II 

115TH CONGRESS 

1ST SESSION S. 18 

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 SENATE OF THE UNITED STATES 

JANUARY 3, 2017 

Mr. MORAN (for himself and Mr. PERDUE) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

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 2017’’. 

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 


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Sec. 2. Congressional findings. 

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

ESTATE AND GIFT TAXES 

Sec. 101. Income taxes repealed. 

Sec. 102. Payroll taxes repealed. 

Sec. 103. Estate and gift taxes repealed. 

Sec. 104. Conforming amendments; effective date. 

TITLE II—SALES TAX ENACTED 

Sec. 201. Sales tax. 

Sec. 202. Conforming and technical amendments. 

TITLE III—OTHER MATTERS 

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 Phase-out of administration of repealed Federal taxes. 

Sec. 302. Administration of other Federal taxes. 

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

TITLE IV—SUNSET OF SALES TAX IF SIXTEENTH AMENDMENT 

NOT REPEALED 

Sec. 401. Elimination of sales tax if Sixteenth Amendment not repealed. 

1 SEC. 2. CONGRESSIONAL FINDINGS. 

2 (a) FINDINGS RELATING TO FEDERAL INCOME

3 TAX.—Congress finds the Federal income tax— 

4 (1) retards economic growth and has reduced 

5 the standard of living of the American public; 

6 (2) impedes the international competitiveness of 

7 United States industry; 

8 (3) reduces savings and investment in the 

9 United States by taxing income multiple times; 

10 (4) slows the capital formation necessary for 

11 real wages to steadily increase; 

12 (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 2017. 

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 2017; and 


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1 (B) to the Internal Revenue Code of 2017 

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, 2019. 

10 TITLE II—SALES TAX ENACTED 

11 SEC. 201. SALES TAX. 

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

13 2017 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. FEDERAL AND STATE COOPERATIVE TAX ADMINISTRATION

‘‘CHAPTER 5. OTHER ADMINISTRATIVE PROVISIONS

‘‘CHAPTER 6. COLLECTIONS; APPEALS; TAXPAYER RIGHTS

‘‘CHAPTER 7. SPECIAL RULES

‘‘CHAPTER 8. FINANCIAL INTERMEDIATION SERVICES

‘‘CHAPTER 9. ADDITIONAL MATTERS


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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 Sep 11 2014 23:50 Jan 03, 2017 Jkt 069200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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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, 2018. 

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 2019.—In the calendar year 2019, the 

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

14 the taxable property or service. 

15 ‘‘(2) FOR YEARS AFTER 2019.—For years after 

16 the calendar year 2019, 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)), 


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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 509. 

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 a business 

8 purpose in a trade or business. 

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

10 imposed under section 101 on any taxable property 

11 or service purchased for an investment purpose and 

12 held exclusively for an investment purpose. 

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

14 shall be imposed under section 101 on State govern15 ment functions that do not constitute the final con16 sumption of property or services. 

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

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

19 trade or business’ means purchased by a person engaged 

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

21 ‘‘(1) for resale, 

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

23 property or services, or 

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

25 purposes. 


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

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

3 means property purchased exclusively for purposes of ap4 preciation or the production of income but not entailing 

5 more than minor personal efforts. 

6 ‘‘SEC. 103. RULES RELATING TO COLLECTION AND REMIT7 TANCE OF TAX. 

8 ‘‘(a) LIABILITY FOR COLLECTION AND REMITTANCE

9 OF THE TAX.—Except as provided otherwise by this sec10 tion, any tax imposed by this subtitle shall be collected 

11 and remitted by the seller of taxable property or services 

12 (including financial intermediation services). 

13 ‘‘(b) TAX TO BE REMITTED BY PURCHASER IN CER14 TAIN CIRCUMSTANCES.— 

15 ‘‘(1) IN GENERAL.—In the case of taxable prop16 erty or services purchased outside of the United 

17 States and imported into the United States for use 

18 or consumption in the United States, the purchaser 

19 shall remit the tax imposed by section 101. 

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

21 of wages or salary paid by a taxable employer which 

22 are taxable services, the employer shall remit the tax 

23 imposed by section 101. 

24 ‘‘(c) CONVERSION OF BUSINESS OR EXPORT PROP25 ERTY OR SERVICES.—Property or services purchased for 


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

2 (sold untaxed pursuant to section 102(a)) that is subse3 quently converted to personal use shall be deemed pur4 chased at the time of conversion and shall be subject to 

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

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

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

8 fair market value during the month of conversion. The 

9 person using or consuming the converted property is liable 

10 for and shall remit the tax. 

11 ‘‘(d) BARTER TRANSACTIONS.—If gross payment for 

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

13 then the person responsible for collecting and remitting 

14 the tax shall remit the tax to the sales tax administering 

15 authority in money as if gross payment had been made 

16 in money at the tax inclusive fair market value of the tax17 able property or services purchased. 

18 ‘‘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. 

19 ‘‘SEC. 201. CREDITS AND REFUNDS. 

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

21 credit with respect to the taxes imposed by section 101 

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


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

2 credit pursuant to section 202 for such month, 

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

4 sales credit pursuant to section 203 for such month, 

5 ‘‘(3) the administration credit pursuant to sec6 tion 204 for such month, 

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

8 205 for such month, 

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

10 section 206 for such month, 

11 ‘‘(6) the transitional inventory credit pursuant 

12 to section 902, and 

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

14 due. 

15 ‘‘(b) CREDITS NOT ADDITIVE.—Only one credit al16 lowed by chapter 2 may be taken with respect to any par17 ticular gross payment. 

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

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

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

21 the aggregate of the amounts determined under subsection 

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

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

24 (and actually paid), and 


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

2 more used during such month for business purposes 

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

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

5 under this paragraph with respect to any taxable property 

6 or service is the lesser of— 

7 ‘‘(1) the product of— 

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

9 ‘‘(B) the quotient that is— 

10 ‘‘(i) the fair market value of the prop11 erty or service when its use is converted, 

12 divided by 

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

14 tax rate imposed by section 101, or 

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

16 such taxable property or service, including the 

17 amount, if any, determined in accordance with sec18 tion 705 (relating to mixed use property). 

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

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

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

22 on the purchase of any taxable property or service pur23 chased for— 

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

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


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

2 consumption outside the United States. 

3 ‘‘SEC. 204. ADMINISTRATION CREDIT. 

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

5 monthly report (with regard to extensions) in compliance 

6 with section 501 shall be entitled to a taxpayer adminis7 trative credit equal to the greater of— 

8 ‘‘(1) $200, or 

9 ‘‘(2) one-quarter of 1 percent of the tax remit10 ted. 

11 ‘‘(b) LIMITATION.—The credit allowed under this sec12 tion shall not exceed 20 percent of the tax due to be remit13 ted prior to the application of any credit or credits per14 mitted by section 201. 

15 ‘‘SEC. 205. BAD DEBT CREDIT. 

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

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

18 invoices within the meaning of subsection (b)) shall be en19 titled to a credit equal to the product of— 

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

21 ‘‘(2) the quotient that is— 

22 ‘‘(A) the amount of the bad debt (as de23 fined in section 802), divided by 

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

25 imposed by section 101. 


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1 ‘‘(b) UNPAID INVOICES.—Any person electing the ac2 crual method pursuant to section 503 that has with re3 spect to a transaction— 

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

5 ‘‘(2) remitted the invoiced tax, 

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

7 performed the taxable services invoiced, and 

8 ‘‘(4) not been paid 180 days after date the in9 voice was due to be paid, 

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

11 remitted and unpaid by the purchaser. 

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

13 with respect to a transaction subsequent to a section 205 

14 credit being taken with respect to that transaction shall 

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

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

17 in the amount of the payment had been made. 

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

19 be treated as pro rata payments of the underlying obliga20 tion and shall be allocated proportionately— 

21 ‘‘(1) for fully taxable payments, between pay22 ment for the taxable property and service and tax, 

23 and 


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1 ‘‘(2) for partially taxable payments, among pay2 ment for the taxable property and service, tax and 

3 other payment. 

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

5 section shall not be available with respect to sales made 

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

7 party means affiliated firms and family members (as de8 fined in section 302(b)). 

9 ‘‘SEC. 206. INSURANCE PROCEEDS CREDIT. 

