I 

108TH CONGRESS 

1ST SESSION H. R. 720

To amend the Internal Revenue Code of 1986 to allow a deduction for 

State and local sales taxes in lieu of State and local income taxes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 12, 2003

Mr. BRADY of Texas (for himself, Mrs. CUBIN, Mr. BAIRD, Mr. WAMP, Mr. 

FOLEY, Mrs. BLACKBURN, Mr. COOPER, Mr. SAM JOHNSON of Texas, 

Mr. BURGESS, Mr. CARTER, Mr. DICKS, Mr. GREEN of Texas, Mr. PAUL, 

Mr. REYES, Ms. EDDIE BERNICE JOHNSON of Texas, Mr. BOYD, Mr. 

HASTINGS of Florida, Mr. NETHERCUTT, Mr. PORTER, Mr. INSLEE, Mr. 

ORTIZ, Mr. SANDLIN, Mr. JANKLOW, Ms. BERKLEY, Mr. DUNCAN, Ms. 

ROS-LEHTINEN, Mr. GIBBONS, Mr. MCDERMOTT, Mr. LARSEN of Washington, Mr. HALL, Mr. FROST, Mr. BONILLA, Mr. TANNER, and Mr. 

DAVIS of Tennessee) introduced the following bill; which was referred to 

the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to allow a 

deduction for State and local sales taxes in lieu of State 

and local income taxes.

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Sales Tax Equity Act 

5 of 2003’’.
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1 SEC. 2. DEDUCTION OF STATE AND LOCAL GENERAL SALES 

2 TAXES IN LIEU OF STATE AND LOCAL IN3 COME TAXES. 

4 (a) IN GENERAL.—Subsection (b) of section 164 of 

5 the Internal Revenue Code of 1986 (relating to definitions 

6 and special rules) is amended by adding at the end the 

7 following: 

8 ‘‘(5) GENERAL SALES TAXES.—For purposes of 

9 subsection (a)—

10 ‘‘(A) ELECTION TO DEDUCT STATE AND

11 LOCAL SALES TAXES IN LIEU OF STATE AND

12 LOCAL INCOME TAXES.—

13 ‘‘(i) IN GENERAL.—At the election of 

14 the taxpayer for the taxable year, sub15 section (a) shall be applied—

16 ‘‘(I) without regard to the ref17 erence to State and local income 

18 taxes, 

19 ‘‘(II) as if State and local general 

20 sales taxes were referred to in a para21 graph thereof, and 

22 ‘‘(III) without regard to the last 

23 sentence. 

24 ‘‘(B) DEFINITION OF GENERAL SALES

25 TAX.—The term ‘general sales tax’ means a tax 
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1 imposed at one rate with respect to the sale at 

2 retail of a broad range of classes of items. 

3 ‘‘(C) SPECIAL RULES FOR FOOD, ETC.—In 

4 the case of items of food, clothing, medical sup5 plies, and motor vehicles—

6 ‘‘(i) the fact that the tax does not 

7 apply with respect to some or all of such 

8 items shall not be taken into account in 

9 determining whether the tax applies with 

10 respect to a broad range of classes of 

11 items, and 

12 ‘‘(ii) the fact that the rate of tax ap13 plicable with respect to some or all of such 

14 items is lower than the general rate of tax 

15 shall not be taken into account in deter16 mining whether the tax is imposed at one 

17 rate. 

18 ‘‘(D) ITEMS TAXED AT DIFFERENT

19 RATES.—Except in the case of a lower rate of 

20 tax applicable with respect to an item described 

21 in subparagraph (C), no deduction shall be al22 lowed under this paragraph for any general 

23 sales tax imposed with respect to an item at a 

24 rate other than the general rate of tax. 
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1 ‘‘(E) COMPENSATING USE TAXES.—A com2 pensating use tax with respect to an item shall 

3 be treated as a general sales tax. For purposes 

4 of the preceding sentence, the term ‘compen5 sating use tax’ means, with respect to any item, 

6 a tax which—

7 ‘‘(i) is imposed on the use, storage, or 

8 consumption of such item, and 

9 ‘‘(ii) is complementary to a general 

10 sales tax, but only if a deduction is allow11 able under this paragraph with respect to 

12 items sold at retail in the taxing jurisdic13 tion which are similar to such item. 

14 ‘‘(F) SPECIAL RULE FOR MOTOR VEHI15 CLES.—In the case of motor vehicles, if the rate 

16 of tax exceeds the general rate, such excess 

17 shall be disregarded and the general rate shall 

18 be treated as the rate of tax. 

19 ‘‘(G) SEPARATELY STATED GENERAL

20 SALES TAXES.—If the amount of any general 

21 sales tax is separately stated, then, to the ex22 tent that the amount so stated is paid by the 

23 consumer (other than in connection with the 

24 consumer’s trade or business) to the seller, such 
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1 amount shall be treated as a tax imposed on, 

2 and paid by, such consumer. 

3 ‘‘(H) AMOUNT OF DEDUCTION TO BE DE4 TERMINED UNDER TABLES.—

5 ‘‘(i) IN GENERAL.—The amount of 

6 the deduction allowed under this para7 graph shall be determined under tables 

8 prescribed by the Secretary. 

9 ‘‘(ii) REQUIREMENTS FOR TABLES.—

10 The tables prescribed under clause (i)—

11 ‘‘(I) shall reflect the provisions of 

12 this paragraph, 

13 ‘‘(II) shall be based on the aver14 age consumption by taxpayers on a 

15 State-by-State basis, as determined by 

16 the Secretary, taking into account fil17 ing status, number of dependents, ad18 justed gross income, and rates of 

19 State and local general sales taxation, 

20 and 

21 ‘‘(III) need only be determined 

22 with respect to adjusted gross incomes 

23 up to the applicable amount (as deter24 mined under section 68(b)).’’. 
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1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2002.

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