14 tion 805) over the rate paid on such 

15 investment; and 

16 ‘‘(II) the amount of the invest17 ment or account; and 

18 ‘‘(ii) with respect to any underlying 

19 interest-bearing debt, the product of— 

20 ‘‘(I) the excess (if any) of the 

21 rate paid on such debt over the basic 

22 interest rate (as defined in section 

23 805); and 

24 ‘‘(II) the amount of the debt. 


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1 ‘‘(b) SELLER OF FINANCIAL INTERMEDIATION SERV2 ICES.—For purposes of section 103(a), the seller of finan3 cial intermediation services shall be— 

4 ‘‘(1) in the case of explicitly charged fees for fi5 nancial intermediation services, the seller shall be 

6 the person who receives the gross payments for the 

7 charged financial intermediation services; 

8 ‘‘(2) in the case of implicitly charged fees for fi9 nancial intermediation services with respect to any 

10 underlying interest-bearing investment or account, 

11 the person making the interest payments on the in12 terest-bearing investment or account; and 

13 ‘‘(3) in the case of implicitly charged fees for fi14 nancial intermediation services with respect to any 

15 interest-bearing debt, the person receiving the inter16 est payments on the interest-bearing debt. 

17 ‘‘SEC. 802. BAD DEBTS. 

18 ‘‘(a) IN GENERAL.—For purposes of section 205(a), 

19 a bad debt shall be a business debt that becomes wholly 

20 or partially worthless to the payee. 

21 ‘‘(b) BUSINESS LOAN.—For purposes of subsection 

22 (a), a business loan or debt is a bona fide loan or debt 

23 made for a business purpose that both parties intended 

24 be repaid. 

25 ‘‘(c) DETERMINATION OF WORTHLESSNESS.— 


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1 ‘‘(1) IN GENERAL.—No loan or debt shall be 

2 considered wholly or partially worthless unless it has 

3 been in arrears for 180 days or more, except that if 

4 a debt is discharged wholly or partially in bank5 ruptcy before 180 days has elapsed, then it shall be 

6 deemed wholly or partially worthless on the date of 

7 discharge. 

8 ‘‘(2) DETERMINATION BY HOLDER.—A loan or 

9 debt that has been in arrears for 180 days or more 

10 may be deemed wholly or partially worthless by the 

11 holder unless a payment schedule has been entered 

12 into between the debtor and the lender. 

13 ‘‘(d) CROSS REFERENCE.—See section 205(c) for tax 

14 on subsequent payments. 

15 ‘‘SEC. 803. TIMING OF TAX ON FINANCIAL INTERMEDIATION 

16 SERVICES. 

17 ‘‘The tax on financial intermediation services pro18 vided by section 801 with respect to an underlying invest19 ment account or debt shall be imposed and collected with 

20 the same frequency that statements are rendered by the 

21 financial institution in connection with the investment ac22 count or debt but not less frequently than quarterly. 

23 ‘‘SEC. 804. FINANCING LEASES. 

24 ‘‘(a) DEFINITION.—For purposes of this section, the 

25 term ‘financing lease’ means any lease under which the 


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1 lessee has the right to acquire the property for 50 percent 

2 or less of its fair market value at the end of the lease 

3 term. 

4 ‘‘(b) GENERAL RULE.—Financing leases shall be 

5 taxed in the method set forth in this section. 

6 ‘‘(c) DETERMINATION OF PRINCIPAL AND INTEREST

7 COMPONENTS OF FINANCING LEASE.—The Secretary 

8 shall promulgate rules for disaggregating the principal 

9 and interest components of a financing lease. The prin10 cipal amount shall be determined to the extent possible 

11 by examination of the contemporaneous sales price or 

12 prices of property the same or similar as the leased prop13 erty. 

14 ‘‘(d) ALTERNATIVE METHOD.—In the event that con15 temporaneous sales prices or property the same or similar 

16 as the leased property are not available, the principal and 

17 interest components of a financing lease shall be 

18 disaggregated using the applicable interest rate (as de19 fined in section 512) plus 4 percent. 

20 ‘‘(e) PRINCIPAL COMPONENT.—The principal compo21 nent of the financing lease shall be subject to tax as if 

22 a purchase in the amount of the principal component had 

23 been made on the day on which said lease was executed. 

24 ‘‘(f) INTEREST COMPONENT.—The financial inter25 mediation services amount with respect to the interest 


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1 component of the financing lease shall be subject to tax 

2 under this subtitle. 

3 ‘‘(g) COORDINATION.—If the principal component 

4 and financial intermediation services amount with respect 

5 to the interest component of a lease have been taxed pur6 suant to this section, then the gross lease or rental pay7 ments shall not be subject to additional tax. 

8 ‘‘SEC. 805. BASIC INTEREST RATE. 

9 ‘‘For purposes of this chapter, the basic interest rate 

10 with respect to a debt instrument, investment, financing 

11 lease, or account shall be the applicable interest rate (as 

12 determined in section 512). For debt instruments, invest13 ments, or accounts of contractually fixed interest, the ap14 plicable interest rate of the month of issuance shall apply. 