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

11 from an insurer by virtue of an insurance contract shall 

12 be entitled to a credit in an amount determined by sub13 section (b), less any amount paid to the insured by the 

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

15 (except that portion allocable to the investment account 

16 of the underlying policy) for the insurance contract giving 

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

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

19 said tax was paid. 

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

21 shall be the product of— 

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

23 ‘‘(2) the quotient that is— 

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

25 the insurer to the insured, divided by 


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

2 imposed by section 101. 

3 ‘‘(c) ADMINISTRATIVE OPTION.—The credit deter4 mined in accordance with subsection (b) shall be paid by 

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

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

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

8 pay the credit and require the insured to make application 

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

10 shall provide to the Secretary and the insured the name 

11 and tax identification number of the insurer and of the 

12 insured and indicate the proper amount of the credit. 

13 ‘‘(d) COORDINATION WITH RESPECT TO EXEMP14 TION.—If taxable property or services purchased by an in15 surer on behalf of an insured are purchased free of tax 

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

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

18 purchase. 

19 ‘‘(e) INSURANCE CONTRACT.—For purposes of sub20 section (a), the term ‘insurance contract’ shall include a 

21 life insurance contract, a health insurance contract, a 

22 property and casualty loss insurance contract, a general 

23 liability insurance contract, a marine insurance contract, 

24 a fire insurance contract, an accident insurance contract, 

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


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1 contract, and an insurance contract that provides a com2 bination of these types of insurance. 

3 ‘‘SEC. 207. REFUNDS. 

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

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

6 upon application by the registered seller in a form pre7 scribed by the sales tax administering authority, the over8 payment shown on the report shall be refunded to the reg9 istered seller within 60 days of receipt of said application. 

10 In the absence of such application, the overpayment may 

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

12 to the credit. 

13 ‘‘(b) OTHER PERSONS.—If a person other than a reg14 istered seller has an overpayment for any month, then, 

15 upon application by the person in a form prescribed by 

16 the sales tax administering authority, the credit balance 

17 due shall be refunded to the person within 60 days of re18 ceipt of said application. 

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

20 balance due from the sales tax administering authority 

21 under this subsection for any month if such balance due 

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

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

24 application for refund is received shall bear interest from 


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1 the date of application. Interest shall be paid at the Fed2 eral short-term rate (as defined in section 511). 

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

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

5 day periods under subsections (a) and (b) shall be sus6 pended with respect to a purported overpayment (or por7 tion thereof) only during any period that there is in effect 

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

9 or State court that there is reasonable cause to believe 

10 that such overpayment may not actually be due. 

11 ‘‘CHAPTER 3—FAMILY CONSUMPTION 

12 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. 

13 ‘‘SEC. 301. FAMILY CONSUMPTION ALLOWANCE. 

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

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

16 be in an amount equal to the product of— 

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

18 and 

19 ‘‘(2) the monthly poverty level. 

20 ‘‘SEC. 302. QUALIFIED FAMILY. 

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

22 the term ‘qualified family’ shall mean one or more family 

23 members sharing a common residence. All family members 


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1 sharing a common residence shall be considered as part 

2 of one qualified family. 

3 ‘‘(b) FAMILY SIZE DETERMINATION.— 

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

5 qualified family for purposes of this chapter, family 

6 members shall mean— 

7 ‘‘(A) an individual, 

8 ‘‘(B) the individual’s spouse, 

9 ‘‘(C) all lineal ancestors and descendants 

10 of said individual (and such individual’s 

11 spouse), 

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

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

14 ‘‘(E) all children under legal guardianship 

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

16 ‘‘(2) IDENTIFICATION REQUIREMENTS.—In 

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

18 family for purposes of determining the size of the 

19 qualified family, such person must— 

20 ‘‘(A) have a bona fide Social Security num21 ber, and 

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

23 States. 

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


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

2 Any person who was a registered student during not 

3 fewer than 5 months in a calendar year while living 

4 away from the common residence of a qualified fam5 ily but who receives over 50 percent of such person’s 

6 support during a calendar year from members of the 

7 qualified family shall be included as part of the fam8 ily unit whose members provided said support for 

9 purposes of this chapter. 

10 ‘‘(2) CHILDREN OF DIVORCED OR SEPARATED

11 PARENTS.—If a child’s parents are divorced or le12 gally separated, a child for purposes of this chapter 

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

14 custodial parent. In cases of joint custody, the custo15 dial parent for purposes of this chapter shall be the 

16 parent that has custody of the child for more than 

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

18 parent entitled to be treated as the custodial parent 

19 pursuant to this paragraph may release this claim to 

20 the other parent if said release is in writing. 

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

22 the family consumption allowance provided by section 301, 

23 a qualified family must register with the sales tax admin24 istering authority in a form prescribed by the Secretary. 

25 The annual registration form shall provide— 


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

2 shared the qualified family’s residence on the family 

3 determination date, 

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

5 member on the family determination date who 

6 shared the qualified family’s residence on the family 

7 determination date, 

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

9 whom the family consumption allowance should be 

10 paid, 

11 ‘‘(4) a certification that all listed family mem12 bers are lawful residents of the United States, 

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

14 sharing the common residence are listed, 

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

16 were incarcerated on the family determination date 

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

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

19 Said registration shall be signed by all members of the 

20 qualified family that have attained the age of 21 years 

21 as of the date of filing. 

22 ‘‘(e) REGISTRATION NOT MANDATORY.—Registra23 tion is not mandatory for any qualified family. 

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

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1 ister in accordance with this section within 30 days of the 

2 family determination date, shall cease receiving the 

3 monthly family consumption allowance in the month be4 ginning 90 days after the family determination date. 

5 ‘‘(g) EFFECT OF CURING FAILURE TO PROVIDE AN6 NUAL REGISTRATION.—Any qualified family that failed to 

7 timely make its annual registration in accordance with this 

8 section but subsequently cures its failure to register, shall 

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

10 payments. No interest on lapsed payment amount shall be 

11 paid. 

12 ‘‘(h) EFFECTIVE DATE OF ANNUAL REGISTRA13 TIONS.—Annual registrations shall take effect for the 

14 month beginning 90 days after the family registration 

15 date. 

16 ‘‘(i) EFFECTIVE DATE OF REVISED REGISTRA17 TIONS.—A revised registration made pursuant to section 

18 305 shall take effect for the first month beginning 60 days 

19 after the revised registration was filed. The existing reg20 istration shall remain in effect until the effective date of 

21 the revised registration. 

22 ‘‘(j) DETERMINATION OF REGISTRATION FILING

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

24 filed when— 


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1 ‘‘(1) deposited in the United States mail, post2 age prepaid, to the address of the sales tax admin3 istering authority, 

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

5 sales tax administering authority, or 

6 ‘‘(3) provided to a designated commercial pri7 vate courier service for delivery within 2 days to the 

8 sales tax administering authority at the address of 

9 the sales tax administering authority. 

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

11 Thirty or more days before the family registration date, 

12 the sales tax administering authority shall mail to the ad13 dress shown on the most recent rebate registration or 

14 change of address notice filed pursuant to section 305(d) 

15 a proposed registration that may be simply signed by the 

16 appropriate family members if family circumstances have 

17 not changed. 

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

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

20 a member of any qualified family if that individual— 

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

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

23 the family determination date, and 

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

25 months or more in the 12-month period following 


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1 the effective date of the annual registration or the 

2 revised registration of said qualified family. 

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

4 determination date is a date assigned to each family by 

5 the Secretary for purposes of determining qualified family 

6 size and other information necessary for the administra7 tion of this chapter. The Secretary shall promulgate regu8 lations regarding the issuance of family determination 

9 dates. In the absence of any regulations, the family deter10 mination date for all families shall be October 1. The Sec11 retary may assign family determination dates for adminis12 trative convenience. Permissible means of assigning family 

13 determination dates include a method based on the 

14 birthdates of family members. 

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

16 false rebate claim, see section 504(i). 

17 ‘‘SEC. 303. MONTHLY POVERTY LEVEL. 

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

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

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

21 poverty level’ shall be the sum of— 

22 ‘‘(1) the annual level determined by the Depart23 ment of Health and Human Services poverty guide24 lines required by sections 652 and 673(2) of the 


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1 Omnibus Reconciliation Act of 1981 for a particular 

2 family size, and 

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

4 couple, the ‘annual marriage penalty elimination 

5 amount’. 

