I
104TH CONGRESS
2D SESSION
H. R. 3039
To promote freedom, fairness, and economic opportunity for families by re-
pealing the income tax, abolishing the Internal Revenue Service and
enacting a national retail sales tax to be administered primarily by
the States.
IN THE HOUSE OF REPRESENTATIVES
MARCH 6, 1996
Mr. SCHAEFER (for himself, Mr. TAUZIN, Mr. CHRYSLER, Mr. BONO, Mr.
HEFLEY, Mr. LINDER, and Mr. STUMP) introduced the following bill;
which was referred to the Committee on Ways and Means
A BILL
To promote freedom, fairness, and economic opportunity for
families by repealing the income tax, abolishing the In-
ternal Revenue Service and enacting a national retail
sales tax to be administered primarily by the States.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘National Retail Sales Tax Act of 1996’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
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Sec. 1. Short title; table of contents.
Sec. 2. Congressional findings.
Sec. 3. Income tax, estate and gift and misc. excise taxes repealed.
Sec. 4. Sales and use tax.
‘‘Sec. 1. Imposition of sales tax.
‘‘Sec. 2. Exemptions.
‘‘Sec. 3. Special rules.
‘‘Sec. 11. Credits and refunds.
‘‘Sec. 12. Special rules for residential real property.
‘‘Sec. 15. Family consumption refund.
‘‘Sec. 21. Definitions.
‘‘Sec. 22. Special rules.
‘‘Sec. 31. Authority for States to collect tax.
‘‘Sec. 32. Federal administrative support for States.
‘‘Sec. 33. Federal administration option for multistate vendors.
‘‘Sec. 41. Monthly report and payment.
‘‘Sec. 42. Records.
‘‘Sec. 43. Registration.
‘‘Sec. 44. Certificates.
‘‘Sec. 45. Penalties.
‘‘Sec. 46. Burden of persuasion and burden of production.
‘‘Sec. 47. Attorneys and accountancy fees.
‘‘Sec. 48. Appeals.
‘‘Sec. 49. Subpoenas.
‘‘Sec. 50. Tax court jurisdiction.
‘‘Sec. 51. Power to levy.
‘‘Sec. 52. Problem resolution offices.
‘‘Sec. 53. Jurisdiction and interstate allocation.
‘‘Sec. 54. Tax to be separately stated and charged.’’
Sec. 5. IRS phase-out.
Sec. 6. Excise Tax Administration.
Sec. 7. Social Security Administration to collect payroll tax..
Sec. 8. Self employment tax.
Sec. 9. Interest.
Sec. 10. Supermajority required to raise rate.
SEC. 2. CONGRESSIONAL FINDINGS.
(a) The Congress finds that the income tax—
(1) retards economic growth and has reduced
the standard of living of the American public;
(2) impedes the international competitiveness of
United States industry;
(3) reduces savings and investment in the Unit-
ed States;
(4) lowers productivity;
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(5) imposes unacceptable administrative costs
on taxpayers, individuals and businesses alike;
(6) is unfair and inequitable; and
(7) unnecessarily intrudes upon the privacy and
civil rights of United States citizens.
(b) The Congress finds further that national sales,
services and use tax on final consumption of goods and
services—
(1) is similar in many respects to those in place
in 45 of the 50 States;
(2) will promote savings;
(3) will promote fairness;
(4) will promote economic growth;
(5) will raise the standard of living;
(6) will increase savings and investment;
(7) will enhance productivity and international
competitiveness;
(8) will reduce administrative burdens on the
taxpayer; and
(9) will respect the privacy interests and civil
rights of taxpayers.
(c) The Congress further finds that—
(1) most of the practical experience administer-
ing sales taxes is found at the State Governmental
level;
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(2) it is desirable to harmonize Federal and
State collection and enforcement efforts to the maxi-
mum extent possible;
(3) it is sound tax administration policy to ad-
minister and collect the Federal sales and service tax
at the State level in return for a reasonable adminis-
tration fee to the States;
(4) businesses that must collect and remit taxes
should receive reasonable compensation for the cost
of doing so; and
(5) the sixteenth amendment to the Constitu-
tion should be repealed.
SEC. 3. REPEAL OF THE INCOME TAX, ESTATE AND GIFT
TAXES, AND CERTAIN EXCISE TAXES.
(a) IN GENERAL.—The following provisions of the In-
ternal Revenue Code of 1986 are hereby repealed:
(1) Chapter 1 (relating to income tax).
(2) Chapter 5 (relating to tax on transfers to
avoid income tax).
(3) Chapter 6 (relating to consolidated returns).
(4) Chapter 24 (relating to collection of income
tax at source).
(5) Subtitle B (relating to estate and gift
taxes).
(6) Chapter 31 (relating to retail excise taxes).
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(7) Chapter 32 (relating to manufacturers ex-
cise taxes).
(8) Subtitle E (relating to alcohol, tobacco, and
certain other excise taxes).
(9) Subtitle F (relating to procedure and ad-
ministration of the income tax and certain other
taxes) except for section 6103 (relating to confiden-
tiality), chapter 66 (relating to limitations), chapter
67 (relating to interest), section 6656 (relating to
failure to make deposit of taxes), section 6657 (re-
lating to bad checks), section 6658 (relating to co-
ordination with title 11), chapter 75 (relating to
crimes), chapter 76 (relating to Judicial Proceed-
ings), section 7431 (relating to damages for unau-
thorized disclosure), section 7432 (relating to dam-
ages for failure to release lien), section 7433 (relat-
ing to damages for unauthorized collection data) and
chapter 77 (relating to miscellaneous provisions).
References to provisions repealed by the preceding
sentence shall be treated as references to such provi-
sions as in effect on the day before the date of the
enactment of this Act.
(b) EFFECTIVE DATE.—
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(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by subsection (a)
shall take effect on January 1, 1998.
(2) INCOME
TAX.—The amendment made by
subsection (a)(1) shall apply to taxable years begin-
ning after December 31, 1997.
(3) SALES TAX.—The amendment made by sec-
tion 4 shall take effect on January 1, 1998.
(4) SUPERMAJORITY REQUIRED.—The amend-
ment made by section 5 shall take effect on January
1, 1998.
SEC. 4. SALES TAX.
(a) IN GENERAL.—Subtitle A of the Internal Reve-
nue Code of 1986 is amended by inserting at the begin-
ning the following new chapter:
‘‘CHAPTER 1—SALES TAX
‘‘SUBCHAPTER A. Imposition of tax.
‘‘SUBCHAPTER B. Credits; refunds; deferred payment of tax on
sales of residences.
‘‘SUBCHAPTER C. Definitions and special rules.
‘‘SUBCHAPTER D. Authority for States to collect tax.
‘‘SUBCHAPTER E. Other administrative provisions.
‘‘Subchapter A—Imposition of Tax
‘‘Sec. 1. Imposition of tax.
‘‘Sec. 2. Exemptions.
‘‘Sec. 3. Special rules relating to collection and remittance of tax.
‘‘SECTION 1. IMPOSITION OF TAX.
‘‘(a) IN GENERAL.—There is hereby imposed a tax
of 15 percent on the gross payments for the use, consump-
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tion or enjoyment in the United States of any taxable
property or service, whether produced or rendered within
or without the United States.
‘‘(b) COORDINATION WITH IMPORT DUTIES.—The
taxes imposed by this section are in addition to any import
duties imposed by law. The Secretary shall provide by reg-
ulation that, to the maximum extent practicable, the taxes
imposed by this section on imported property and services
are collected and administered in conjunction with any ap-
plicable import duties.
‘‘(c) LIABILITY FOR COLLECTION AND REMITTANCE
OF THE TAX.—
‘‘(1) GENERAL
RULE.—The tax imposed by
subsection (a) shall be collected and remitted by the
seller, except as provided in subsection (2).