15 For debt instruments, investments, or accounts of variable 

16 interest rates and which have no reference interest rate, 

17 the applicable interest shall be the Federal short-term in18 terest rate for each month. For debt instruments, invest19 ments, or accounts of variable interest rates and which 

20 have a reference interest rate, the applicable interest shall 

21 be the applicable interest rate for the reference interest 

22 rate for each month. 


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1 ‘‘SEC. 806. FOREIGN FINANCIAL INTERMEDIATION SERV2 ICES. 

3 ‘‘(a) SPECIAL RULES RELATING TO INTERNATIONAL

4 FINANCIAL INTERMEDIATION SERVICES.—Financial 

5 intermediation services shall be deemed as used or con6 sumed within the United States if the person (or any re7 lated party as defined in section 205(e)) purchasing the 

8 services is a resident of the United States. 

9 ‘‘(b) DESIGNATION OF TAX REPRESENTATIVE.—Any 

10 person that provides financial intermediation services to 

11 United States residents must, as a condition of lawfully 

12 providing such services, designate, in a form prescribed 

13 by the Secretary, a tax representative for purposes of this 

14 subtitle. The tax representative shall be responsible for en15 suring that the taxes imposed by this subtitle are collected 

16 and remitted and shall be jointly and severally liable for 

17 collecting and remitting these taxes. The Secretary may 

18 require reasonable bond of the tax representative. The 

19 Secretary or a sales tax administering authority may bring 

20 an action seeking a temporary restraining order, an in21 junction, or such other order as may be appropriate to 

22 enforce this section. 

23 ‘‘(c) CROSS REFERENCES.—For definition of person, 

24 see section 901. 

25 ‘‘CHAPTER 9—ADDITIONAL MATTERS 

‘‘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. 

1 ‘‘SEC. 901. ADDITIONAL MATTERS. 

2 ‘‘(a) INTANGIBLE PROPERTY ANTIAVOIDANCE

3 RULE.—Notwithstanding section 2(a)(14)(a)(i), the sale 

4 of a copyright or trademark shall be treated as the sale 

5 of taxable services (within the meaning of section 101(a)) 

6 if the substance of the sales of copyright or trademark 

7 constituted the sale of the services that produced the copy8 righted material or the trademark. 

9 ‘‘(b) DE MINIMIS PAYMENTS.—Up to $400 of gross 

10 payments per calendar year shall be exempt from the tax 

11 imposed by section 101 if— 

12 ‘‘(1) made by a person not in connection with 

13 a trade or business at any time during such calendar 

14 year prior to making said gross payments, and 

15 ‘‘(2) made to purchase any taxable property or 

16 service which is imported into the United States by 

17 such person for use or consumption by such person 

18 in the United States. 

19 ‘‘(c) DE MINIMIS SALES.—Up to $1,200 per calendar 

20 year of gross payments shall be exempt from the tax im21 posed by section 101 if received— 


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1 ‘‘(1) by a person not in connection with a trade 

2 or business during such calendar year prior to the 

3 receipt of said gross payments; and 

4 ‘‘(2) in connection with a casual or isolated 

5 sale. 

6 ‘‘(d) DE MINIMIS SALE OF FINANCIAL INTERMEDI7 ATION SERVICES.—Up to $10,000 per calendar year of 

8 gross payments received by a person from the sale of fi9 nancial intermediation services (as determined in accord10 ance with section 801) shall be exempt from the tax im11 posed by section 101. The exemption provided by this sub12 section is in addition to other exemptions afforded by this 

13 chapter. The exemption provided by this subsection shall 

14 not be available to large sellers (as defined in section 

15 501(e)(3)). 

16 ‘‘(e) PROXY BUYING TAXABLE.—If a registered per17 son provides taxable property or services to a person either 

18 as a gift, prize, reward, or as remuneration for employ19 ment, and such taxable property or services were not pre20 viously subject to tax pursuant to section 101, then the 

21 provision of such taxable property or services by the reg22 istered person shall be deemed the conversion of such tax23 able property or services to personal use subject to tax 

24 pursuant to section 103(c) at the tax inclusive fair market 

25 value of such taxable property or services. 


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1 ‘‘(f) SUBSTANCE OVER FORM.—The substance of a 

2 transaction will prevail over its form if the transaction has 

3 no bona fide economic purpose and is designed to evade 

4 tax imposed by this subtitle. 

5 ‘‘(g) CERTAIN EMPLOYEE DISCOUNTS TAXABLE.— 

6 ‘‘(1) EMPLOYEE DISCOUNT.—For purposes of 

7 this subsection, the term ‘employee discount’ means 

8 an employer’s offer of taxable property or services 

9 for sale to its employees or their families (within the 

10 meaning of section 302(b)) for less than the offer of 

11 such taxable property or services to the general pub12 lic. 

13 ‘‘(2) EMPLOYEE DISCOUNT AMOUNT.—For pur14 poses of this subsection, the employee discount 

15 amount is the amount by which taxable property or 

16 services are sold pursuant to an employee discount 

17 below the amount for which such taxable property or 

18 services would have been sold to the general public. 