6 ‘‘(b) ANNUAL MARRIAGE PENALTY ELIMINATION

7 AMOUNT.—The annual marriage penalty elimination 

8 amount shall be the amount that is— 

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

10 level determined by the Department of Health and 

11 Human Services poverty guidelines required by sec12 tions 652 and 673(2) of the Omnibus Reconciliation 

13 Act of 1981 for a family of one, less 

14 ‘‘(2) the annual level determined by the Depart15 ment of Health and Human Services poverty guide16 lines required by sections 652 and 673(2) of the 

17 Omnibus Reconciliation Act of 1981 for a family of 

18 two. 

19 ‘‘SEC. 304. REBATE MECHANISM. 

20 ‘‘(a) GENERAL RULE.—The Social Security Adminis21 tration shall provide a monthly sales tax rebate to duly 

22 registered qualified families in an amount determined in 

23 accordance with section 301. 

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

25 shall be made to the persons designated by the qualifying 


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1 family in the annual or revised registration for each quali2 fied family in effect with respect to the month for which 

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

4 persons 18 years or older. If more than 1 person is des5 ignated in a registration to receive the rebate, then the 

6 rebate payment shall be divided evenly between or among 

7 those persons designated. 

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

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

10 for which the rebate is being provided. 

11 ‘‘(d) SMARTCARDS AND DIRECT ELECTRONIC DE12 POSIT PERMISSIBLE.—The Social Security Administration 

13 may provide rebates in the form of smartcards that carry 

14 cash balances in their memory for use in making pur15 chases at retail establishments or by direct electronic de16 posit. 

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

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

19 of a revised registration in accordance with this chapter, 

20 the common residence of the qualified family, marital sta21 tus and number of persons in a qualified family on the 

22 family registration date shall govern determinations re23 quired to be made under this chapter for purposes of the 

24 following calendar year. 


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

2 person be considered part of more than one qualified fam3 ily. 

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

5 qualified family may file a revised registration for pur6 poses of section 302(d) to reflect a change in family cir7 cumstances. A revised registration form shall provide— 

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

9 shared the qualified family’s residence on the filing 

10 date of the revised registration, 

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

12 member who shared the qualified family’s residence 

13 on the filing date of the revised registration, 

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

15 whom the family consumption allowance should be 

16 paid, 

17 ‘‘(4) a certification that all listed family mem18 bers are lawful residents of the United States, 

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

20 sharing the commoner residence are listed, 

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

22 were incarcerated on the family determination date 

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

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


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1 Said revised registration shall be signed by all members 

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

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

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

5 a qualified family may be filed with the sales tax admin6 istering authority at any time and shall not constitute a 

7 revised registration. 

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

9 Revised registrations reflecting changes in family status 

10 are not mandatory. 

11 ‘‘CHAPTER 4—FEDERAL AND STATE 

12 COOPERATIVE TAX ADMINISTRATION 

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

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

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

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

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

‘‘Sec. 406. General administrative matters. 

‘‘Sec. 407. Jurisdiction. 

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

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

15 on gross payments for the use or consumption of taxable 

16 property or services within a State shall be administered, 

17 collected, and remitted to the United States Treasury by 

18 such State if the State is an administering State. 

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

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

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


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

2 with the Secretary containing reasonable provisions 

3 governing the administration by such State of the 

4 taxes imposed by the subtitle and the remittance to 

5 the United States in a timely manner of taxes col6 lected under this chapter. 

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

8 under subsection (b)(2) shall include provisions for the ex9 peditious transfer of funds, contact officers, dispute reso10 lution, information exchange, confidentiality, taxpayer 

11 rights, and other matters of importance. The agreement 

12 shall not contain extraneous matters. 

13 ‘‘(d) TIMELY REMITTANCE OF TAX.— 

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

15 remit and pay over taxes collected under this subtitle 

16 on behalf of the United States (less the administra17 tion fee allowable under paragraph (2)) not later 

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

19 the Federal short-term rate shall be paid with re20 spect to amounts remitted after the due date. 

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

22 State may retain an administration fee equal to one23 quarter of 1 percent of the amounts otherwise re24 quired to be remitted to the United States under 

25 this chapter by the administering State. 


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

2 UNITED STATES.—The Secretary may administer the tax 

3 imposed by this subtitle in an administering State only 

4 if— 

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

6 to timely remit to the United States taxes collected 

7 under this chapter on behalf of the United States, 

8 or 

9 ‘‘(B) such State has on a regular basis other10 wise materially breached the agreement referred to 

11 in subsection (b)(2), 

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

13 failures and breaches within a reasonable time, 

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

15 written notice of such alleged failures and breaches, 

16 and 

17 ‘‘(4) a District Court of the United States with18 in such State, upon application of the Secretary, has 

19 rendered a decision— 

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

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

22 basis to timely remit to the United States 

23 taxes collected under this chapter on behalf 

24 of the United States, or such State has on 

25 a regular basis otherwise materially 


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1 breached the agreement referred to in sub2 section (b)(2), 

3 ‘‘(ii) the Secretary has provided such 

4 State with written notice of such alleged 

5 failures and breaches, and 

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

7 alleged failures and breaches within a rea8 sonable time, and 

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

10 the best interest of the citizens of the United 

11 States that the administering State’s authority 

12 to administer the tax imposed by this subtitle 

13 be revoked and said tax be administered di14 rectly by the Secretary. 

15 The order of the District Court revoking the author16 ity of an Administering State shall contain provi17 sions governing the orderly transfer of authority to 

18 the Secretary. 

19 ‘‘(f) REINSTITUTION.—A State that has had its au20 thority revoked pursuant to subsection (e) shall not be an 

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

22 after the date of the order of revocation. For the first cal23 endar year commencing 8 years after the date of the order 

24 of revocation, the State shall be regarded without preju25 dice as eligible to become an administering State. 


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1 ‘‘(g) THIRD STATE ADMINISTRATION PERMIS2 SIBLE.—It shall be permissible for a State to contract with 

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

4 for an agreed fee. In this case, the agreement con5 templated by subsection (c) shall have both the State and 

6 the Federal Government as parties. 

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

8 States shall not conduct investigations or audits at facili9 ties in other administering States in connection with the 

10 tax imposed by section 101 or conforming State sales tax 

11 but shall instead cooperate with other administering 

12 States using the mechanisms established by section 402, 

13 by compact or by other agreement. 

14 ‘‘SEC. 402. FEDERAL ADMINISTRATIVE SUPPORT FOR 

15 STATES. 

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

17 a program to facilitate information sharing among States. 

18 ‘‘(b) STATE COMPACTS.—The Secretary shall facili19 tate, and may be a party to a compact among States for 

20 purposes of facilitating the taxation of interstate pur21 chases and for other purposes that may facilitate imple22 mentation of this subtitle. 

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

24 Secretary is authorized to enter into and shall enter into 

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1 forming States to collect conforming State sales tax on 

2 sales made by sellers without a particular conforming 

3 State to a destination within that particular conforming 

4 State. 

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

6 have the authority to promulgate regulations, to provide 

7 guidelines, to assist States in administering the national 

8 sales tax, to provide for uniformity in the administration 

9 of the tax, and to provide guidance to the public. 

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

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

12 a conference with the sales tax administrators from the 

13 various administering States to evaluate the state of the 

14 national sales tax system, to address issues of mutual con15 cern and to develop and consider legislative, regulatory, 

16 and administrative proposals to improve the tax system. 

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

18 ‘‘The Secretary shall administer the tax imposed by 

19 this subtitle in any State or other United States jurisdic20 tion that— 

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

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

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


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1 ‘‘SEC. 405. INTERSTATE ALLOCATION AND DESTINATION 

2 DETERMINATION. 

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

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

5 shall govern for purposes of determining— 

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

7 and services is within or without the United States, 

8 and 

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

10 States is the destination of taxable property and 

11 services. 

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

13 provided in subsection (g) (relating to certain leases), the 

14 destination of tangible personal property shall be the State 

15 or territory in which the property was first delivered to 

16 the purchaser (including agents and authorized represent17 atives). 

18 ‘‘(c) REAL PROPERTY.—The destination of real prop19 erty, or rents or leaseholds on real property, shall be the 

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

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

22 other taxable property shall be the residence of the pur23 chaser. 