‘‘(2) TAX TO BE PAID BY PURCHASER IN CER-
TAIN CIRCUMSTANCES.—
‘‘(A) GENERAL RULE.—In the case of tax-
able property or services purchased outside of
the United States for use, consumption or en-
joyment in the United States, the purchaser
shall remit the tax imposed by subsection (a).
‘‘(B) In the case of a purchaser electing to
pay tax in installments pursuant to section 12,
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the purchaser shall remit the tax imposed by
subsection (a).
‘‘(C) The Secretary may provide by regula-
tion that the tax imposed by subsection (a) is
to be collected and remitted by the purchaser
rather than the seller.
‘‘SEC. 2. EXEMPTIONS.
‘‘(a) IN GENERAL.—No tax shall be imposed under
this subtitle on any taxable property or service—
‘‘(1) purchased for resale,
‘‘(2) purchased to produce taxable property or
services, or
‘‘(3) exported from the United States for use,
consumption or enjoyment outside the United
States.
‘‘(b) EXCEPTION FOR DE MINIMIS PAYMENTS.—The
tax imposed by section 1 shall not apply to payments made
by any person not engaged in an active trade or business
at any time during a calendar year if in the case of any
taxable property or service imported into the United
States for use, consumption or enjoyment by such per-
son—
‘‘(1) the gross amount paid for such property or
services does not exceed $400 for any particular
entry, and
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‘‘(e) AFFILIATED FIRMS.—Firms that make pur-
chases from, or sell to, affiliated firms which are exempt
pursuant to subsection (a) shall not need to comply with
the requirements of subsection (d) for said purchases to
remain exempt. For purposes of this section, a firm is af-
filiated with another if one firm owns 50 percent or more
of the voting shares or interests in the other.
‘‘(f) CROSS REFERENCES.—
‘‘For option to collect tax on certain exempt pur-
chases, see section 3(b).
‘‘For registration requirements, see section 43.
‘‘For certificate rules, see section 44.
‘‘SEC. 3. SPECIAL RULES RELATING TO COLLECTION AND
REMITTANCE OF TAX.
‘‘(a) OBLIGATION OF GOVERNMENTAL UNITS AND
NOT-FOR-PROFIT ORGANIZATIONS TO COLLECT, REMIT
AND PAY TAXES.—
‘‘(1) GOVERNMENTAL UNITS.—Nothing in this
subtitle shall be construed to exempt any Federal,
State, or local governmental unit or political subdivi-
sion from paying any tax imposed by this subtitle on
any sale, purchase, use, consumption or enjoyment
by such a unit.
‘‘(2) NOT-FOR-PROFIT ORGANIZATIONS.—
‘‘(A) IN
GENERAL.—Dues, contributions
and payments to qualified not-for-profit organi-
zations shall not be considered gross payments
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for taxable property or services for purposes of
this subtitle.
‘‘(B) EXCEPTION.—Notwithstanding sub-
paragraph (2)(A), payments of any form to a
not-for-profit organization shall be considered
gross payments for taxable property or services
if the property or service provided in exchange
is not substantially related to the exempt pur-
poses of the organization or is commercially
available.
‘‘(C) For purposes of this section, qualified
not-for-profit organization means a not-for-prof-
it organization organized and operated exclu-
sively—
‘‘(i) for religious, charitable, scientific,
testing for public safety, literary or edu-
cational purposes;
‘‘(ii) as civic leagues or social welfare
organizations;
‘‘(iii) as labor, agricultural or horti-
cultural organizations;
‘‘(iv) as chambers of commerce, busi-
ness leagues or trade associations; or
‘‘(v) as fraternal beneficiary societies,
orders or associations;
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‘‘no part of the net earnings of which inures to
the benefit of any private shareholder or indi-
vidual.
‘‘(D) Upon application in a form pre-
scribed by the State Administrator, the State
Administrator shall provide qualification certifi-
cates to qualified not-for-profit organizations.
‘‘(E) If a not-for-profit organization pro-
vides property or personal services in connection
with contributions or dues to the organizations,
then it shall be required to treat the provision
of said property or personal services as a pur-
chase taxable pursuant to this subtitle at the
fair market value of said property or personal
services.
‘‘(F) Taxable property and services pur-
chased by not-for-profit organizations for resale
or for use in the production of taxable property
or services shall be eligible for the exemptions
provided in section 2.
‘‘(b) OPTION TO COLLECT TAX ON CERTAIN EX-
EMPT PURCHASES.—
‘‘(1) IN GENERAL.—In the case of a purchase
which would (but for this subsection (b) be exempt
from the tax imposed by section 1 by reason of sec-
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tion 2(a), such subsection shall not apply to such
purchase if the seller—
‘‘(A) elects the application of this sub-
section, and
‘‘(B) immediately provides the purchaser
with a receipt reflecting the information re-
quired by section 54. Seller may elect to exer-
cise the application of this section with respect
to some or all purchases or purchasers.
‘‘(2) The Secretary may by regulation provide
that certain industries or specific products are such
that the vendor must collect the tax on otherwise ex-
empt purchase if, in the Secretary’s judgment, said
industry or products are such that consumers buy
25 percent or more of the product sold by the indus-
try or the product. A registered vendor may by ap-
plication for good cause shown elect to opt out of the
application of this paragraph.
‘‘(3) CROSS REFERENCE.—
‘‘For credit to purchaser where seller collects tax
on exempt purchase, see section 11(a)(3).
‘‘For Tax To Be Separately Stated and Charged,
see section 59.
‘‘Subchapter 
B—Credits; 
Refunds; 
Install-
ment Payments of Tax on Purchases of
Residences
‘‘Sec. 11. Credits and refunds.
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‘‘Sec. 12. Installment payments of tax on purchases of principal
residences.
‘‘Sec. 15. Family Consumption Refund.
‘‘SEC. 11. CREDITS AND REFUNDS.
‘‘(a) GENERAL CREDITS.—Each person shall be al-
lowed a credit against the taxes imposed by section 1 for
any month in an amount equal to the sum of—
‘‘(1) such person’s used property credit under
subsection (c) for such month,
‘‘(2) such person’s business use conversion
credit under subsection (d) for such month,
‘‘(3) the amount paid by such person with re-
spect to a purchase during such month by reason of
a tax collected on an exempt purchase pursuant to
section 3(b) (relating to election to collect tax on
certain nontaxable purchases),
‘‘(4) the administration credit under section (e),
‘‘(5) the compliance equipment cost credit
under section (f), and
‘‘(6) any amount paid in excess of amount due.
‘‘(b) REFUNDS.—
‘‘(1) FILERS.—If a person files two consecutive
monthly tax reports with a credit balance, then,
upon application in a form prescribed by the State
Administrator, then the credit balance shown on the
second monthly report shall be refunded to the tax-
payer within 60 days of said application.
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‘‘(2) NONFILERS.—If a person other than a
monthly-filer has an excess credit for any month,
then, upon application in a form prescribed by the
State Administrator, then the credit balance due
shall be refunded to the taxpayer within 60 days of
said application.
‘‘(3) INTEREST.—No interest shall be required
to be paid on any overpayment under this subsection
for any month if such overpayment is paid within 60
days after the close of such month.
‘‘(4) SUSPENSION OF PERIOD TO PAY REFUND
ONLY IF FEDERAL COURT RULING.—The 60-day pe-
riods under paragraphs (1) and (2) shall be sus-
pended with respect to a purported credit balance
(or portion thereof) only during any period that
there is in effect a preliminary ruling from a Federal
court that there is reasonable cause to believe that
such credit balance is not actually the amount due.
‘‘(5) MONTHLY-FILER.—For purposes of this
subsection, the term ‘monthly-filer’ means, with re-
spect to any month, any person required to register
under section 43 for such month.
‘‘(c) USED PROPERTY CREDIT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), a seller shall receive credit for previous sales tax
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paid on the resale of taxable property or services, as
provided in this subsection (c).
‘‘(2) DETERMINATION
OF
USED
PROPERTY
CREDIT AMOUNT.—The used property credit amount
determined under this paragraph with respect to any
property is the lesser of—
‘‘(A) the amount of tax due and paid by
virtue of the present transaction (without re-
gard to any credits), or
‘‘(B) the most recent prior tax imposed by
section 1 with respect to such property trans-
action (without regard to any credits).