19 ‘‘(3) TAXABLE AMOUNT.—If the employee dis20 count amount exceeds 20 percent of the price that 

21 the taxable property or services would have been sold 

22 to the general public, then the sale of such taxable 

23 property or services by the employer shall be deemed 

24 the conversion of such taxable property or services 

25 to personal use and tax shall be imposed on the taxVerDate Aug 31 2005 05:01 Jan 08, 2007 Jkt 059200 PO 00000 Frm 00107 Fmt 6652 Sfmt 6201 E:\BILLS\H25.IH H25

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1 able employee discount amount. The taxable em2 ployee discount amount shall be— 

3 ‘‘(A) the employee discount amount, minus 

4 ‘‘(B) 20 percent of the amount for which 

5 said taxable property or services would have 

6 been sold to the general public. 

7 ‘‘(h) SATURDAY, SUNDAY, OR LEGAL HOLIDAY.— 

8 When the last day prescribed for performing any act re9 quired by this subtitle falls on a Saturday, Sunday, or 

10 legal holiday (in the jurisdiction where the return is to 

11 be filed), the performance of such act shall be considered 

12 timely if it is performed on the next day which is not a 

13 Saturday, Sunday, or legal holiday (in the jurisdiction 

14 where the return is to be filed). 

15 ‘‘SEC. 902. TRANSITION MATTERS. 

16 ‘‘(a) INVENTORY.— 

17 ‘‘(1) QUALIFIED INVENTORY.—Inventory held 

18 by a trade or business on the close of business on 

19 December 31, 2008, shall be qualified inventory if it 

20 is sold— 

21 ‘‘(A) before December 31, 2009; 

22 ‘‘(B) by a registered person; and 

23 ‘‘(C) subject to the tax imposed by section 

24 101. 


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1 ‘‘(2) COSTS.—For purposes of this section, 

2 qualified inventory shall have the cost that it had for 

3 Federal income tax purposes for the trade or busi4 ness as of December 31, 2008 (including any 

5 amounts capitalized by reason of section 263A of the 

6 Internal Revenue Code of 1986 as in effect on De7 cember 31, 2008). 

8 ‘‘(3) TRANSITIONAL INVENTORY CREDIT.—The 

9 trade or business which held the qualified inventory 

10 on the close of business on December 31, 2008, shall 

11 be entitled to a transitional inventory credit equal to 

12 the cost of the qualified inventory (determined in ac13 cordance with paragraph (2)) times the rate of tax 

14 imposed by section 101. 

15 ‘‘(4) TIMING OF CREDIT.—The credit provided 

16 under paragraph (3) shall be allowed with respect to 

17 the month when the inventory is sold subject to the 

18 tax imposed by this subtitle. Said credit shall be re19 ported as an intermediate and export sales credit 

20 and the person claiming said credit shall attach sup21 porting schedules in the form that the Secretary 

22 may prescribe. 

23 ‘‘(b) WORK-IN-PROCESS.—For purposes of this sec24 tion, inventory shall include work-in-process. 


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1 ‘‘(c) QUALIFIED INVENTORY HELD BY BUSINESSES

2 NOT SELLING SAID QUALIFIED INVENTORY AT RE3 TAIL.— 

4 ‘‘(1) IN GENERAL.—Qualified inventory held by 

5 businesses that sells said qualified inventory not sub6 ject to tax pursuant to section 102(a) shall be eligi7 ble for the transitional inventory credit only if that 

8 business (or a business that has successor rights 

9 pursuant to paragraph (2)) receives certification in 

10 a form satisfactory to the Secretary that the quali11 fied inventory was subsequently sold subject to the 

12 tax imposed by this subtitle. 

13 ‘‘(2) TRANSITIONAL INVENTORY CREDIT RIGHT

14 MAY BE SOLD.—The business entitled to the transi15 tional inventory credit may sell the right to receive 

16 said transitional inventory credit to the purchaser of 

17 the qualified inventory that gave rise to the credit 

18 entitlement. Any purchaser of such qualified inven19 tory (or property or services into which the qualified 

20 inventory has been incorporated) may sell the right 

21 to said transitional inventory credit to a subsequent 

22 purchaser of said qualified inventory (or property or 

23 services into which the qualified inventory has been 

24 incorporated). 


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1 ‘‘SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY 

2 ADMINISTRATION. 

3 ‘‘(a) IN GENERAL.—Employers shall submit such in4 formation to the Social Security Administration as is re5 quired by the Social Security Administration to calculate 

6 Social Security benefits under title II of the Social Secu7 rity Act, including wages paid, in a form prescribed by 

8 the Secretary. A copy of the employer submission to the 

9 Social Security Administration relating to each employee 

10 shall be provided to each employee by the employer. 

11 ‘‘(b) WAGES.—For purposes of this section, the term 

12 ‘wages’ means all cash remuneration for employment (in13 cluding tips to an employee by third parties provided that 

14 the employer or employee maintains records documenting 

15 such tips) including self-employment income; except that 

16 such term shall not include— 

17 ‘‘(1) any insurance benefits received (including 

18 death benefits); 

19 ‘‘(2) pension or annuity benefits received; 

20 ‘‘(3) tips received by an employee over $5,000 

21 per year; and 

22 ‘‘(4) benefits received under a government enti23 tlement program (including Social Security benefits 

24 and unemployment compensation benefits). 