24 ‘‘(e) SERVICES.— 

25 ‘‘(1) GENERAL RULE.—The destination of serv26 ices shall be the State or territory in which the use 


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1 or consumption of the services occurred. Allocation 

2 of service invoices relating to more than 1 jurisdic3 tion shall be on the basis of time or another method 

4 determined by regulation. 

5 ‘‘(2) TELECOMMUNICATIONS SERVICES.—The 

6 destination of telecommunications services shall be 

7 the residence of the purchaser. Telecommunications 

8 services include telephone, telegraph, beeper, radio, 

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

10 network services. 

11 ‘‘(3) DOMESTIC TRANSPORTATION SERVICES.— 

12 For transportation services where all of the final 

13 destinations are within the United States, the des14 tination of transportation services shall be the final 

15 destination of the trip (in the case of round or mul16 tiple trip fares, the services amount shall be equally 

17 allocated among each final destination). 

18 ‘‘(4) INTERNATIONAL TRANSPORTATION SERV19 ICES.—For transportation services where the final 

20 destination or origin of the trip is without the 

21 United States, the service amount shall be deemed 

22 50 percent attributable to the United States destina23 tion or origin. 


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

2 electrical services shall be the residence of the pur3 chaser. 

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

5 destination of financial intermediation services shall be the 

6 residence of the purchaser. 

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

8 PROPERTY.— 

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

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

11 lease of tangible property and leaseholds on such 

12 property shall be where the property is located while 

13 in use. 

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

15 CRAFT.—The destination of rental and lease pay16 ments on land vehicles, aircraft and water craft shall 

17 be— 

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

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

20 land vehicle, aircraft, or water craft was origi21 nally delivered to the renter or lessee, and 

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

23 term greater than 1 month, the residence of the 

24 renter or lessee. 


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1 ‘‘(h) ALLOCATION RULES.—For purposes of allo2 cating revenue— 

3 ‘‘(1) between or among administering States 

4 from taxes imposed by this subtitle or from State 

5 sales taxes administered by third-party admin6 istering States, or 

7 ‘‘(2) between or among States imposing con8 forming State sales taxes, 

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

10 destination of the taxable property or service. 

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

12 The Secretary shall establish an Office of Revenue Alloca13 tion to arbitrate any claims or disputes among admin14 istering States as to the destination of taxable property 

15 and services for purposes of allocating revenue between or 

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

17 determination of the Administrator of the Office of Rev18 enue Allocation shall be subject to judicial review in any 

19 Federal court with competent jurisdiction. The standard 

20 of review shall be abuse of discretion. 

21 ‘‘SEC. 406. GENERAL ADMINISTRATIVE MATTERS. 

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

23 administering authority may employ such persons as may 

24 be necessary for the administration of this subtitle and 

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1 views, hearings, prescribe rules, promulgate regulations, 

2 and perform such other duties as are required by this sub3 title. 

4 ‘‘(b) RESOLUTION OF ANY INCONSISTENT RULES

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

6 any sales tax administering authority have issued incon7 sistent rules or regulations, any lawful rule or regulation 

8 issued by the Secretary shall govern. 

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

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

11 not his designee), no rule or regulation issued by the Sec12 retary with respect to any internal revenue law shall take 

13 effect before 90 days have elapsed after its publication in 

14 the Federal Register. Upon issuance, the Secretary shall 

15 provide copies of all rules or regulations issued under this 

16 title to each sales tax administering authority. 

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

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

19 issued or promulgated by the Secretary relating to any in20 ternal revenue law or by a sales tax administering author21 ity shall apply to a period prior to its publication in the 

22 Federal Register (or State equivalent) except that a regu23 lation may take retroactive effect to prevent abuse. 

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

25 AND RULINGS ON SMALL BUSINESS.— 


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1 ‘‘(1) SUBMISSION TO SMALL BUSINESS ADMIN2 ISTRATION.—After publication of any proposed or 

3 temporary regulation by the Secretary relating to in4 ternal revenue laws, the Secretary shall submit such 

5 regulation to the Chief Counsel for Advocacy of the 

6 Small Business Administration for comment on the 

7 impact of such regulation on small businesses. Not 

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

9 submission, the Chief Counsel for Advocacy of the 

10 Small Business Administration shall submit com11 ments on such regulation to the Secretary. 

12 ‘‘(2) CONSIDERATION OF COMMENTS.—In pre13 scribing any final regulation which supersedes a pro14 posed or temporary regulation which had been sub15 mitted under this subsection to the Chief Counsel 

16 for Advocacy of the Small Business Administration, 

17 the Secretary shall— 

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

19 Counsel for Advocacy of the Small Business 

20 Administration on such proposed or temporary 

21 regulation, and 

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

23 include a narrative that describes the response 

24 to such comments. 


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1 ‘‘(3) SUBMISSION OF CERTAIN FINAL REGULA2 TION.—In the case of promulgation by the Secretary 

3 of any final regulations (other than a temporary reg4 ulation) which do not supersede a proposed regula5 tion, the requirements of paragraphs (1) and (2) 

6 shall apply, except that the submission under para7 graph (1) shall be made at least 30 days before the 

8 date of such promulgation, and the consideration 

9 and discussion required under paragraph (2) shall 

10 be made in connection with the promulgation of such 

11 final regulation. 

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

13 The Small Business Regulatory Enforcement Fairness Act 

14 (Public Law 104–121; 110 Stat. 857 (SBREFA)) and the 

15 Regulatory Flexibility Act (5 U.S.C. 601–612 (RFA)) 

16 shall apply to regulations promulgated under this subtitle. 

17 ‘‘SEC. 407. JURISDICTION. 

18 ‘‘(a) STATE JURISDICTION.—A sales tax admin19 istering authority shall have jurisdiction over any gross 

20 payments made which have a destination (as determined 

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

22 sales tax administering authority. This grant of jurisdic23 tion is not exclusive of any other jurisdiction that such 

24 sales tax administering authority may have. 


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1 ‘‘(b) FEDERAL JURISDICTION.—The grant of juris2 diction in subsection (a) shall not be in derogation of Fed3 eral jurisdiction over the same matter. The Federal Gov4 ernment shall have the right to exercise preemptive juris5 diction over matters relating to the taxes imposed by this 

6 subtitle. 

7 ‘‘CHAPTER 5—OTHER ADMINISTRATIVE 

8 PROVISIONS 

‘‘Sec. 501. Monthly reports and payments. 

‘‘Sec. 502. Registration. 

‘‘Sec. 503. Accounting. 

‘‘Sec. 504. Penalties. 

‘‘Sec. 505. Burden of persuasion and burden of production. 

‘‘Sec. 506. Attorneys’ and accountancy fees. 

‘‘Sec. 507. Summons, examinations, audits, etc. 

‘‘Sec. 508. Records. 

‘‘Sec. 509. Tax to be separately stated and charged. 

‘‘Sec. 510. Coordination with title 11. 

‘‘Sec. 511. Applicable interest rate. 

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

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

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

12 of each month, each person who is— 

13 ‘‘(A) liable to collect and remit the tax im14 posed by this subtitle by reason of section 

15 103(a), or 

16 ‘‘(B) liable to pay tax imposed by this sub17 title which is not collected pursuant to section 

18 103(a), 

19 shall submit to the appropriate sales tax admin20 istering authority (in a form prescribed by the SecVerDate Sep 11 2014 23:50 Jan 03, 2017 Jkt 069200 PO 00000 Frm 00054 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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1 retary) a report relating to the previous calendar 

2 month. 

3 ‘‘(2) CONTENTS OF REPORT.—The report re4 quired under paragraph (1) shall set forth— 

5 ‘‘(A) the gross payments referred to in sec6 tion 101, 

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

8 connection with such payments, 

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

10 claimed, and 

11 ‘‘(D) other information reasonably required 

12 by the Secretary or the sales tax administering 

13 authority for the administration, collection, and 

14 remittance of the tax imposed by this subtitle. 

15 ‘‘(b) TAX PAYMENTS DATE.— 

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

17 subtitle during any calendar month is due and shall 

18 be paid to the appropriate sales tax administering 

19 authority on or before the 15th day of the suc20 ceeding month. Both Federal tax imposed by this 

21 subtitle and conforming State sales tax (if any) shall 

22 be paid in 1 aggregate payment. 

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

24 relating to remitting of separate segregated funds 

25 for sellers that are not small sellers. 