‘‘(3) TRANSITIONAL DEEMED PAID RULE FOR
PROPERTY OWNED ON EFFECTIVE DATE OF ACT.—
In the case of property which was acquired by the
seller before January 1, 1999, the amount under
paragraph (2)(B) shall be the amount which is the
product of—
‘‘(A) that which would be determined
under paragraph (2)(B) as if this subtitle had
been in effect at the time of such acquisition,
and
‘‘(B) the equity ratio (as defined in para-
graph (4)).
‘‘(4) The equity ratio is the quotient of—
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‘‘(i) the income tax basis in the prop-
erty at the end of 1997, less the mortgage
or debt secured by said property, divided
by
‘‘(ii) the income tax basis in the prop-
erty at the end of 1997:
Provided, however, That the quantity defined in sub-
paragraph (1) can not be less than zero and further
providing that the equity ratio so calculated cannot
be less than zero or greater than one.
‘‘(d) BUSINESS USE CONVERSION CREDIT.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), a person’s business use conversion credit for any
month is the aggregate of the amounts determined
under paragraph (2) with respect to property—
‘‘(A) on which a prior tax was imposed by
section 1 on the purchase by such person, and
‘‘(B) which commences to be exclusively
used during such month in the production by
such person of other taxable property or serv-
ices.
‘‘(2) AMOUNT OF CREDIT.—The amount deter-
mined under this paragraph with respect to any
property is lesser of—
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‘‘(A) the product of the rate imposed by
section 1 and the fair market value of the prop-
erty when its use is converted, and
‘‘(B) the prior tax referred to in paragraph
(1)(A).
‘‘(3) Property converted from business use to
personal use shall be subject to tax pursuant to sec-
tion 1 on the book value of the converted property
as of the date of conversion, provided that the books
are kept in accordance with generally accepted ac-
counting principles.
‘‘(e) ADMINISTRATION CREDIT.—Every taxpayer fil-
ing a timely monthly report in compliance with section 41
shall be entitled to a taxpayer administrative credit equal
to the greater of—
‘‘(1) $100, or
‘‘(2) one-half of 1 percent of the tax remitted:
Provided, however, That in no event will the credit
afforded by this section exceed 20 percent of the tax
due to be remitted prior to the application of this
credit.
‘‘(f) COMPLIANCE EQUIPMENT COST CREDIT.—Ven-
dors required to purchase new equipment to comply with
the provisions of section 54 shall be entitled to a credit
in the amount of 50 percent of the cost of such equipment.
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‘‘SEC. 12. INSTALLMENT PAYMENTS OF TAX ON PURCHASE
OF PRINCIPAL RESIDENCES.
‘‘(a) IN GENERAL.—If—
‘‘(1) property is purchased and used as the
principal residence of any purchaser of such prop-
erty, and
‘‘(2) such purchaser elects the application of
this section, then the tax imposed by section 1 with
respect to such purchase shall be paid in equal an-
nual installments over the 30-year period beginning
on the date of such sale together with simple inter-
est at the rate imposed by section 6621 of the Inter-
nal Revenue Code of 1986
‘‘(b) TERMINATION OF INSTALLMENTS IF PROPERTY
IS SOLD OR OTHERWISE CEASES TO BE PRINCIPAL RESI-
DENCE.—
‘‘(1) IN GENERAL.—If, before the close of the
30-year period referred to in subsection (a), any
property to which an election under subsection (a)
applies—
‘‘(A) is sold, or
‘‘(B) otherwise ceases to be used as the
principal residence of any purchaser making
such election,
then the unpaid installments shall be due no later
than two years after the time of such sale or ces-
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sation. To the extent that such sale or cessation is
only of a portion of such residential property, the
preceding sentence shall apply only to a like portion
(based on value) of such unpaid installments.
‘‘(2) SPECIAL RULE.—In a case to which para-
graph (1)(B) applies with respect to any pur-
chaser—
‘‘(A) if such purchaser purchases within
two years another property which property is
purchased and used as the principal residence
of such purchaser, the remaining unpaid install-
ments shall be due at the time of such pur-
chase, and
‘‘(B) if subparagraph (A) does not apply to
such purchaser, the remaining unpaid install-
ments shall be due at the close of the two-year
period beginning on the date of the cessation
referred to in paragraph (1)(B).
‘‘(C) The two-year period referred to in
subparagraph (B) shall be suspended during
any period that such purchaser uses such prop-
erty as his principal residence.
‘‘(3) If any purchaser exercises the right to in-
stallment payments under this section, then the re-
sponsibility to remit the tax due is the purchaser’s
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rather than the seller’s provided that the seller has
on file a copy of the election form prescribed by the
Secretary.
‘‘SEC. 15. FAMILY CONSUMPTION REFUND.
‘‘(a) GENERAL RULE.—Each qualified family unit
(as defined in subsection (b)) shall be eligible to receive
a sales tax rebate in an amount no greater than the prod-
uct of—
‘‘(1) the rate of tax imposed by section 1, and
‘‘(2) the lesser of—
‘‘(A) the poverty level (as defined in sub-
section (c)), or
‘‘(B) the wage income of the family unit,
in the manner prescribed and subject to the limitations
set forth by this section.
‘‘(b) QUALIFIED FAMILY UNIT DEFINED.—For pur-
poses of this section, the term qualified family unit shall
mean any family sharing a common residence. Any family
members (as defined in subsection (e)) sharing a common
residence shall be considered part of one integrated family
unit.
‘‘(c) POVERTY LEVEL DEFINED.—The poverty level
shall be the quotient that is—
‘‘(1) the level determined by the Department of
Health and Human Services poverty guidelines re-
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quired by sections 652 and 673(2) of the Omnibus
Reconciliation Act of 1981 (all States and the Dis-
trict of Columbia) for family units of a particular
size, divided by
‘‘(2) the quantity that is one minus the tax rate
imposed by section 1.
‘‘(d) REBATE MECHANISM.—
‘‘(1) GENERAL RULE.—The rebate provided by
section (a) shall be provided to each qualified family
unit by including the pay period rebate amount in
each paycheck.
‘‘(2) PAY PERIOD REBATE AMOUNT.—The pay
period rebate amount shall be the lesser of product
of the rate of tax imposed by the section 1 and—
‘‘(A) the wages paid during the pay period,
or
‘‘(B) the quotient that is the poverty level
for the family unit (determined in accordance
with subsection (c)) divided by the number of
pay periods in a year.
‘‘(3) ADJUSTED WITHHOLDING TABLES TO BE
PROVIDED
TO
EMPLOYERS.—The Social Security
Administration shall publish revised withholding ta-
bles for use by employers.
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‘‘(4) COORDINATION.—The family member re-
ceiving the family consumption rebate shall set
forth, in a form prescribed by the Social Security
Administration, the names and Social Security num-
bers of all members of the family unit for which a
rebate is claimed. Employers shall provide this infor-
mation in the form prescribed to the Social Security
Administration.
‘‘(e) FAMILY MEMBERS DEFINED.—For purposes of
determining the size of the family unit, family members
shall include each spouse or the head of household, chil-
dren, grandchildren, parents and grandparents.
‘‘(f) DISQUALIFIED FAMILY MEMBERS.—In order for
a family member to be counted for purposes of determin-
ing family unit size, said family member must—
‘‘(1) if over the age of two years, have a bona
fide Social Security number; and
‘‘(2) be a lawful resident of the United States.
‘‘(g) STUDENTS LIVING AWAY FROM HOME.—A stu-
dent during each of five months in a calendar year living
away from the common residence of a family unit but who
receives over 50 percent of his support from the family
unit shall be included as part of that family unit for pur-
poses of this section.
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‘‘(h) CHANGE
IN FAMILY CIRCUMSTANCES.—The
residence of family members, marital status and number
of persons in a family unit on the first day of the calendar
year shall govern determinations required to be made
under this section for purposes of said calendar year.