25 ‘‘(c) SELF-EMPLOYMENT INCOME.—For purposes of 

26 subsection (b), the term ‘self-employment income’ means 


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1 gross payments received for taxable property or services 

2 minus the sum of— 

3 ‘‘(1) gross payments made for taxable property 

4 or services (without regard to whether tax was paid 

5 pursuant to section 101 on such taxable property or 

6 services), and 

7 ‘‘(2) wages paid by the self-employed person to 

8 employees of the self-employed person. 

9 ‘‘SEC. 904. TRUST FUND REVENUE. 

10 ‘‘(a) SECRETARY TO MAKE ALLOCATION OF SALES

11 TAX REVENUE.—The Secretary shall allocate the revenue 

12 received by virtue of the tax imposed by section 101 in 

13 accordance with this section. The revenue shall be allo14 cated among— 

15 ‘‘(1) the general revenue, 

16 ‘‘(2) the old-age and survivors insurance trust 

17 fund, 

18 ‘‘(3) the disability insurance trust fund, 

19 ‘‘(4) the hospital insurance trust fund, and 

20 ‘‘(5) the Federal supplementary medical insur21 ance trust fund. 

22 ‘‘(b) GENERAL RULE.— 

23 ‘‘(1) GENERAL REVENUE.—The proportion of 

24 total revenue allocated to the general revenue shall 

25 be the same proportion as the rate in section 


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1 101(b)(4) bears to the combined Federal tax rate 

2 percentage (as defined in section 101(b)(3)). 

3 ‘‘(2) The amount of revenue allocated to the 

4 old-age and survivors insurance and disability insur5 ance trust funds shall be the same proportion as the 

6 old-age, survivors and disability insurance rate (as 

7 defined in subsection (d)) bears to the combined 

8 Federal tax rate percentage (as defined in section 

9 101(b)(3)). 

10 ‘‘(3) The amount of revenue allocated to the 

11 hospital insurance and Federal supplementary med12 ical insurance trust funds shall be the same propor13 tion as the hospital insurance rate (as defined in 

14 subsection (e)) bears to the combined Federal tax 

15 rate percentage (as defined in section 101(b)(3)). 

16 ‘‘(c) CALENDAR YEAR 2009.—Notwithstanding sub17 section (b), the revenue allocation pursuant to subsection 

18 (a) for calendar year 2009 shall be as follows: 

19 ‘‘(1) 64.83 percent of total revenue to general 

20 revenue; 

21 ‘‘(2) 27.43 percent of total revenue to the old22 age and survivors insurance and disability insurance 

23 trust funds, and 


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1 ‘‘(3) 7.74 percent of total revenue to the hos2 pital insurance and Federal supplementary medical 

3 insurance trust funds. 

4 ‘‘(d) OLD-AGE, SURVIVORS AND DISABILITY INSUR5 ANCE RATE.—The old-age, survivors and disability insur6 ance rate shall be determined by the Social Security Ad7 ministration. The old-age, survivors and disability insur8 ance rate shall be that sales tax rate which is necessary 

9 to raise the same amount of revenue that would have been 

10 raised by imposing a 12.4 percent tax on the Social Secu11 rity wage base (including self-employment income) as de12 termined in accordance with chapter 21 of the Internal 

13 Revenue Code most recently in effect prior to the enact14 ment of this Act. The rate shall be determined using actu15 arially sound methodology and announced at least 6 

16 months prior to the beginning of the Calendar year for 

17 which it applies. 

18 ‘‘(e) HOSPITAL INSURANCE RATE.—The hospital in19 surance rate shall be determined by the Social Security 

20 Administration. The hospital insurance rate shall be that 

21 sales tax rate which is necessary to raise the same amount 

22 of revenue that would have been raised by imposing a 2.9 

23 percent tax on the Medicare wage base (including self-em24 ployment income) as determined in accordance with chap25 ter 21 of the Internal Revenue Code most recently in effect 


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1 prior to the enactment of this Act. The rate shall be deter2 mined using actuarially sound methodology and an3 nounced at least 6 months prior to the beginning of the 

4 calendar year for which it applies. 

5 ‘‘(f) ASSISTANCE.—The Secretary shall provide such 

6 technical assistance as the Social Security Administration 

7 shall require to determine the old-age, survivors and dis8 ability insurance rate and the hospital insurance rate. 

9 ‘‘(g) FURTHER ALLOCATIONS.— 

10 ‘‘(1) OLD-AGE, SURVIVORS AND DISABILITY IN11 SURANCE.—The Secretary shall allocate revenue re12 ceived because of the old-age, survivors and dis13 ability insurance rate to the old-age and survivors 

14 insurance trust fund and the disability insurance 

15 trust fund in accordance with law or, in the absence 

16 of other statutory provision, in the same proportion 

17 that the old-age and survivors insurance trust fund 

18 receipts bore to the sum of the old-age and survivors 

19 insurance trust fund receipts and the disability in20 surance trust fund receipts in calendar year 2008 

21 (taking into account only receipts pursuant to chap22 ter 21 of the Internal Revenue Code). 