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

2 ‘‘(1) AUTOMATIC EXTENSIONS FOR NOT MORE

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

4 more than 30 days to file reports under subsection 

5 (a) shall be automatically granted. 

6 ‘‘(2) OTHER EXTENSIONS.—On application, ex7 tensions of 30 to 60 days to file such reports shall 

8 be liberally granted by the sales tax administering 

9 authority for reasonable cause. Extensions greater 

10 than 60 days may be granted by the sales tax ad11 ministering authority to avoid hardship. 

12 ‘‘(3) NO EXTENSION FOR PAYMENT OF

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

14 no extension shall be granted with respect to the 

15 time for paying or remitting the taxes under this 

16 subtitle. 

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

18 Secretary shall establish a system under which a violation 

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

20 tax administering authority for investigation through the 

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

22 ‘‘(e) SEPARATE SEGREGATED ACCOUNTS.— 

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

24 is not a small seller shall deposit all sales taxes col25 lected pursuant to section 103 in a particular week 


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1 in a separate segregated account maintained at a 

2 bank or other financial institution within 3 business 

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

4 shall also maintain in that account sufficient funds 

5 to meet the bank or financial institution minimum 

6 balance requirements, if any, and to pay account 

7 fees and costs. 

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

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

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

11 this subtitle in any of the previous 12 months. 

12 ‘‘(3) LARGE SELLERS.—Any seller that has col13 lected $100,000 or more of the taxes imposed by 

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

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

16 administering authority the entire balance of depos17 ited taxes in its separate segregated account on the 

18 first business day following the end of the calendar 

19 week. The Secretary may by regulation require the 

20 electronic transfer of funds due from large sellers. 

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

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

23 on a Friday. 


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

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

3 filed when— 

4 ‘‘(1) deposited in the United States mail, post5 age prepaid, addressed to the sales tax administering 

6 authority, 

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

8 sales tax administering authority, 

9 ‘‘(3) provided to a designated commercial pri10 vate courier service for delivery within 2 days to the 

11 sales tax administering authority at the address of 

12 the sales tax administering authority, or 

13 ‘‘(4) by other means permitted by the Sec14 retary. 

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

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

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

18 $100,000 or one and one-half times the seller’s average 

19 monthly tax liability during the previous 6 calendar 

20 months. Security may be a cash bond, a bond from a sur21 ety company approved by the Secretary, a certificate of 

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

23 bond qualifying under this subsection must be a con24 tinuing instrument for each calendar year (or portion 

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


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1 in effect until the surety or sureties are released and dis2 charged. Failure to provide security in accordance with 

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

4 502 registration. If a person who has provided security 

5 pursuant to this subsection— 

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

7 notice of amount due under this subtitle (within the 

8 meaning of section 605(d)), 

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

10 relating to the amount due, 

11 ‘‘(3) either the time for filing an appeal pursu12 ant to section 604 has passed or the appeal was de13 nied, and 

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

15 any judicial forum, 

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

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

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

19 ‘‘(h) REWARDS PROGRAM.—The Secretary is author20 ized to maintain a program of awards wherein individuals 

21 that assist the Secretary or sales tax administering au22 thorities in discovering or prosecuting tax fraud may be 

23 remunerated. 

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

25 remitted late, see section 6601. 


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1 ‘‘SEC. 502. REGISTRATION. 

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

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

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

5 tax administering authority administering the taxes im6 posed by this subtitle. 

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

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

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

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

11 as separate persons for purposes of this subtitle. 

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

13 Every person registered pursuant to subsection (a) shall 

14 designate a tax matters person who shall be an individual 

15 whom the sales tax administering authority may contact 

16 regarding tax matters. Each person registered must pro17 vide notice of a change in the identity of the tax matters 

18 person within 30 days of said change. 

19 ‘‘(d) EFFECT OF FAILURE TO REGISTER.—Any per20 son that is required to register and who fails to do so is 

21 prohibited from selling taxable property or services. The 

22 Secretary or a sales tax administering authority may bring 

23 an action seeking a temporary restraining order, an in24 junction, or such other order as may be appropriate to 

25 enforce this section. 


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1 ‘‘SEC. 503. ACCOUNTING. 

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

3 Registered sellers and other persons shall report trans4 actions using the cash method of accounting unless an 

5 election to use the accrual method of accounting is made 

6 pursuant to subsection (b). 

7 ‘‘(b) ELECTION TO USE ACCRUAL METHOD.—A per8 son may elect with respect to a calender year to remit 

9 taxes and report transactions with respect to the month 

10 where a sale was invoiced and accrued. 

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

12 relating to bad debts for sellers electing the accrual meth13 od. 

14 ‘‘SEC. 504. PENALTIES. 

15 ‘‘(a) FAILURE TO REGISTER.—Each person who is 

16 required to register pursuant to section 502 but fails to 

17 do so prior to notification by the sales tax administering 

18 authority shall be liable for a penalty of $500. 

19 ‘‘(b) RECKLESS OR WILLFUL FAILURE TO COLLECT

20 TAX.— 

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

22 who is required to and recklessly or willfully fails to 

23 collect taxes imposed by this subtitle shall be liable 

24 for a penalty equal to the greater of $500 or 20 per25 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) 2 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. 505. 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. 506. 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. 507. 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. 508. RECORDS. 

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

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

14 509 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. 509. 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. 510. COORDINATION WITH TITLE 11. 

12 ‘‘No addition to tax shall be made under section 504 

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. 511. 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 Sep 11 2014 23:50 Jan 03, 2017 Jkt 069200 PO 00000 Frm 00074 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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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 Sep 11 2014 23:50 Jan 03, 2017 Jkt 069200 PO 00000 Frm 00077 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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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 505), the right of the 

14 person to professional fees (pursuant to section 506), 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 one 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 

23 title— 


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1 ‘‘(A) no officer or employee (including 

2 former officers and employees) of the United 

3 States, 

4 ‘‘(B) no officer or employee (including 

5 former officers and employees) of any State or 

6 local agency who has had access to returns or 

7 return information, and 

8 ‘‘(C) no other person who has had access 

9 to returns or return information, 

10 shall disclose any report or report information ob11 tained by him in any manner in connection with his 

12 service as such officer or employee or otherwise. 

13 ‘‘(2) DESIGNEES.—The sales tax administering 

14 authority may, subject to such requirements as the 

15 Secretary may impose, disclose the report and report 

16 information of a person to that person or persons as 

17 that person may designate to receive said informa18 tion or return. 

19 ‘‘(3) OTHER SALES TAX ADMINISTERING AU20 THORITIES.—A sales tax administering authority 

21 may impose, disclose the report and report informa22 tion to another sales tax administering authority. 

23 ‘‘(4) INCOMPETENCY.—A sales tax admin24 istering authority may, subject to such requirements 

25 as the Secretary may impose, disclose the report and 


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1 report information to the committee, trustee, or 

2 guardian of a person who is incompetent. 

3 ‘‘(5) DECEASED PERSONS.—A sales tax admin4 istering authority may, subject to such requirements 

5 as the Secretary may impose, disclose the report and 

6 report information to the decedent’s— 

7 ‘‘(A) administrator, executor, estate trust8 ee, or 

9 ‘‘(B) heir at law, next of kin, or beneficiary 

10 under a will who has a material interest that 

11 will be affected by the information. 

12 ‘‘(6) BANKRUPTCY.—A sales tax administering 

13 authority may, subject to such requirements as the 

14 Secretary may impose, disclose the report and report 

15 information to a person’s trustee in bankruptcy. 

16 ‘‘(7) CONGRESS.—Upon written request from 

17 the Chairman of the Committee on Ways and 

18 Means, the Chairman of the Committee on Finance 

19 of the Senate, or the Chairman or Chief of Staff of 

20 the Joint Committee on Taxation, a sales tax admin21 istering authority shall disclose the report and report 

22 information, except that any report or report infor23 mation that can be associated with or otherwise 

24 identify a particular person shall be furnished to 

25 such committee only when sitting in closed executive 


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1 session unless such person otherwise consents in 

2 writing to such disclosure. 

3 ‘‘(8) WAIVER OF PRIVACY RIGHTS.—A person 

4 may waive confidentiality rights provided by this sec5 tion. Such waiver must be in writing. 