‘‘(i) TWO OR MORE FAMILY MEMBERS WORKING.—
The family unit may elect to divide the rebate between
two family members. Family members shall make this
election in a form prescribed by the Social Security Ad-
ministration and shall when making said election disclose
the name and Social Security number of the other family
members. Creditable wages for families making this elec-
tion shall not exceed one half of the poverty level for that
family unit.
‘‘(j) EMPLOYERS TO ADJUST REMITTANCES.—Em-
ployers shall reduce their payroll tax remittances to the
Social Security Administration by the amount of Family
Consumption Rebate provided in employee paychecks.
‘‘(k) NO DOUBLE COUNTING.—In no event shall any
person be considered part of more than one family unit.
‘‘(l) SOCIAL SECURITY ADMINISTRATION.—The So-
cial Security Administration shall provide to multiple
wage-earner family units who received a lower rebate
amount than that to which that were entitled under sub-
section (a) due to the application of the limitations in sub-
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section (d)(2) and subsection (i) any payment due within
30 days of the close of the calendar year.
‘‘Subchapter C—Definitions and Special
Rules
‘‘Sec. 21. Definitions.
‘‘Sec. 22. Special rules.
‘‘SEC. 21. DEFINITIONS.
‘‘(a) FINANCIAL INTERMEDIATION SERVICES.—For
purposes of this subtitle—
‘‘(1) 
IN
GENERAL.—The 
term 
‘financial
intermediation services’ means the sum of—
‘‘(A) 
explicitly 
charged 
financial
intermediation services, and
‘‘(B) 
implicitly 
charged 
financial
intermediation services.
‘‘(2) EXCEPTIONS.—Nothing in this chapter
shall be construed to impose a tax under this sub-
title on interest, dividends, capital gains or other in-
vestment income.
‘‘(3) 
EXPLICITLY
CHARGED
FINANCIAL
INTERMEDIATION
SERVICES.—The term ‘explicitly
charged financial intermediation services’ includes—
‘‘(A) brokerage fees (including the full
amount of stated commissions, and the spread
between bid and asked price on a particular ex-
ecuted trade),
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‘‘(B) explicitly stated banking, loan origi-
nation, processing, documentation, credit check
fees or other similar fees,
‘‘(C) safe-deposit box fees,
‘‘(D) insurance premiums, to the extent
such premiums are not allocable to the invest-
ment account of the underlying insurance pol-
icy,
‘‘(E) trustees’ fees, and
‘‘(F) other financial services fees (includ-
ing mutual fund management, sales and exit
fees).
‘‘(4) 
IMPLICITLY
CHARGED
FINANCIAL
INTERMEDIATION SERVICES.—
‘‘(A) IN GENERAL.—The term ‘implicitly
charged financial intermediation services’ in-
cludes the gross imputed amount in relation to
any underlying interest bearing investment, ac-
count or debt less any explicitly stated amounts
or fees in relation to such underlying interest
bearing investment, account or debt.
‘‘(B) GROSS IMPUTED AMOUNT.—For pur-
poses of subparagraph (A), the term ‘gross im-
puted amount’ means—
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‘‘(i) with respect to any underlying in-
terest bearing investment or account, the
product of—
‘‘(I) the excess (if any) of the ap-
plicable interest rate over the rate
paid on such investment, and
‘‘(II) such account balance; and
‘‘(ii) with respect to any underlying
interest bearing debt, the product of—
‘‘(I) the excess (if any) of the
rate paid on such debt over the appli-
cable interest rate, and
‘‘(II) such debt balance.
‘‘(C) APPLICABLE
INTEREST
RATE.—For
purposes of subparagraph (B), the applicable
interest rate shall be the sum of the—
‘‘(i) rate that the Federal Government
generally pays when it issues securities of
like-term and like-issuance date to the
term and issuance date of the underlying
investment or debt for which a gross im-
puted amount is being calculated and
‘‘(ii) 2 percent.
The Secretary shall publish a table of applicable
interest rates to be used for purposes of this
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paragraph for each month and for various
terms.
‘‘(b) GROSS PAYMENTS.—For purposes of this sub-
title, the term ‘gross payments’ shall mean gross payments
inclusive of Federal tax imposed by, and State taxes im-
posed in conformity with, this chapter but exclusive of cus-
toms duties. Gross payment shall be the product of the
pre-tax factor and the payments for the taxable property
or service exclusive of State and Federal taxes imposed
by, and State taxes imposed in conformity with, this sub-
title. For purposes of this section, the pre-tax factor shall
be one divided by the quantity that is one minus the sum
of—
‘‘(1) the Federal tax rate imposed by section 1,
and
‘‘(2) the State tax rate imposed in conformity
with this subtitle.
‘‘(c) Primary residence shall mean residential real
property used predominantly as the place of abode for a
person or persons. A person shall have only one primary
residence for purposes of this section. A married couple
shall have only one primary residence.
‘‘(d) PURCHASED FOR RESALE.—For purposes of
section 2(a)(1), a property or service is purchased for re-
sale if such property or service is purchased by a person
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in an active trade or business for the purpose of reselling
the taxable property or service in the ordinary course of
that active trade or business.
‘‘(e) PURCHASED TO PRODUCE TAXABLE PROPERTY
OR SERVICES.—For purposes of section 2(a)(2)—
‘‘(1) IN
GENERAL.—A property or service is
purchased to produce a taxable property or service
if such property or service is purchased by a person
in an active trade or business for the purpose of em-
ploying or using such property or service in the pro-
duction or sale of other taxable property or services
in the ordinary course of that active trade or busi-
ness.
‘‘(2) RESEARCH
EXPERIMENTATION
AND
DE-
VELOPMENT.—Taxable property or services used in
an active trade or business for the purpose of re-
search, experimentation and development shall be
treated as purchased to produce taxable property or
services.
‘‘(3) INSURANCE
PAYMENTS.—A property or
service purchased by an insurance company on be-
half of an insured shall be treated as a property or
service purchased to produce a taxable property or
service if the entire premium for the insurance con-
tract giving rise to the insurer’s obligation was sub-
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ject to tax in accordance with subsection (a) (relat-
ing to financial intermediation services).
‘‘(4) EDUCATION
AND
TRAINING.—Education
and training shall be treated as purchased to
produce taxable property or services. For purposes
of this section, education and training shall mean
tuition for general primary, secondary, or university
level education, and tuition for job-related training
courses. Tuition shall not include amounts attrib-
utable to room or board for the student.
‘‘(f) Qualified fixtures shall include only those fix-
tures that are a permanent, integral, incorporated and
irremovable part of the structure and shall exclude fur-
niture, furnishings, appliances or similar tangible personal
property.
‘‘(g) REAL PROPERTY.—For purposes of this chap-
ter, the term real property shall have the meaning ascribed
to it at common law. The Secretary shall by regulation
establish uniform national rules for purposes of admin-
istering this chapter to the extent that jurisdictions within
the United States may provide different holdings as to the
scope of the term real property.
‘‘(h) RESIDENCE.—Whenever this chapter requires
that the State of ‘residence’ need be determined, it shall
be determined in descending order of priority as the State
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of permanent abode, the center of vital interests, or the
habitual abode. If the State of residence is still undeter-
mined, if the person is a resident of the United States,
the determination will be made by the Federal Office of
Revenue Allocation.
‘‘(i) Residential real property is real property, includ-
ing structures, land, and qualified fixtures and appur-
tenances thereto that—
‘‘(1) is held in fee simple and
‘‘(2) is predominantly used as a residence or
dwelling.
‘‘(j) SECRETARY.—For purposes of this chapter, the
term ‘Secretary’ means the United States Secretary of
Treasury.
‘‘(k) STATE ADMINISTRATOR.—For purposes of this
chapter, the term ‘State Administrator’ shall mean the
highest State official responsible for administering the
taxes imposed by this subtitle in the conforming State. In
States that are not conforming States, the ‘State Adminis-
trator’ shall mean the person designated by the Secretary
as the Federal official responsible for administering the
taxes imposed by this chapter in a non-conforming State.