23 ‘‘(2) HOSPITAL INSURANCE.—The Secretary 

24 shall allocate revenue received because of the hos25 pital insurance rate to the hospital insurance trust 


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1 fund and the Federal supplementary medical insur2 ance trust fund in accordance with law or, in the ab3 sence of other statutory provision, in the same pro4 portion that hospital insurance trust fund receipts 

5 bore to the sum of the hospital insurance trust fund 

6 receipts and Federal supplementary medical insur7 ance trust fund receipts in calendar year 2008 (tak8 ing into account only receipts pursuant to chapter 

9 21 of the Internal Revenue Code). 

10 ‘‘SEC. 905. WITHHOLDING OF TAX ON NONRESIDENT ALIENS 

11 AND FOREIGN CORPORATIONS. 

12 ‘‘(a) IN GENERAL.—All persons, in whatever capacity 

13 acting (including lessees or mortgagors or real or personal 

14 property, fiduciaries, employers, and all officers and em15 ployees of the United States) having control, receipt, cus16 tody, disposal, or payment of any income to the extent 

17 such income constitutes gross income from sources within 

18 the United States of any nonresident alien individual, for19 eign partnership, or foreign corporation shall deduct and 

20 withhold from that income a tax equal to 23 percent there21 of. 

22 ‘‘(b) EXCEPTION.—No tax shall be required to be de23 ducted from interest on portfolio debt investments. 

24 ‘‘(c) TREATY COUNTRIES.—In the case of payments 

25 to nonresident alien individuals, foreign partnerships, or 


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1 foreign corporations that have a residence in (or the na2 tionality of a country) that has entered into a tax treaty 

3 with the United States, then the rate of withholding tax 

4 prescribed by the treaty shall govern.’’. 

5 SEC. 202. CONFORMING AND TECHNICAL AMENDMENTS. 

6 (a) REPEALS.—The following provisions of the Inter7 nal Revenue Code of 1986 are repealed: 

8 (1) Subchapter A of chapter 61 of subtitle D 

9 (as redesignated by section 104) (relating to infor10 mation and returns). 

11 (2) Sections 6103 through 6116 of subchapter 

12 B of chapter 61 of subtitle D (as so redesignated). 

13 (3) Section 6157 (relating to unemployment 

14 taxes). 

15 (4) Section 6163 (relating to estate taxes). 

16 (5) Section 6164 (relating to corporate taxes). 

17 (6) Section 6166 (relating to estate taxes). 

18 (7) Section 6167 (relating to foreign expropria19 tion losses). 

20 (8) Sections 6201, 6205 and 6207 (relating to 

21 assessments). 

22 (9) Subchapter C of chapter 63 of subtitle D 

23 (as so redesignated) (relating to tax treatment of 

24 partnership items). 


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1 (10) Section 6305 (relating to collections of cer2 tain liabilities). 

3 (11) Sections 6314, 6315, 6316, and 6317 (re4 lating to payments of repealed taxes). 

5 (12) Sections 6324, 6324A and 6324B (relat6 ing to liens for estate and gift taxes). 

7 (13) Section 6344 (relating to cross references). 

8 (14) Section 6411 (relating to carrybacks). 

9 (15) Section 6413 (relating to employment 

10 taxes). 

11 (16) Section 6414 (relating to withheld income 

12 taxes). 

13 (17) Section 6422 (relating to cross references). 

14 (18) Section 6425 (relating to overpayment of 

15 corporate estimated taxes). 

16 (19) Section 6504 (relating to cross references). 

17 (20) Section 6652 (relating to failure to file 

18 certain information returns). 

19 (21) Sections 6654 and 6655 (relating to fail20 ure to payment estimated income tax). 

21 (22) Section 6662 (relating to penalties). 

22 (23) Sections 6677 through 6711 (relating to 

23 income tax related penalties). 

24 (24) Part II of subchapter B of chapter 68 (re25 lating to certain information returns). 


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1 (25) Part I of subchapter A of chapter 70 (re2 lating to termination of taxable year). 

3 (26) Section 6864 (relating to certain 

4 carrybacks). 

5 (27) Section 7103 (relating to cross references). 

6 (28) Section 7204 (relating to withholding 

7 statements). 

8 (29) Section 7211 (relating certain statements). 

9 (30) Section 7231 (relating to failure to obtain 

10 certain licenses). 

11 (31) Section 7270 (relating to insurance poli12 cies). 

13 (32) Section 7404 (relating to estate taxes). 

14 (33) Section 7404 (relating to income tax pre15 parers). 

16 (34) Section 7408 (relating to income tax shel17 ters). 

18 (35) Section 7409 (relating to 501(c)(3) organi19 zations). 

20 (36) Section 7427 (relating to income tax pre21 parers). 

22 (37) Section 7428 (relating to 501(c)(3) organi23 zations). 

24 (38) Section 7476 (relating to declaratory judg25 ments relating to retirement plans). 


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1 (39) Section 7478 (relating to declaratory judg2 ments relating to certain tax-exempt obligations). 