6 ‘‘(9) INTERNAL USE.—Disclosure of the report 

7 or report information by officers or employees of a 

8 sales tax administering authority to other officers or 

9 employees of a sales tax administering authority in 

10 the ordinary course of tax administration activities 

11 shall not constitute unlawful disclosure of the report 

12 or report information. 

13 ‘‘(10) STATISTICAL USE.—Upon request in 

14 writing by the Secretary of Commerce, the Secretary 

15 shall furnish such reports and report information to 

16 officers and employees of the Department of Com17 merce as the Secretary may prescribe by regulation 

18 for the purposes of, and only to the extent necessary 

19 in, the structuring of censuses and national eco20 nomic accounts and conducting related statistical ac21 tivities authorized by law. 

22 ‘‘(11) DEPARTMENT OF THE TREASURY.—Re23 turns and return information shall be open for in24 spection by officers and employees of the Depart25 ment of the Treasury whose official duties require 


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1 such inspection or disclosure for the purpose of, and 

2 only to the extent necessary for, preparing economic 

3 or financial forecasts, projections, analyses, or esti4 mates. Such inspection or disclosure shall be per5 mitted only upon written request that sets forth the 

6 reasons why such inspection or disclosure is nec7 essary and is signed by the head of the bureau or 

8 office of the Department of the Treasury requesting 

9 the inspection or disclosure. 

10 ‘‘SEC. 606. INSTALLMENT AGREEMENTS; COMPROMISES. 

11 ‘‘The sales tax administering authority is authorized 

12 to enter into written agreements with any person under 

13 which the person is allowed to satisfy liability for payment 

14 of any tax under this subtitle (and penalties and interest 

15 relating thereto) in installment payments if the sales tax 

16 administering authority determines that such agreement 

17 will facilitate the collection of such liability. The agree18 ment shall remain in effect for the term of the agreement 

19 unless the information that the person provided to the 

20 sales tax administering authority was materially inac21 curate or incomplete. The sales tax administering author22 ity may compromise any amounts alleged to be due. 

23 ‘‘CHAPTER 7—SPECIAL RULES 

‘‘Sec. 701. Hobby activities. 

‘‘Sec. 702. Gaming activities. 

‘‘Sec. 703. Government purchases. 

‘‘Sec. 704. Government enterprises. 


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‘‘Sec. 705. Mixed use property. 

‘‘Sec. 706. Not-for-profit organizations. 

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 two or more of the most recent 3 calendar years during 

14 which it operated, then 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 one or 

18 more chances is a gaming sponsor and shall register, in 

19 a form prescribed by the Secretary, with the sales tax ad20 ministering 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 


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1 of the right gives rise to an obligation by the gaming spon2 sor to pay upon the occurrence of— 

3 ‘‘(1) a random or unpredictable event, or 

4 ‘‘(2) an event over which neither the gaming 

5 sponsor nor the person purchasing the chance has 

6 control over the outcome. 

7 ‘‘(c) CHANCES NOT TAXABLE PROPERTY OR SERV8 ICE.—Notwithstanding any other provision in this sub9 title, a chance is not taxable property or services for pur10 poses of section 101. 

11 ‘‘(d) TAX ON GAMING SERVICES IMPOSED.—A 23- 

12 percent tax is hereby imposed on the taxable gaming serv13 ices of a gaming sponsor. This tax shall be paid and remit14 ted by the gaming sponsor. The tax shall be remitted by 

15 the 15th day of each month with respect to taxable gaming 

16 services during the previous calendar month. 

17 ‘‘(e) TAXABLE GAMING SERVICES DEFINED.—For 

18 purposes of this section, the term ‘taxable gaming services’ 

19 means— 

20 ‘‘(1) gross receipts of the gaming sponsor from 

21 the sale of chances, minus 

22 ‘‘(2) the sum of— 

23 ‘‘(A) total gaming payoffs to chance pur24 chasers (or their designees), and 


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1 ‘‘(B) gaming specific taxes (other than the 

2 tax imposed by this section) imposed by the 

3 Federal, State, or local government. 

4 ‘‘SEC. 703. GOVERNMENT PURCHASES. 

5 ‘‘(a) GOVERNMENT PURCHASES.— 

6 ‘‘(1) PURCHASES BY THE FEDERAL GOVERN7 MENT.—Purchases by the Federal Government of 

8 taxable property and services shall be subject to the 

9 tax imposed by section 101. 

10 ‘‘(2) PURCHASE BY STATE GOVERNMENTS AND

11 THEIR POLITICAL SUBDIVISIONS.—Purchases by 

12 State governments and their political subdivisions of 

13 taxable property and services shall be subject to the 

14 tax imposed by section 101. 

15 ‘‘(b) CROSS REFERENCES.—For purchases by gov16 ernment enterprises see section 704. 

17 ‘‘SEC. 704. GOVERNMENT ENTERPRISES. 

18 ‘‘(a) GOVERNMENT ENTERPRISES TO COLLECT AND

19 REMIT TAXES ON SALES.—Nothing in this subtitle shall 

20 be construed to exempt any Federal, State, or local gov21 ernmental unit or political subdivision (whether or not the 

22 State is an administering State) operating a government 

23 enterprise from collecting and remitting tax imposed by 

24 this subtitle on any sale of taxable property or services. 

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1 posed by this subtitle and shall be liable for penalties and 

2 subject to enforcement action in the same manner as pri3 vate persons that are not government enterprises. 

4 ‘‘(b) GOVERNMENT ENTERPRISE.—Any entity owned 

5 or operated by a Federal, State, or local governmental unit 

6 or political subdivision that receives gross payments from 

7 private persons is a government enterprise, except that a 

8 government-owned entity shall not become a government 

9 enterprise for purposes of this section unless in any quar10 ter it has revenues from selling taxable property or serv11 ices that exceed $2,500. 

12 ‘‘(c) GOVERNMENT ENTERPRISES INTERMEDIATE

13 SALES.— 

14 ‘‘(1) IN GENERAL.—Government enterprises 

15 shall not be subject to tax on purchases that would 

16 not be subject to tax pursuant to section 102(b) if 

17 the government enterprise were a private enterprise. 

18 ‘‘(2) EXCEPTION.—Government enterprises 

19 may not use the exemption afforded by section 

20 102(b) to serve as a conduit for tax-free purchases 

21 by government units that would otherwise be subject 

22 to taxation on purchases pursuant to section 703. 

23 Transfers of taxable property or services purchased 

24 exempt from tax from a government enterprise to 

25 such government unit shall be taxable. 


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1 ‘‘(d) SEPARATE BOOKS OF ACCOUNT.—Any govern2 ment enterprise must maintain books of account, separate 

3 from the nonenterprise government accounts, maintained 

4 in accordance with generally accepted accounting prin5 ciples. 

6 ‘‘(e) TRADE OR BUSINESS.—A government enterprise 

7 shall be treated as a trade or business for purposes of this 

8 subtitle. 

9 ‘‘(f) ENTERPRISE SUBSIDIES CONSTITUTE TAXABLE

10 PURCHASE.—A transfer of funds to a government enter11 prise by a government entity without full consideration 

12 shall constitute a taxable government purchase with the 

13 meaning of section 703 to the extent that the transfer of 

14 funds exceeds the fair market value of the consideration. 

15 ‘‘SEC. 705. MIXED USE PROPERTY. 

16 ‘‘(a) MIXED USE PROPERTY OR SERVICE.— 

17 ‘‘(1) MIXED USE PROPERTY OR SERVICE DE18 FINED.—For purposes of this section, the term 

19 ‘mixed use property or service’ is a taxable property 

20 or taxable service used for both taxable use or con21 sumption and for a purpose that would not be sub22 ject to tax pursuant to section 102(a)(1). 

23 ‘‘(2) TAXABLE THRESHOLD.—Mixed use prop24 erty or service shall be subject to tax notwith25 standing section 102(a)(1) unless such property or 


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1 service is used more than 95 percent for purposes 

2 that would give rise to an exemption pursuant to 

3 section 102(a)(1) during each calendar year (or por4 tions thereof) it is owned. 

5 ‘‘(3) MIXED USE PROPERTY OR SERVICES

6 CREDIT.—A person registered pursuant to section 

7 502 is entitled to a business use conversion credit 

8 (pursuant to section 202) equal to the product of— 

9 ‘‘(A) the mixed use property amount, 

10 ‘‘(B) the business use ratio, and 

11 ‘‘(C) the rate of tax imposed by section 

12 101. 