State Administrator shall also mean, when the context so
requires, the Federal official responsible for administering
the multi-State vendor program.
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‘‘(l) Structures, for purposes of subsection (i) shall
include homes that are manufactured housing but not self-
propelled and not on wheels.
‘‘(m) TANGIBLE PERSONAL PROPERTY.—For pur-
poses of this chapter, the term tangible personal property
shall have the meaning ascribed to it at common law. The
Secretary shall by regulation establish uniform national
rules for purposes of administering this chapter to the ex-
tent that jurisdictions within the United States may pro-
vide different holdings as to the scope of the term tangible
personal property.
‘‘(n) TAXABLE PROPERTY OR SERVICES.—
‘‘(1) GENERAL
RULE.—For purposes of this
chapter, the term ‘taxable property or service’
means—
‘‘(A) any property (including leaseholds of
any term or rents with respect to such prop-
erty) other than intangible property, and
‘‘(B) any service (including any financial
intermediation services).
‘‘(2) WAGES.—For purposes of the preceding
sentence, services shall not include wages paid by an
employer engaged in an active trade or business that
is registered pursuant to section 43. Services shall
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include wages paid by an employer not engaged in
an active trade or business unless—
‘‘(A) those wages are subject to tax pursu-
ant to section 22(i), or
‘‘(B) those wages are paid by a qualified
not-for-profit organization (as defined in section
3(a)(iii)).
‘‘(o) UNITED STATES.—For purposes of this chapter,
the term ‘United States’, when used in the geographical
sense, means the 50 States, the District of Columbia, and
any commonwealth, territory or possession of the United
States.
‘‘SEC. 22. SPECIAL RULES.
‘‘(a) 
TIMING
OF
TAX
ON
FINANCIAL
INTERMEDIATION
SERVICES.—The tax on financial
intermediation services provided in connection to an un-
derlying investment account or debt shall be calculated
and collected with the same frequency that statements are
rendered by the financial institution in connection with the
investment account or debt but not less frequently than
quarterly.
‘‘(b) The financial institution need not calculate its
liability on a transaction by transaction or account by ac-
count basis provided that the method used by the financial
institution is—
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‘‘(1) reasonable, and
‘‘(2) will lead to a tax liability that is substan-
tially similar to that projected under ordinary sales
tax principles.
‘‘(c) SPECIAL RULES RELATING TO INTERNATIONAL
FINANCIAL
INTERMEDIATION
SERVICES.—Financial
intermediation services shall be deemed as used, consumed
or enjoyed within the United States if the financial
intermediation services provider or any related party has
a permanent establishment in the United States and the
person purchasing the services is a resident of the United
States. For purposes of the preceding sentence, the term
‘related party’ means, with respect to any financial institu-
tion, any corporation which is a member of a controlled
group (as defined in former section 267(f)) which includes
such institution.
‘‘(d) FINANCING LEASES.—The Secretary shall pro-
mulgate rules for disaggregating the principle and interest
components of a financing lease. For purposes of this sub-
section, a financing lease shall be any lease under which
the lessee shall have the right to acquire the property for
50 percent or less of its fair market value at the end of
the lease term. The imputed interest rate to be employed
by the Secretary when promulgating said regulations shall
be the applicable rate (as defined in section 21(a)(4)(C)).
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‘‘(e) 
INSTALLMENT
SALES, 
ACCOUNTING, 
RE-
TURNS.—
‘‘(1) GENERAL RULE.—Tax will be due when
payment for the taxable property and services sold,
consumed, used or enjoyed is actually received.
‘‘(2) ALTERNATIVE RULE.—A vendor may elect
to adopt the accrual method of accounting for pur-
poses of determining when the tax will be due. Said
election must apply to all sales made by vendor in
a particular calendar year.
‘‘(3) INSTALLMENT SALES.—Tax will be due on
taxable property and services sold under the install-
ment method when payment for the taxable property
and services sold is actually received.
‘‘(4) RETURNS.—A credit shall be provided to
the vendor for returned taxable property and serv-
ices when actual payment for the returned taxable
property and services is made by the vendor to the
person returning the taxable property and services.
‘‘(f) MIXED USE PROPERTY OR SERVICES.—
‘‘(1) MIXED USE PROPERTY OR SERVICE DE-
FINED.—Mixed Use Property or Service is taxable
property or services purchased both for a purpose
that would give rise to an exemption pursuant to
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section 2 and for taxable use, consumption or enjoy-
ment.
‘‘(2) EXEMPTION
THRESHOLD.—Mixed Use
Property or Service shall not be exempt pursuant to
section 2 unless said property is used more than 95
percent for purposes that would give rise to an ex-
emption pursuant to section 2.
‘‘(3) MIXED
USE
PROPERTY
OR
SERVICES
CREDIT.—A business registered pursuant to section
43 is entitled to a business use conversion credit
(pursuant to section 11(d)) equal to product of—
‘‘(A) the mixed use property amount,
‘‘(B) the business use ratio, and
‘‘(C) the rate of tax imposed by section 1.
‘‘(4) MIXED
USE
PROPERTY
AMOUNT.—The
mixed use property amount for each year shall be—
‘‘(A) one-thirtieth of the purchase price for
real property for thirty years or until the prop-
erty is sold,
‘‘(B) one-seventh of the purchase price for
tangible personal property for seven years or
until the property is sold,
‘‘(C) one-fifth of the purchase price for ve-
hicles for five years or until the property is
sold, and
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‘‘(D) a reasonable amount for other types
of taxable property or services or in accordance
with regulations.
‘‘(5) BUSINESS USE RATIO.—The business use
ratio is the ratio of business use to total use for a
particular year. For vehicles, the business use ratio
will be the ratio of business purpose miles to total
miles. For real property, the business use ratio is
the ratio of floor space used for business purposes
to total floor space. For tangible personal property
(except for vehicles), the business use ratio is the
ratio of total time used for business purposes to
total time used. For other property or services, the
business ratio shall be calculated using a reasonable
method. Reasonable records must be maintained to
support a taxpayer’s business use of the mixed use
property or service.
‘‘(g) HOBBY ACTIVITIES.—The exemptions afforded
by section 2 shall not be available for purchases made by
a trade or business if that trade or business is an activity
not engaged in for profit. If the business activity has re-
ceived gross payments that exceed the sum of—
‘‘(1) taxable property and services purchased,
‘‘(2) wages paid, and
‘‘(3) taxes paid,
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in three or more of the most recent calendar years then
the business activity shall be deemed to be engaged in for
profit.
‘‘(h) GAMING.—There is hereby imposed a 15-percent
tax on taxable gaming services. Taxable gaming services
shall be the gross gaming receipts less total gaming pay-
offs. This tax shall be paid and remitted by the person
offering the gaming services.
‘‘(i) GOVERNMENT SERVICES.—There is hereby im-
posed an excise tax on the receipt of wages by Federal,
State and local government employees equal to 15 percent
of said wages. Said excise tax is to be withheld and remit-
ted by the employer.
‘‘Subchapter D—Authority for States to
Collect Tax
‘‘Sec. 31. Authority for States to collect tax.
‘‘Sec. 32. Federal administrative support for States.
‘‘Sec. 33. Federal administration option for multi-State vendors.
‘‘SEC. 31. AUTHORITY FOR STATES TO COLLECT TAX.
‘‘(a) IN GENERAL.—The tax imposed by this chapter
on gross payments for the use, consumption or enjoyment
of taxable property or services within a State which is an
administering State shall be administered, collected, and
remitted to the United States Treasury by such State.
‘‘(b) ADMINISTERING STATE.—For purposes of this
section, the term ‘administering State’ means any State—
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‘‘(1) which maintains a conforming sales tax,
and
‘‘(2) which enters into a cooperative agreement
with the Secretary containing reasonable provisions,
limited in scope and detail, governing the adminis-
tration by such State of the taxes imposed by this
chapter and the remittance to the United States in
a timely manner of taxes collected under this chap-
ter.