3 (40) Section 7508 (relating to postponing time 

4 for certain actions required by the income, estate, 

5 and gift tax). 

6 (41) Section 7509 (relating to Postal Service 

7 payroll taxes). 

8 (42) Section 7512 (relating to payroll taxes). 

9 (43) Section 7517 (relating to estate and gift 

10 tax evaluation). 

11 (44) Section 7518 (relating to Merchant Marine 

12 tax incentives). 

13 (45) Section 7519 (relating to taxable years). 

14 (46) Section 7520 (relating to insurance and 

15 annuity valuation tables). 

16 (47) Section 7523 (relating to reporting Fed17 eral income and outlays on Form 1040s). 

18 (48) Section 7611 (relating to church income 

19 tax exemptions and church unrelated business in20 come tax inquiries). 

21 (49) Section 7654 (relating to possessions’ in22 come taxes). 

23 (50) Section 7655 (relating to cross references). 

24 (51) Section 7701(a)(16). 

25 (52) Section 7701(a)(19). 


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1 (53) Section 7701(a)(20). 

2 (54) Paragraphs (32) through (38) of section 

3 7701(a). 

4 (55) Paragraphs (41) through (46) of section 

5 7701(a). 

6 (56) Section 7701(b). 

7 (57) Subsections (e) through (m) of section 

8 7701. 

9 (58) Section 7702 (relating to life insurance 

10 contracts). 

11 (59) Section 7702A (relating to modified en12 dowment contracts). 

13 (60) Section 7702B (relating to long-term care 

14 insurance). 

15 (61) Section 7703 (relating to the determina16 tion of marital status). 

17 (62) Section 7704 (relating to publicly traded 

18 partnerships). 

19 (63) Section 7805. 

20 (64) Section 7851. 

21 (65) Section 7872. 

22 (66) Section 7873. 

23 (b) OTHER CONFORMING AND TECHNICAL AMEND24 MENTS.— 


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1 (1) Section 6151 is amended by striking sub2 section (b) and by redesignating subsection (c) as 

3 subsection (b). 

4 (2) Section 6161 is amended to 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, re9 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) 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) is amended to read as fol19 lows: 

20 ‘‘(b) REBATE DEFINED.—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 44 was less than the excess of the amount specified in 

25 subsection (a)(1) over the rebates previously made.’’. 


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1 (5) Section 6212(b) is amended to read as fol2 lows: 

3 ‘‘(b) ADDRESS FOR NOTICE OF DEFICIENCY.—In the 

4 absence of notice to the Secretary under section 6903 of 

5 the existence of a fiduciary relationship, notice of a defi6 ciency in respect of a tax imposed by chapter 42, 43, or 

7 44 if mailed to the taxpayer at his last known address, 

8 shall be sufficient for purposes of such chapter and this 

9 chapter even if such taxpayer is deceased, or is under a 

10 legal disability, or, in the case of a corporation has termi11 nated its existence.’’. 

12 (6) Section 6302(b) is amended by striking 

13 ‘‘21,’’. 

14 (7) Section 6302 is amended by striking sub15 sections (g) and (i) and by redesignating subsection 

16 (h) as subsection (g). 

17 (8) Section 6325 is amended by striking sub18 section (c) and by redesignating subsections (d) 

19 through (h) as subsections (c) through (g), respec20 tively. 

21 (9) Section 6402(d) is amended by striking 

22 paragraph (3). 

23 (10) Section 6402 is amended by striking sub24 section (j) and by redesignating subsection (k) as 

25 subsection (j). 


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1 (11) Section 6501(b) is amended— 

2 (A) by striking ‘‘except tax imposed by 

3 chapter 3, 21, or 24,’’ in paragraph (1), and 

4 (B) by striking paragraph (2) and by re5 designation paragraphs (3) and (4) as para6 graphs (2) and (3), respectively. 

7 (12) Section 6501(c) is amended by striking 

8 paragraphs (5) through (9). 

9 (13) Section 6501(e) is amended by striking 

10 ‘‘subsection (c)—’’ and all that follows through 

11 ‘‘subtitle D’’ in paragraph (3) and inserting ‘‘sub12 section (c), in the case of a return of a tax imposed 

13 under a provision of subtitle B’’. 

14 (14) Section 6501 is amended by striking sub15 section (f) through (k) and subsections (m) and (n) 

16 and by redesignating subsection (1) as subsection 

17 (f). 

18 (15) Section 6503(a) is amended— 

19 (A) by striking paragraph (2), 

20 (B) by striking ‘‘DEFICIENCY.—’’and all 

21 that follows through ‘‘The running’’ and insert22 ing ‘‘DEFICIENCY.—The running’’, and 

23 (C) by striking ‘‘income, estate, gift and’’. 

24 (16) Section 6503 is amended by striking sub25 sections (e), (f), (i), and (k) and by redesignating 


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1 subsections (g), (h), and (j) as subsections (e), (f), 

2 and (g), respectively. 

3 (17) Section 6511 is amended by striking sub4 sections (d) and (g) and by redesignating sub5 sections (f) and (h) as subsections (d) and (e), re6 spectively. 