13 ‘‘(4) MIXED USE PROPERTY AMOUNT.—The 

14 mixed use property amount for each month (or frac15 tion thereof) in which the property was owned shall 

16 be— 

17 ‘‘(A) one-three-hundred-sixtieth of the 

18 gross payments for real property for 360 

19 months or until the property is sold, 

20 ‘‘(B) one-eighty-fourth of the gross pay21 ments for tangible personal property for 84 

22 months or until the property is sold, 

23 ‘‘(C) one-sixtieth of the gross payments for 

24 vehicles for 60 months or until the property is 

25 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 511) 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 511). 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 Sep 11 2014 23:50 Jan 03, 2017 Jkt 069200 PO 00000 Frm 00105 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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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, 2018, shall be qualified inventory if it 

20 is sold— 

21 ‘‘(A) before December 31, 2019, 

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, 2018 (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, 2018). 

8 ‘‘(3) TRANSITIONAL INVENTORY CREDIT.—The 

9 trade or business which held the qualified inventory 

10 on the close of business on December 31, 2018, 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 2019.—Notwithstanding sub17 section (b), the revenue allocation pursuant to subsection 

18 (a) for calendar year 2019 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 of 1986 as most recently in effect prior to 

14 the enactment of this Act. The rate shall be determined 

15 using actuarially sound methodology and announced at 

16 least 6 months prior to the beginning of the calendar year 

17 for 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 of 1986 most recently 


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1 in effect prior to the enactment of this Act. The rate shall 

2 be determined using actuarially sound methodology and 

3 announced 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 2018 

21 (taking into account only receipts pursuant to chap22 ter 21 of the Internal Revenue Code of 1986). 

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 2018 (tak8 ing into account only receipts pursuant to chapter 

9 21 of the Internal Revenue Code of 1986). 

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 2017 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 6431 (relating to credit for quali17 fied bonds allowed to issuer). 

18 (20) Section 6432 (relating to COBRA pre19 mium assistance). 

20 (21) Section 6504 (relating to cross references). 

21 (22) Section 6652 (relating to failure to file 

22 certain information returns). 

23 (23) Sections 6654 and 6655 (relating to fail24 ure to payment estimated income tax). 

25 (24) Section 6662 (relating to penalties). 


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1 (25) Section 6662A (relating to imposition of 

2 accuracy-related penalty on understatements with 

3 respect to reportable transactions). 

4 (26) Sections 6677 through 6711, and 6720B 

5 (relating to income tax related penalties). 

6 (27) Part II of subchapter B of chapter 68 (re7 lating to certain information returns). 

8 (28) Part I of subchapter A of chapter 70 (re9 lating to termination of taxable year). 

10 (29) Section 6864 (relating to certain 

11 carrybacks). 

12 (30) Section 7103 (relating to cross references). 

13 (31) Section 7204 (relating to withholding 

14 statements). 

15 (32) Section 7211 (relating certain statements). 

16 (33) Section 7231 (relating to failure to obtain 

17 certain licenses). 

18 (34) Section 7270 (relating to insurance poli19 cies). 

20 (35) Section 7404 (relating to estate taxes). 

21 (36) Section 7407 (relating to income tax pre22 parers). 

23 (37) Section 7408 (relating to income tax shel24 ters). 


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1 (38) Section 7409 (relating to 501(c)(3) organi2 zations). 

3 (39) Section 7427 (relating to income tax pre4 parers). 

5 (40) Section 7428 (relating to 501(c)(3) organi6 zations). 

7 (41) Section 7476 (relating to declaratory judg8 ments relating to retirement plans). 

9 (42) Section 7477 (relating to declaratory judg10 ments relating to value of certain gifts). 

11 (43) Section 7478 (relating to declaratory judg12 ments relating to status of certain governmental ob13 ligations). 

14 (44) Section 7479 (relating to declaratory judg15 ments relating to eligibility of estate with respect to 

16 installment payments under section 6166). 

17 (45) Section 7508 (relating to postponing time 

18 for certain actions required by the income, estate, 

19 and gift tax). 

20 (46) Section 7509 (relating to Postal Service 

21 payroll taxes). 

22 (47) Section 7512 (relating to payroll taxes). 

23 (48) Section 7517 (relating to estate and gift 

24 tax evaluation). 


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1 (49) Section 7518 (relating to Merchant Marine 

2 tax incentives). 

3 (50) Section 7519 (relating to taxable years). 

4 (51) Section 7520 (relating to insurance and 

5 annuity valuation tables). 

6 (52) Section 7523 (relating to reporting Fed7 eral income and outlays on Form 1040s). 

8 (53) Section 7527 (relating to advance payment 

9 of credit for health insurance costs of eligible indi10 viduals). 

11 (54) Section 7611 (relating to church income 

12 tax exemptions and church unrelated business in13 come tax inquiries). 

14 (55) Section 7654 (relating to possessions’ in15 come taxes). 

16 (56) Section 7655 (relating to cross references). 

17 (57) Section 7701(a)(16). 

18 (58) Section 7701(a)(19). 

19 (59) Section 7701(a)(20). 

20 (60) Paragraphs (32) through (38) of section 

21 7701(a). 

22 (61) Paragraphs (41) through (47) of section 

23 7701(a). 

24 (62) Section 7701(b). 


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1 (63) Subsections (e) through (m) of section 

2 7701. 

3 (64) Section 7702 (relating to life insurance 

4 contracts). 

5 (65) Section 7702A (relating to modified en6 dowment contracts). 

7 (66) Section 7702B (relating to long-term care 

8 insurance). 

9 (67) Section 7703 (relating to the determina10 tion of marital status). 

11 (68) Section 7704 (relating to publicly traded 

12 partnerships). 

13 (69) Section 7805 (relating to rules and regula14 tions). 

15 (70) Section 7851 (relating to applicability of 

16 revenue laws). 

17 (71) Section 7872 (relating to treatment of 

18 loans with below-market interest rates). 

19 (72) Section 7873 (relating to Federal tax 

20 treatment of income derived by Indians from exer21 cise of fishing rights secured by treaty, etc.). 

22 (73) Section 7874 (relating to rules relating to 

23 expatriated entities and their foreign parents). 

24 (b) OTHER CONFORMING AND TECHNICAL AMEND25 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 section (g) and by redesignating subsection (h) as 

16 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 (k) and by redesignating subsection (l) as 

25 subsection (k). 


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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 designating paragraphs (3) and (4) as para6 graphs (2) and (3), respectively. 

7 (12) Section 6501(c) is amended by striking 

8 paragraphs (5) through (11). 

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 sections (f) through (k) and subsections (m) and (n) 

16 and by redesignating subsection (l) as subsection (f). 

17 (15) Section 6503(a) is amended— 

18 (A) by striking paragraph (2), 

19 (B) by striking ‘‘DEFICIENCY.—’’ and all 

20 that follows through ‘‘The running’’ and insert21 ing ‘‘DEFICIENCY.—The running’’, and 

22 (C) by striking ‘‘income, estate, gift and’’. 

23 (16) Section 6503 is amended by striking sub24 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 (i) and by redesignating subsections 

5 (f) and (h) as subsections (d) and (e), respectively. 

6 (18) Section 6512(b)(1) is amended by striking 

7 ‘‘of income tax for the same taxable year, of gift tax 

8 for the same calendar year or calendar quarter, of 

9 estate tax in respect of the taxable estate of the 

10 same decedent or’’. 

11 (19) Section 6513 is amended— 

12 (A) by striking ‘‘(a) EARLY RETURN OR

13 ADVANCE PAYMENT OF TAX.—’’, and 

14 (B) by striking subsections (b) and (e). 

15 (20) Chapter 67 is amended by striking sub16 chapters A through D and inserting the following: 

17 ‘‘SEC. 6601. INTEREST ON OVERPAYMENTS AND UNDER18 PAYMENT. 

19 ‘‘(a) UNDERPAYMENTS.—If any amount of tax im20 posed by this title is not paid on or before the last date 

21 prescribed for payment, interest on such amount at the 

22 Federal short-term rate (as defined in section 511(b)) 

23 shall be paid from such last date to the date paid. 