‘‘(c) CONFORMING SALES TAX.—For purposes of
subsection (b), a State maintains a conforming sales tax
if such State imposes, administers, and collects a sales
tax—
‘‘(1) which conforms to the tax imposed by this
chapter in all significant respects (other than the
rate of tax), including—
‘‘(A) the same taxable property and serv-
ices,
‘‘(B) the same exemptions, and
‘‘(C) the same credits and refunds (other
than section 11(a)(4) relating to the taxpayer
administrative credit and section 15 relating to
the family consumption refund), and
‘‘(2) which is imposed at a rate of no less than
1 percent.
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‘‘(d) COOPERATIVE AGREEMENTS.—The agreement
under subsection (b)(2) shall be limited in scope and detail
but include provisions for the expeditious transfer of
funds, contact officers, dispute resolution, and other mat-
ters of importance.
‘‘(e) TIMELY REMITTANCE OF TAX.—
‘‘(1) IN GENERAL.—Administering States shall
remit and pay over taxes collected under this chap-
ter on behalf of the United States (less the adminis-
tration fee allowable under paragraph (2)) no later
than 15 days after receipt.
‘‘(2) 
ADMINISTRATION
FEE.—Administering
States may retain an administration fee equal to one
percent of the amounts otherwise required to be re-
mitted to the United States under this chapter by
the State.
‘‘(f) LIMITATION ON ADMINISTRATION OF TAX BY
UNITED STATES.—The Secretary may administer the tax
imposed by this chapter in an administering State only
if—
‘‘(1)(A) such State has failed on a regular and
sustained basis to timely remit to the United States
taxes collected under this chapter on behalf of the
United States, or
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‘‘(B) such State has on a regular and sustained
basis otherwise materially breached the agreement
referred to in subsection (b)(2),
‘‘(2) the State has failed to cure such failures
and alleged breaches within a reasonable time,
‘‘(3) the Secretary provides such State with
written notice of such failures and alleged breaches,
and
‘‘(4) a district court of the United States within
such State has rendered a decision permitting such
administration.
‘‘(g) The Secretary shall administer the tax imposed
by this chapter in any State or other jurisdiction that is
not an administering State.
‘‘(h) It shall be permissible for a conforming State
to contract with another conforming State to administer
its sales tax for an agreed fee. In this case, the agreement
contemplated by subsection (d) shall have both States and
the Federal Government as parties.
‘‘(i) COORDINATION AMONG CONFORMING STATES.—
‘‘(1) EXEMPTION
CERTIFICATES.—Conforming
States shall honor exemption certificates issued by
other conforming States.
‘‘(2) AUDITS.—Conforming States shall not
conduct audits at facilities in other Conforming
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States but shall instead cooperate with other Con-
forming States using the mechanisms established by
section 32 of this subchapter or by other agreement
or Compact.
‘‘SEC. 
32. 
FEDERAL 
ADMINISTRATIVE 
SUPPORT 
FOR
STATES.
‘‘(a) The Secretary shall administer a program to fa-
cilitate information sharing among States.
‘‘(b) The Secretary shall facilitate and may be a party
to a Compact Among Conforming States for purposes of
facilitating the taxation of interstate purchases and for
other purposes that may facilitate implementation of this
chapter.
‘‘(c) The Secretary shall have the authority to pro-
mulgate regulations and guidelines to assist States in ad-
ministering the national sales tax, to provide for uniform-
ity in the administration of the tax and to provide guid-
ance to taxpayers and administrators.
‘‘SEC. 
33. 
FEDERAL 
ADMINISTRATION 
OPTION 
FOR
MULTISTATE VENDORS.
‘‘(a) IN GENERAL.—Vendors that maintain retail es-
tablishments in five or more conforming States may elect,
in a form prescribed by the Secretary, to have their sales
tax obligations administered by the Federal Government
under the multistate vendor program.
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‘‘(b) FEDERAL GOVERNMENT TO COLLECT
AND
REMIT STATE SALES TAXES.—Under the multistate ven-
dor program, the Federal Government will collect Federal
and conforming State sales taxes and remit the State sales
taxes to the States within 10 days of receiving said reve-
nue.
‘‘(c) FEDERAL ADMINISTRATION.—The Federal Gov-
ernment will serve in the place of the State administrator
with respect to multi-State vendors exercising the election
under this section. With respect to electing multi-State
vendors, the Federal Government exclusively will—
‘‘(1) audit;
‘‘(2) provide exemption certificates; and
‘‘(3) otherwise administer the Federal and con-
forming State sales tax in place of the administering
State.
‘‘Subchapter E—Other Administrative
Provisions
‘‘Sec. 41. Monthly reports and payments.
‘‘Sec. 42. Records.
‘‘Sec. 43. Registration.
‘‘Sec. 44. Certificates.
‘‘Sec. 45. Penalties.
‘‘Sec. 46. Burden of persuasion and burden of production.
‘‘Sec. 47. Attorneys and accountancy fees.
‘‘Sec. 48. Appeals.
‘‘Sec. 49. Subpoenas.
‘‘Sec. 50. Tax court jurisdiction.
‘‘Sec. 51. Power to levy.
‘‘Sec. 52. Problem resolution officers.
‘‘Sec. 53. Interstate allocation.
‘‘Sec. 54. Tax to be separately stated and charged.
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‘‘SEC. 41. MONTHLY REPORTS AND PAYMENTS.
‘‘(a) REPORTS.—On or before the 25th of each
month, every person who is liable to collect and remit the
tax imposed by this chapter, or pay the tax imposed by
this chapter by reason of gross payments described in sec-
tion (1) (hereafter in this section referred to as the ‘tax-
payer’), shall submit to the appropriate tax authority (in
a form satisfactory to the Secretary) a report relating to
the previous month that sets forth—
‘‘(1) the gross payments referred to in section
1,
‘‘(2) the tax collected under this chapter in con-
nection with such payments, and
‘‘(3) the amount and type of any credit claimed.
‘‘(b) PAYMENTS OF TAX.—The tax imposed by this
chapter with respect to any use, consumption or enjoy-
ment during any month shall be paid on or before the 25th
of the succeeding month. One payment shall pay both Fed-
eral and conforming State tax liability.
‘‘(c) INTEREST ON AMOUNTS REMITTED LATE.—
‘‘(1) IN GENERAL.—If any amount required to
be paid on or before the 25th of any month is paid
after such 25th day, the taxpayer shall pay simple
interest from such 25th day at the rate of—
‘‘(A) 1 percent per month (or any fraction
thereof) for the first month, and
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‘‘(B) 1.5 percent per month (or any frac-
tion thereof) thereafter.
‘‘(2) AMOUNTS PAID AFTER COLLECTION AC-
TION.—
‘‘(A) IN GENERAL.—The rate of interest
under paragraph (1) shall be 2 percent per
month (or any fraction thereof) with respect to
amounts paid only after the commencement of
a collection action with respect to such
amounts.
‘‘(B) COLLECTION ACTION.—For purposes
of subparagraph (A), the term ‘collection ac-
tion’ includes administrative levies or garnish-
ments and the commencement of legal action in
any court.
‘‘(d) PENALTY FOR LATE FILING.—
‘‘(1) IN GENERAL.—In the case of a failure by
any person to file a report required by subsection (a)
on or before due date (determined with regard to
any extension) for such report, such person shall pay
a penalty equal to the greater of—
‘‘(A) $50, or
‘‘(B) 0.5 percent of the gross payments re-
ferred to in section 1 required to be shown on
the report.
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‘‘(2) INCREASED PENALTY ON RETURNS FILED
AFTER WRITTEN INQUIRY.—The amount of the pen-
alty under paragraph (1) shall be doubled with re-
spect to any report filed after a written inquiry with
respect to such report is received by the taxpayer
from the State Administrator.