7 (18) Section 6512(b)(1) is amended by striking 

8 ‘‘of income tax for the same taxable year, of gift tax 

9 for the same calendar year or calendar quarter, of 

10 estate tax in respect of the taxable estate of the 

11 same decedent or’’. 

12 (19) Section 6513 is amended— 

13 (A) by striking ‘‘(a) EARLY RETURN OR

14 ADVANCE PAYMENT OF TAX.—’’, 

15 (B) by striking subsections (b) and (e). 

16 (20) Chapter 67 is amended by striking sub17 chapters A through D and inserting the following: 

18 ‘‘SEC. 6601. INTEREST ON OVERPAYMENTS AND UNDER19 PAYMENT. 

20 ‘‘(a) UNDERPAYMENTS.—If any amount of tax im21 posed by this title is not paid on or before the last date 

22 prescribed for payment, interest on such amount at the 

23 Federal short-term rate (as defined in section 512(b)) 

24 shall be paid from such last date to the date paid. 


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1 ‘‘(b) OVERPAYMENTS.—Interest shall be allowed and 

2 paid upon any overpayment in respect of any internal rev3 enue tax at the Federal short-term rate (as defined in sec4 tion 512(b)) from 60 days after the date of the overpay5 ment until the date the overpayment is refunded.’’. 

6 (21) Section 6651(a)(1) is amended by striking 

7 ‘‘subchapter A of chapter 61 (other than part III 

8 thereof,’’. 

9 (22) Section 6656 is amended by striking sub10 section (c) and by redesignating subsection (d) as 

11 subsection (c). 

12 (23) Section 6663 is amended by striking sub13 section (c). 

14 (24) Section 6664(c) is amended— 

15 (A) by striking ‘‘Exception.—’’ and all 

16 that follows through ‘‘No penalty’’ and insert17 ing ‘‘Exception.—No penalty,’’ and 

18 (B) by striking paragraphs (2) and (3). 

19 (25) Chapter 72 is amended by striking all 

20 matter preceding section 7011. 

21 (26) Section 7422 is amended by striking sub22 sections (h) and (i) and by redesignating subsections 

23 (j) and (k) as subsections (h) and (i), respectively. 

24 (27) Section 7451 is amended to read as fol25 lows: 


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1 ‘‘SEC. 7451. FEE FOR FILING PETITION. 

2 ‘‘The Tax Court is authorized to impose a fee in an 

3 amount not in excess of $60 to be fixed by the Tax Court 

4 for the filing of any petition for the redetermination of 

5 a deficiency.’’. 

6 (28) Section 7454 is amended by striking sub7 section (b) and by redesignating subsection (c) as 

8 subsection (b). 

9 (29) Section 7463(a) is amended— 

10 (A) by striking paragraphs (2) and (3), 

11 (B) by redesignating paragraph (4) as 

12 paragraph (2), and 

13 (C) by striking ‘‘D’’ in paragraph (2) (as 

14 so redesignated) and inserting ‘‘B’’. 

15 (30) Section 7463(c) is amended by striking 

16 ‘‘sections 6214(a) and’’ and inserting ‘‘section’’. 

17 (31) Section 7463(c) is amended by striking ‘‘, 

18 to the extent that the procedures described in sub19 chapter B of chapter 63 apply’’. 

20 (32) Section 7481 is amended by striking sub21 section (d). 

22 (33) Section 7608 is amended by striking ‘‘sub23 title E’’ each place it appears and inserting ‘‘subtitle 

24 C’’. 

25 (34) Section 7651 is amended by striking para26 graph (5). 


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1 (35) Section 7701(a)(29) is amended by strik2 ing ‘‘1986’’ and inserting ‘‘2007’’. 

3 (36) Section 7809(c) is amended by striking 

4 paragraphs (1) and (4) and by redesignating para5 graphs (2) and (3) as paragraphs (1) and (2), re6 spectively. 

7 (37) Section 7871(a) is amended by striking 

8 paragraphs (1) and (3) through (6) and by redesig9 nating paragraphs (2) and (7) as paragraphs (1) 

10 and (2), respectively. 

11 (38) Section 7871 is amended by striking sub12 section (c) and by redesignating subsections (d) and 

13 (e) as subsections (c) and (d), respectively. 

14 (39) Section 8021 is amended by striking sub15 section (a) and by redesignating subsections (b) 

16 through (f) as subsections (a) through (e), respec17 tively. 

18 (40) Section 8022(a)(2)(A) is amended by 

19 striking ‘‘, particularly the income tax’’. 

20 (41) Section 8023 is amended by striking ‘‘In21 ternal Revenue Service’’ each place it appears and 

22 inserting ‘‘Department of the Treasury’’. 

23 (42) Section 9501(b)(2) is amended by striking 

24 subparagraph (C). 


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1 (43) Section 9702(a) is amended by striking 

2 paragraph (4). 

3 (44) Section 9705(a) is amended by striking 

4 paragraph (4) and by redesignating paragraph (5) 

5 as paragraph (4). 

6 (45) Section 9706(d)(2)(A) is amended by 

7 striking ‘‘6103’’ and inserting ‘‘605(e)’’. 

8 (46) Section 9707 is amended by striking sub9 section (f). 