24 ‘‘(b) OVERPAYMENTS.—Interest shall be allowed and 

25 paid upon any overpayment in respect of any internal revVerDate Sep 11 2014 23:50 Jan 03, 2017 Jkt 069200 PO 00000 Frm 00124 Fmt 6652 Sfmt 6201 E:\BILLS\S18.IS S18

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1 enue tax at the Federal short-term rate (as defined in sec2 tion 511(b)) from 60 days after the date of the overpay3 ment until the date the overpayment is refunded.’’. 

4 (21) Section 6651(a)(1) is amended by striking 

5 ‘‘subchapter A of chapter 61 (other than part III 

6 thereof,’’. 

7 (22) Section 6656 is amended by striking sub8 section (c) and by redesignating subsections (d) and 

9 (e) as subsections (c) and (d), respectively. 

10 (23) Section 6663 is amended by striking sub11 section (c). 

12 (24) Section 6664(c) is amended— 

13 (A) by striking ‘‘Exception.—’’ and all 

14 that follows through ‘‘No penalty’’ and insert15 ing ‘‘Exception.—No penalty’’, and 

16 (B) by striking paragraphs (2), (3), and 

17 (4). 

18 (25) Chapter 72 is amended by striking all 

19 matter preceding section 7011. 

20 (26) Section 7422 is amended by striking sub21 section (i) and by redesignating subsections (j) and 

22 (k) as subsections (h) and (i), respectively. 

23 (27) Section 7451 is amended to read as fol24 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 inserting ‘‘or’’ at the end of para11 graph (1), 

12 (B) by striking paragraphs (2) and (3), 

13 (C) by redesignating paragraph (4) as 

14 paragraph (2), and 

15 (D) by striking ‘‘D’’ in paragraph (2) (as 

16 so redesignated) and inserting ‘‘B’’. 

17 (30) Section 7463(c) is amended by striking 

18 ‘‘sections 6214(a) and’’ and inserting ‘‘section’’. 

19 (31) Section 7463(e) is amended by striking ‘‘, 

20 to the extent that the procedures described in sub21 chapter B of chapter 63 apply’’. 

22 (32) Section 7481 is amended by striking sub23 section (d). 

24 (33) Section 7608 is amended by striking ‘‘sub25 title E’’ each place it appears and inserting ‘‘subtitle 

26 C’’. 


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1 (34) Section 7651 is amended by striking para2 graph (4). 

3 (35) Section 7701(a)(29) is amended by strik4 ing ‘‘1986’’ and inserting ‘‘2017’’. 

5 (36) Section 7809(c) is amended by striking 

6 paragraphs (1) and (4), by redesignating paragraphs 

7 (2) and (3) as paragraphs (1) and (2), respectively, 

8 by inserting ‘‘and’’ at the end of paragraph (1) (as 

9 so redesignated), and by striking ‘‘and’’ at the end 

10 of paragraph (2) (as so redesignated). 

11 (37) Section 7871(a) is amended by striking 

12 paragraphs (1) and (3) through (6) and by redesig13 nating paragraphs (2) and (7) as paragraphs (1) 

14 and (2), respectively. 

15 (38) Section 7871 is amended by striking sub16 sections (c) and (f) and by redesignating subsections 

17 (d) and (e) as subsections (c) and (d), respectively. 

18 (39) Section 8021 is amended by striking sub19 section (a) and by redesignating subsections (b) 

20 through (f) as subsections (a) through (e), respec21 tively. 

22 (40) Section 8022(a)(2)(A) is amended by 

23 striking ‘‘, particularly the income tax’’. 


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1 (41) Section 8023 is amended by striking ‘‘In2 ternal Revenue Service’’ each place it appears and 

3 inserting ‘‘Department of the Treasury’’. 

4 (42) Section 9501(b)(2) is amended by striking 

5 subparagraph (C). 

6 (43) Section 9702(a) is amended by striking 

7 paragraph (4). 

8 (44) Section 9705(a) is amended by striking 

9 paragraph (4) and by redesignating paragraph (5) 

10 as paragraph (4). 

11 (45) Section 9706(d)(2)(A) is amended by 

12 striking ‘‘6103’’ and inserting ‘‘605(e)’’. 

13 (46) Section 9707 is amended by striking sub14 section (f). 

15 (47) Section 9712(d) is amended by striking 

16 paragraph (5) and by redesignating paragraph (6) 

17 as paragraph (5). 

18 (48) Section 9803(a) is amended by striking 

19 ‘‘(as defined in section 414(f))’’. 

20 TITLE III—OTHER MATTERS 

21 SEC. 301. PHASE-OUT OF ADMINISTRATION OF REPEALED 

22 FEDERAL TAXES. 

23 (a) APPROPRIATIONS.—Appropriations for any ex24 penses of the Internal Revenue Service including proc25 essing tax returns for years prior to the repeal of the taxes 


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1 repealed by title I of this Act, revenue accounting, man2 agement, transfer of payroll and wage data to the Social 

3 Security Administration for years after fiscal year 2021 

4 shall not be authorized. 

5 (b) RECORDS.—Federal records related to the admin6 istration of taxes repealed by title I of this Act shall be 

7 destroyed by the end of fiscal year 2021, except that any 

8 records necessary to calculate Social Security benefits 

9 shall be retained by the Social Security Administration 

10 and any records necessary to support ongoing litigation 

11 with respect to taxes owed or refunds due shall be retained 

12 until final disposition of such litigation. 

13 (c) CONFORMING AMENDMENTS.— 

14 (1) Subchapter A of chapter 80 is amended by 

15 striking sections 7802 and 7804. 

16 (2) Section 7803 is amended— 

17 (A) by striking subsections (a) and (b) and 

18 by redesignating subsections (c) and (d) as sub19 sections (a) and (b), 

20 (B) by striking ‘‘Internal Revenue Service’’ 

21 each place it appears and inserting ‘‘Depart22 ment of the Treasury’’, and 

23 (C) by striking ‘‘Commissioner’’ or ‘‘Com24 missioner of Internal Revenue’’ each place they 

25 appear and inserting ‘‘Secretary’’. 


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1 (d) EFFECTIVE DATE.—The amendments made by 

2 subsection (c) shall take effect on January 1, 2021. 

3 SEC. 302. ADMINISTRATION OF OTHER FEDERAL TAXES. 

4 Section 7801 (relating to the authority of the Depart5 ment of the Treasury) is amended by adding at the end 

6 the following: 

7 ‘‘(d) EXCISE TAX BUREAU.—There shall be in the 

8 Department of the Treasury an Excise Tax Bureau to ad9 minister those excise taxes not administered by the Bu10 reau of Alcohol, Tobacco and Firearms. 

11 ‘‘(e) SALES TAX BUREAU.—There shall be in the De12 partment of the Treasury a Sales Tax Bureau to admin13 ister the national sales tax in those States where it is re14 quired pursuant to section 404, and to discharge other 

15 Federal duties and powers relating to the national sales 

16 tax (including those required by sections 402, 403, and 

17 405). The Office of Revenue Allocation shall be within the 

18 Sales Tax Bureau.’’. 

19 SEC. 303. SALES TAX INCLUSIVE SOCIAL SECURITY BENE20 FITS INDEXATION. 

21 Subparagraph (D) of section 215(i)(1) of the Social 

22 Security Act (42 U.S.C. 415(i)(1)) (relating to cost-of-liv23 ing increases in Social Security benefits) is amended to 

24 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 cal22 endar quarter which was a base quarter under sub23 paragraph (A)(ii) or, if later, the most recent cost 

24 of living computation quarter under subparagraph 

25 (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 2017, di5 vided by 

6 ‘‘(II) the quantity that is 1 minus such 

7 sales tax rate.’’. 

8 TITLE IV—SUNSET OF SALES 

9 TAX IF SIXTEENTH AMEND10 MENT NOT REPEALED 

11 SEC. 401. ELIMINATION OF SALES TAX IF SIXTEENTH 

12 AMENDMENT NOT REPEALED. 

13 If the Sixteenth Amendment to the Constitution of 

14 the United States is not repealed before the end of the 

15 7-year period beginning on the date of the enactment of 

16 this Act, then all provisions of, and amendments made by, 

17 this Act shall not apply to any use or consumption in any 

18 year beginning after December 31 of the calendar year 

19 in which or with which such period ends, except that the 

20 Sales Tax Bureau of the Department of the Treasury shall 

21 not be terminated until 6 months after such December 31. 

Æ 


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