‘‘(3) EXCEPTIONS.—
‘‘(A) REASONABLE
CAUSE.—No penalty
shall be imposed under paragraph (1) with re-
spect to any failure if it is shown that such fail-
ure is due to reasonable cause.
‘‘(B) OTHER WAIVER AUTHORITY.—In ad-
dition to penalties not imposed by reason of
subparagraph (A), the State Administrator, on
application, shall waive the penalty imposed by
paragraph (1) once per taxpayer per 2-year pe-
riod. The preceding sentence shall not apply to
a penalty determined under paragraph (2).
‘‘(e) EXTENSIONS FOR FILING REPORTS.—
‘‘(1) AUTOMATIC EXTENSIONS FOR LESS THAN
30 DAYS.—On application, extensions of less than 30
days to file reports under subsection (a) shall be
automatically granted.
‘‘(2) OTHER EXTENSIONS.—Extensions of 30 to
90 days to file such reports shall be liberally granted
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by the State Administrator for reasonable cause. Ex-
tensions greater than 90 days may be granted by the
State Administrator to avoid hardship.
‘‘(3) 
NO
EXTENSION
FOR
PAYMENT
OF
TAXES.—Notwithstanding paragraphs (1) and (2),
no extension shall be granted with respect to the
time for paying the taxes under this chapter.
‘‘(f) PENALTY FOR WILLFULLY OR RECKLESSLY AC-
CEPTING A FALSE EXEMPTION CERTIFICATE.—A person
who willingly or recklessly accepts a false exemption cer-
tificate shall pay a penalty equal to 20 percent of the tax
not collected on gross payments for taxable property and
services by virtue of said acceptance.
‘‘(g) The Secretary shall establish a system whereby
violation of the National Retail Sales Tax Act of 1996 can
be brought to the attention of the Secretary for investiga-
tion through the use of a toll-free telephone number and
otherwise.
‘‘SEC. 42. RECORDS.
‘‘Any person liable to collect and remit taxes pursu-
ant to this chapter or pay the tax imposed by this chapter
by reason of gross payments described in section 1, shall
keep records (including, but not limited to, copies of all
section 54 receipts provided and complete records of ex-
empt purchases including exempt purchaser’s exemption
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certificates and tax number and the net of tax amount
of purchase) sufficient to provide a reasonable basis for
determining the amounts reported, collected, and remitted
for a period of 3 years after the filing of the report for
which the records formed the basis. Any purchaser who
purchased taxable property or services but did not pay tax
by reason of asserting an exemption shall keep records
sufficient to provide a reasonable basis for determining
whether the exemption was valid for a period of 3 years
after the purchase of taxable property or services.
‘‘SEC. 43. REGISTRATION.
‘‘(a) IN GENERAL.—Any person liable to collect and
remit taxes pursuant to section 1 who is engaged in an
active trade or business shall register with the State or
Federal taxing authorities administering the taxes im-
posed by this chapter.
‘‘(b) DESIGNATION OF TAX MATTERS PERSON.—
Every person registered pursuant to subsection (a) shall
designate a tax matters person. Each person registered
must provide notice of a change in the identity of the tax
matters person within 30 days of said change.
‘‘SEC. 44. CERTIFICATE.
‘‘The State Administrator shall issue certificates of
registration, exemption certificates, qualification certifi-
cates to qualified not-for-profit organizations and may
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issue such other certificates as may prove useful in the
administration of the taxes imposed by this chapter.
‘‘SEC. 45. PENALTIES.
‘‘(a) FAILURE TO REGISTER.—Each person who is
required to register pursuant to section 43 but fails to do
so prior to notification by the State Administrator shall
be liable for a penalty of $500.
‘‘(b) FAILURE TO COLLECT OR REMIT TAX.—
‘‘(1) CIVIL PENALTY.—Each person who reck-
lessly or willfully fails to collect or remit taxes im-
posed by section 1 shall be liable for a penalty equal
to the greater of $500 or 20 percent of the tax not
collected or remitted.
‘‘(2) CRIMINAL
PENALTY.—Each person who
willfully fails as part of an active trade or business
to collect or remit taxes imposed by this chapter
may be imprisoned for a period of up to one year.
‘‘(c) FAILURE TO PAY TAX.—
‘‘(1) CIVIL PENALTY.—Each person who will-
fully fails to pay taxes imposed by section 1 shall be
liable for a penalty equal to the greater of $500 or
20 percent of the tax not paid.
‘‘(2) CRIMINAL
PENALTY.—Each person who
willfully fails to pay taxes imposed by this chapter
may be imprisoned for a period of up to six months.
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‘‘SEC. 46. BURDEN OF PERSUASION AND BURDEN OF PRO-
DUCTION.
‘‘In all disputes concerning taxes imposed by this
chapter, the person engaged in a dispute with the State
Administrator shall have the burden of production of doc-
uments and records but the State Administrator shall
have the burden of persuasion. In all disputes concerning
the legitimacy of an exemption claimed by a purchaser,
if the seller has on file a copy of a bona fide exemption
certificate and did not have reasonable cause to believe
that an exemption from the tax was unavailable to the
purchaser with respect to such purchase, then the burden
of production of documents and records relating to that
exemption shall rest with the purchaser and not with the
seller.
‘‘SEC. 47. ATTORNEYS AND ACCOUNTANCY FEES.
‘‘In all disputes concerning taxes imposed by this
chapter, the person engaged in a dispute with the State
Administrator shall be entitled to reasonable attorneys
and accountancy fees incurred in direct relation to the dis-
pute unless the State Administrator establishes that his
position was substantially justified.
‘‘SEC. 48. APPEALS.
‘‘The State Administrator shall establish an adminis-
trative appeals process wherein the taxpayer is provided
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a full and fair hearing in connection with any disputes
he has with the State Administrator.
‘‘SEC. 49. TAXPAYER SUBJECT TO SUBPOENA ON PRODUC-
TION.
‘‘Taxpayers are subject to subpoena for records and
documents required by the State Administrator to accu-
rately determine liability for tax under this chapter.
‘‘SEC. 50. TAX COURT JURISDICTION.
‘‘The United States Tax Court shall have jurisdiction
pursuant to section 7442 of the Internal Revenue Code
of 1986 in connection with all disputes with taxpayers
arising under this chapter.
‘‘SEC. 51. POWER TO LEVY.
‘‘Pursuant to enforcement of a judgment duly ren-
dered by a court of law, the State Administrator shall have
the right to levy and seize property and garnish wages to
collect amounts due under this chapter.
‘‘SEC. 52. PROBLEM RESOLUTION OFFICERS.
‘‘The State Administrator shall establish a Problem
Resolution Office. Problem Resolution Officers shall have
the authority to investigate taxpayer complaints and en-
join collection activity if, in the opinion of the Problem
Resolution Officer, said collection activity is reasonably
likely to not be in compliance with law. Said administra-
tive injunction may only be reversed by the highest official
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in the relevant State or Federal taxing authority or by
its General Counsel upon a finding that the collection ac-
tivity is justified by clear and convincing evidence. The
authority to reverse this administrative injunction may not
be delegated. Problem Resolution Officers shall not be dis-
ciplined or adversely affected for the issuance of adminis-
trative injunctions unless a pattern or issuing injunctions
that are manifestly unreasonable is proven in an adminis-
trative hearing. Nothing in this section shall limit the au-
thority of the State Administrators or the taxpayer to pur-
sue any legal remedy in any court with jurisdiction over
the dispute at issue.
‘‘SEC. 53. JURISDICTION AND INTERSTATE ALLOCATION.
‘‘(a) ALLOCATION RULES.—For purposes of allocat-
ing revenue between or among administering states from
taxes imposed by this subtitle, the revenue shall be allo-
cated to those states that are the destination of the taxable
property or services. The destination of the purchase of
taxable property and services shall be determined in ac-
cordance with this section.