10 (47) Section 9712(d) is amended by striking 

11 paragraph (5) and by redesignating paragraph (6) 

12 as paragraph (5). 

13 (48) Section 9803(a) is amended by striking 

14 ‘‘(as defined in section 414(f))’’. 

15 TITLE III—OTHER MATTERS 

16 SEC. 301. PHASE-OUT OF ADMINISTRATION OF REPEALED 

17 FEDERAL TAXES. 

18 (a) APPROPRIATIONS.—Appropriations for any ex19 penses of the Internal Revenue Service including proc20 essing tax returns for years prior to the repeal of the taxes 

21 repealed by title I of this Act, revenue accounting, man22 agement, transfer of payroll and wage data to the Social 

23 Security Administration for years after fiscal year 2011 

24 shall not be authorized. 


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1 (b) RECORDS.—Federal records related to the admin2 istration of taxes repealed by title I of this Act shall be 

3 destroyed by the end of fiscal year 2011, except that any 

4 records necessary to calculate Social Security benefits 

5 shall be retained by the Social Security Administration 

6 and any records necessary to support ongoing litigation 

7 with respect to taxes owed or refunds due shall be retained 

8 until final disposition of such litigation. 

9 (c) CONFORMING AMENDMENTS.—Section 7802 is 

10 amended— 

11 (1) by striking subsections (a) and (b) and by 

12 redesignating subsections (c) and (d) as subsections 

13 (a) and (b), 

14 (2) by striking ‘‘Internal Revenue Service’’ each 

15 place it appears and inserting ‘‘Department of the 

16 Treasury’’, and 

17 (3) by striking ‘‘Commissioner’’ or ‘‘Commis18 sioner of Internal Revenue’’ each place they appear 

19 and inserting ‘‘Secretary’’. 

20 (d) EFFECTIVE DATE.—The amendments made by 

21 subsection (c) shall take effect on January 1, 2011. 

22 SEC. 302. ADMINISTRATION OF OTHER FEDERAL TAXES. 

23 (a) IN GENERAL.—Section 7801 (relating to the au24 thority of the Department of the Treasury) is amended 

25 by adding at the end the following: 


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1 ‘‘(d) EXCISE TAX BUREAU.—There shall be in the 

2 Department of the Treasury an Excise Tax Bureau to ad3 minister those excise taxes not administered by the Bu4 reau of Alcohol, Tobacco and Firearms. 

5 ‘‘(e) SALES TAX BUREAU.—There shall be in the De6 partment of the Treasury a Sales Tax Bureau to admin7 ister the national sales tax in those States where it is re8 quired pursuant to section 404, and to discharge other 

9 Federal duties and powers relating to the national sales 

10 tax (including those required by sections 402, 403, and 

11 405). The Office of Revenue Allocation shall be within the 

12 Sales Tax Bureau.’’. 

13 (b) ASSISTANT GENERAL COUNSELS.—Section 

14 7801(b)(2) is amended to read as follows: 

15 ‘‘(2) ASSISTANT GENERAL COUNSELS.—The 

16 Secretary of the Treasury may appoint, without re17 gard to the provisions of the civil service laws, and 

18 fix the duties of not more than 5 assistant general 

19 counsels.’’. 

20 SEC. 303. SALES TAX INCLUSIVE SOCIAL SECURITY BENE21 FITS INDEXATION. 

22 Subparagraph (D) of section 215(i)(1) of the Social 

23 Security Act (42 U.S.C. 415(i)(1)) (relating to cost-of-liv24 ing increases in Social Security benefits) is amended to 

25 read as follows: 


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1 ‘‘(D)(i) the term ‘CPI increase percentage’, 

2 with respect to a base quarter or cost-of-living quar3 ter in any calendar year, means the percentage 

4 (rounded to the nearest one-tenth of 1 percent) by 

5 which the Consumer Price Index for that quarter (as 

6 prepared by the Department of Labor) exceeds such 

7 index for the most recent prior calendar quarter 

8 which was a base quarter under subparagraph 

9 (A)(ii) or, if later, the most recent cost-of-living 

10 computation quarter under subparagraph (B); 

11 ‘‘(ii) if the Consumer Price Index (as so pre12 pared) does not include the national sales tax paid, 

13 then the term ‘CPI increase percentage’, with re14 spect to a base quarter or cost-of-living quarter in 

15 any calendar year, means the percentage (rounded 

16 to the nearest one-tenth of 1 percent) by which the 

17 product of— 

18 ‘‘(I) the Consumer Price Index for that 

19 quarter (as so prepared), and 

20 ‘‘(II) the national sales tax factor, 

21 exceeds such index for the most recent prior calendar 

22 quarter which was a base quarter under subparagraph 

23 (A)(ii) or, if later, the most recent cost of living computa24 tion quarter under subparagraph (B); and 


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1 ‘‘(iii) the national sales tax factor is equal to 1 

2 plus the quotient that is— 

3 ‘‘(I) the sales tax rate imposed by section 

4 101 of the Internal Revenue Code of 2007, di5 vided by 

6 ‘‘(II) the quantity that is 1 minus such 

7 sales tax rate.’’. 

Æ 


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