I 

108TH CONGRESS 

1ST SESSION H. R. 689

To amend the Internal Revenue Code of 1986 to allow residents of States 

with no income tax a deduction for State and local sales taxes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 11, 2003

Mr. GREEN of Texas (for himself, Mr. REYES, Mr. GONZALEZ, and Mr. 

FROST) 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 residents of States with no income tax a deduction for 

State and local sales 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 Equitability 

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

2 TAXES FOR RESIDENTS OF STATES WITH NO 

3 INCOME TAX. 

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 this section—

10 ‘‘(A) DEDUCTION OF STATE AND LOCAL

11 SALES TAXES BY RESIDENTS OF STATES IMPOS12 ING NO INCOME TAX.—In the case of an indi13 vidual who is a resident for more than half of 

14 the taxable year of a State which imposes no in15 come tax on income earned within such State 

16 by residents of such State and who elects the 

17 application of this paragraph, subsection (a) 

18 shall be applied—

19 ‘‘(i) without regard to the reference to 

20 State and local income taxes, 

21 ‘‘(ii) as if State and local general sales 

22 taxes were referred to in a paragraph 

23 thereof, and 

24 ‘‘(iii) without regard to the last sen25 tence. 
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1 ‘‘(B) DEFINITION OF GENERAL SALES

2 TAX.—The term ‘general sales tax’ means a tax 

3 imposed at one rate with respect to the sale at 

4 retail of a broad range of classes of items. 

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

6 the case of items of food, clothing, medical sup7 plies, and motor vehicles—

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

9 apply with respect to some or all of such 

10 items shall not be taken into account in 

11 determining whether the tax applies with 

12 respect to a broad range of classes of 

13 items, and 

14 ‘‘(ii) the fact that the rate of tax ap15 plicable with respect to some or all of such 

16 items is lower than the general rate of tax 

17 shall not be taken into account in deter18 mining whether the tax is imposed at one 

19 rate. 

20 ‘‘(D) ITEMS TAXED AT DIFFERENT

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

22 tax applicable with respect to an item described 

23 in subparagraph (C), no deduction shall be al24 lowed under this paragraph for any general 
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1 sales tax imposed with respect to an item at a 

2 rate other than the general rate of tax. 

3 ‘‘(E) COMPENSATING USE TAXES.—A com4 pensating use tax with respect to an item shall 

5 be treated as a general sales tax. For purposes 

6 of the preceding sentence, the term ‘compen7 sating use tax’ means, with respect to any item, 

8 a tax which—

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

10 consumption of such item, and 

11 ‘‘(ii) is complementary to a general 

12 sales tax, but only if a deduction is allow13 able under this paragraph with respect to 

14 items sold at retail in the taxing jurisdic15 tion which are similar to such item. 

16 ‘‘(F) SPECIAL RULE FOR MOTOR VEHI17 CLES.—In the case of motor vehicles, if the rate 

18 of tax exceeds the general rate, such excess 

19 shall be disregarded and the general rate shall 

20 be treated as the rate of tax. 

21 ‘‘(G) SEPARATELY STATED GENERAL

22 SALES TAXES.—If the amount of any general 

23 sales tax is separately stated, then, to the ex24 tent that the amount so stated is paid by the 

25 consumer (other than in connection with the 
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1 consumer’s trade or business) to the seller, such 

2 amount shall be treated as a tax imposed on, 

3 and paid by, such consumer. 

4 ‘‘(H) AMOUNT OF DEDUCTION TO BE DE5 TERMINED UNDER TABLES.—

6 ‘‘(i) IN GENERAL.—The amount of 

7 the deduction allowed under this para8 graph shall be determined under tables 

9 prescribed by the Secretary. 

10 ‘‘(ii) REQUIREMENTS FOR TABLES.—

11 The tables prescribed under clause (i)—

12 ‘‘(I) shall reflect the provisions of 

13 this paragraph, 

14 ‘‘(II) shall be based on the aver15 age consumption by taxpayers on a 

16 State-by-State basis, as determined by 

17 the Secretary, taking into account fil18 ing status, number of dependents, ad19 justed gross income, and rates of 

20 State and local general sales taxation, 

21 and 

22 ‘‘(III) need only be determined 

23 with respect to adjusted gross incomes 

24 up to the applicable amount (as deter25 mined under section 68(b)).’’. 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 subsection (a) shall apply to taxable years beginning after 

3 the date of the enactment of this Act.

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