‘‘(b) FEDERAL OFFICE OF REVENUE ALLOCATION.—
The Secretary shall establish an Office of Revenue Alloca-
tion to arbitrate any claims or disputes among administer-
ing states as to the destination of taxable property and
services for purposes of allocating revenue between or
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among the states from taxes imposed by this subtitle. The
determination of the Administrator of the Office of Reve-
nue Allocation shall be subject to judicial review in any
federal court with competent jurisdiction provided, how-
ever, that the standard of review shall be abuse of discre-
tion.
‘‘(c) TANGIBLE PERSONAL PROPERTY.—The destina-
tion of tangible personal property shall be the state or ter-
ritory in which the property was first delivered to the pur-
chaser. Tangible personal property shipped by means of
the mail or common carrier shall be deemed delivered to
the location of the purchaser for purposes of this sub-
section upon shipment by mail or common carrier.
‘‘(d) REAL PROPERTY.—The destination of real prop-
erty or rents or leaseholds on real property shall be state
or territory in which the real property is located.
‘‘(e) OTHER PROPERTY.—The destination of other
property shall be residence of the purchaser.
‘‘(f) SERVICES.—
‘‘(1) GENERAL RULE.—The destination of serv-
ices shall be state or territory in which the use, con-
sumption or enjoyment of the services occurred. Al-
location of service invoices relating to more than one
jurisdiction shall be on the basis of time.
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‘‘(2) TELECOMMUNICATIONS
SERVICES.—The
destination of telecommunications services shall be
the residence of the purchaser. Telecommunications
services shall include telephone, telegraph, cable tele-
vision, satellite and computer on-line or network
services.
‘‘(3) DOMESTIC TRANSPORTATION SERVICES.—
For transportation services where all of the final
destinations are within the United States, the des-
tination of transportation services shall be the final
destination of the trip (in the case of round or mul-
tiple trip fares, the services amount shall be equally
allocated among the final destinations).
‘‘(4) INTERNATIONAL TRANSPORTATION SERV-
ICES.—For transportation services where the final
destination or origin of the trip is without the Unit-
ed States, the service amount shall be deemed 50
percent attributable to the United States destination
and origin.
‘‘(g) FINANCIAL INTERMEDIATION SERVICES.—The
destination of financial intermediation services shall be the
residence of the purchase.
‘‘(h) A State Tax Administrator shall have jurisdic-
tion over any gross payments made which have a destina-
tion (as determined in accordance with this section) within
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the state of said State Tax Administrator. This grant of
jurisdiction is not exclusive of other jurisdiction that said
State Tax Administrator may have.
‘‘(i) RENTS AND ROYALTIES PAID FOR THE LEASE
OF TANGIBLE PROPERTY.—
‘‘(1) GENERAL RULE.—The destination of rents
and royalties paid for the lease of tangible property
shall be where the property is located.
‘‘(2) VEHICLES.—The destination of rent and
lease payments on vehicles shall be—
‘‘(A) in the case of rentals and leases of a
term one month or less, the location where the
vehicle was originally delivered to the lessee;
and
‘‘(B) in the case of rentals and leases of a
term greater than one month, the residence of
the lessee.
‘‘(j) ROYALTIES FOR THE LICENSE OF INTANGIBLE
PROPERTY.—The destination of royalties for the license
of intangible is where the property is used.
‘‘SEC. 54. TAX TO BE STATED AND CHARGED SEPARATELY.
‘‘(a) IN GENERAL.—For each purchase of taxable
property or services for which a tax is imposed pursuant
to section 1, the sales tax shall be charged separately from
the purchase price by the vendor or seller. For purchase
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of taxable property or services for which a tax is imposed
pursuant to section 1, the vendor shall provide to the pur-
chaser a receipt that sets forth at least the following infor-
mation—
‘‘(1) the property or services price exclusive of
tax;
‘‘(2) the amount of tax paid;
‘‘(3) the property or service price inclusive of
tax;
‘‘(4) the tax rate (the amount of tax paid (per
subparagraph 2) divided by the property or service
price inclusive of tax (per subparagraph 3));
‘‘(5) the date that the good or service was sold;
‘‘(6) the name of the vendor; and
‘‘(7) the vendor registration number.
‘‘(b) VENDING MACHINE EXCEPTION.—The require-
ments of subsection (a) shall be inapplicable in the case
of sales by vending machines. Vending machines for pur-
poses of this subsection shall mean machines—
‘‘(1) that dispense taxable property in exchange
for coins, one, five, ten or twenty dollar bills, and
‘‘(2) that sell no single item exceeding ten dol-
lars per unit in price.’’
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SEC. 5. PHASE-OUT OF THE INTERNAL REVENUE SERVICE.
Appropriations for any expenses of the Internal Reve-
nue Service including processing income tax returns for
years prior to the repeal of the income tax, revenue ac-
counting, management, transfer of payroll tax data to the
Social Security Administration and otherwise for years
after fiscal year 2000 are not authorized.
SEC. 6. EXCISE TAX ADMINISTRATION.
The Secretary shall establish an Excise Tax Bureau
to collect excise taxes formerly collected and administered
by the Internal Revenue Service that are not repealed by
this Act.
SEC. 7. SOCIAL SECURITY ADMINISTRATION TO COLLECT
PAYROLL TAXES.
(a) Commencing January 1, 1998, the Social Secu-
rity Administration shall collect and administer the taxes
imposed pursuant to chapter 2 of subtitle A (relating to
self employment income taxes) and subtitle C (relating to
employment taxes) of the Internal Revenue Code of 1986.
(b) CROSS REFERENCES.—
For revised rules relating to the self-employment
tax, see section 57.
For rules relating to revised withholding tax
schedules and family consumption refund, see sec-
tion 15.
For rules relating to trust fund accounting and
payroll tax revenues, see section 6(b) of this act.
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SEC. 8. SELF-EMPLOYMENT TAX.
(a) Subsection 1402(a) of the Internal Revenue Code
of 1986 is amended to read as follows:
‘‘(a) IN GENERAL.—‘Self employment income’ shall
mean gross payments received in a calendar year from the
sale of taxable property or services (without regard to ex-
emption) less the sum in a calendar year of—
‘‘(1) purchases of taxable property or services
(without regard to exemption) in furtherance of a
business purpose,
‘‘(2) any wages paid (whether to the self-em-
ployed person or others) in furtherance of a business
purpose,
‘‘(3) unused transition amounts, and
‘‘(4) undeducted negative self employment in-
come amounts from prior periods.
‘‘(b) TRANSITION AMOUNTS.—
‘‘(1) GENERAL RULE.—The transition amount
for the ten calendar years commencing in 1998 shall
be the unrecovered basis amount as of the end of
December 31, 1997 divided by ten.
‘‘(2) UNRECOVERED BASIS AMOUNT.—The un-
recovered basis amount shall be remaining income
tax basis relating to—
‘‘(A) prior law section 167 property placed
in service prior to January 1, 1998, and
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‘‘(B) inventory held as of the end of 1997
(including any amounts capitalized in accord-
ance with prior law section 263A).’’
(b) 
CONFORMING
AMENDMENTS.—Subsection
1402(b) and 1402(c) are hereby repealed. Subsections
1402(d) et seq. are hereby renumbered as subsections
1402(b) et seq.
SEC. 9. INTEREST.
Section 6621 of the Internal Revenue Code of 1986
is amended by striking the last sentence in section
6621(a)(1) and by striking ‘‘3’’ in section 6621(a)(2)(B)
and substituting in its stead ‘‘2’’.
SEC. 10. SUPERMAJORITY REQUIRED TO RAISE RATE.
‘‘(a) IN GENERAL.—It shall not be in order in the
House of Representatives or the Senate to consider any
bill, joint resolution, amendment thereto, or conference re-
port thereon that includes any provision that—
(1) increases any federal sales tax rate,
(2) provides any exemption, deduction, credit or
other benefit which results in a reduction in federal
revenues.
(b) WAIVER OR SUSPENSION.—This section may be
waived or suspended in the House of Representatives or
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the Senate only by the affirmative vote of two-thirds of
the Members, duly chosen and sworn.
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