‘‘(2) issued a final notice of amount due; 
‘‘(3) filed an administrative lien, levy, or gar-
nishment; 
‘‘(4) commenced other collection action; 
‘‘(5) commenced an action for civil penalties; or 
‘‘(6) any other legal action, 
a document setting forth in plain English the rights of 
the person. The document shall explain the administrative 
appeals process, the authority of the Problem Resolution 
Office (established pursuant to section 603) and how to 
contact that Office, the burden of production and persua-
sion that the person and the sales tax administering au-
thority bear (pursuant to section 505), the right of the 
person to professional fees (pursuant to section 506), the 
right to record interviews and such other rights as the per-
son may possess under this subtitle. Said document will 
also set forth the procedures for entering into an install-
ment agreement. 
‘‘(b) RIGHT TO PROFESSIONAL ASSISTANCE.—In all 
dealings with the sales tax administering authority, a per-
son shall have the right to assistance, at their own ex-
pense, of 1 or more professional advisors. 
‘‘(c) RIGHT TO RECORD INTERVIEWS.—Any person 
who is interviewed by an agent of the sales tax admin-
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istering authority shall have the right to video or audio 
tape the interview at the person’s own expense. 
‘‘(d) RIGHT TO FINAL NOTICE OF AMOUNT DUE.— 
No collection or enforcement action will be commenced 
against a person until 30 days after they have been pro-
vided with a final notice of amount due under this subtitle 
by the sales tax administering authority. The final notice 
of amount due shall set forth the amount of tax due (along 
with any interest and penalties due) and the factual and 
legal basis for such amounts being due with sufficient 
specificity that such basis can be understood by a reason-
able person who is not a tax professional reading the no-
tice. The final notice shall be sent by certified mail, return 
receipt requested, to— 
‘‘(1) the address last provided by a registered 
seller; or 
‘‘(2) the best available address to a person who 
is not a registered seller. 
‘‘(e) CONFIDENTIALITY OF TAX INFORMATION.— 
‘‘(1) IN GENERAL.—All reports and report in-
formation (related to any internal revenue law) shall 
be confidential and except as authorized by this 
title— 
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‘‘(A) no officer or employee (including 
former officers and employees) of the United 
States; 
‘‘(B) no officer or employee (including 
former officers and employees) of any State or 
local agency who has had access to returns or 
return information; and 
‘‘(C) no other person who has had access 
to returns or return information; 
shall disclose any report or report information ob-
tained by him in any manner in connection with his 
service as such officer or employee or otherwise. 
‘‘(2) DESIGNEES.—The sales tax administering 
authority may, subject to such requirements as the 
Secretary may impose, disclose the report and report 
information of a person to that person or persons as 
that person may designate to receive said informa-
tion or return. 
‘‘(3) OTHER
SALES
TAX
ADMINISTERING
AU-
THORITIES.—A sales tax administering authority 
may impose, disclose the report and report informa-
tion to another sales tax administering authority. 
‘‘(4) INCOMPETENCY.—A sales tax admin-
istering authority may, subject to such requirements 
as the Secretary may impose, disclose the report and 
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report information to the committee, trustee, or 
guardian of a person who is incompetent. 
‘‘(5) DECEASED PERSONS.—A sales tax admin-
istering authority may, subject to such requirements 
as the Secretary may impose, disclose the report and 
report information to the decedent’s— 
‘‘(A) administrator, executor, estate trust-
ee, or 
‘‘(B) heir at law, next of kin, or beneficiary 
under a will who has a material interest that 
will be affected by the information. 
‘‘(6) BANKRUPTCY.—A sales tax administering 
authority may, subject to such requirements as the 
Secretary may impose, disclose the report and report 
information to a person’s trustee in bankruptcy. 
‘‘(7) CONGRESS.—Upon written request from 
the Chairman of the Committee on Ways and 
Means, the Chairman of the Committee on Finance 
of the Senate, or the Chairman or Chief of Staff of 
the Joint Committee on Taxation, a sales tax admin-
istering authority shall disclose the report and report 
information, except that any report or report infor-
mation that can be associated with or otherwise 
identify a particular person shall be furnished to 
such committee only when sitting in closed executive 
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session unless such person otherwise consents in 
writing to such disclosure. 
‘‘(8) WAIVER OF PRIVACY RIGHTS.—A person 
may waive confidentiality rights provided by this sec-
tion. Such waiver must be in writing. 
‘‘(9) INTERNAL USE.—Disclosure of the report 
or report information by officers or employees of a 
sales tax administering authority to other officers or 
employees of a sales tax administering authority in 
the ordinary course of tax administration activities 
shall not constitute unlawful disclosure of the report 
or report information. 
‘‘(10) STATISTICAL
USE.—Upon request in 
writing by the Secretary of Commerce, the Secretary 
shall furnish such reports and report information to 
officers and employees of the Department of Com-
merce as the Secretary may prescribe by regulation 
for the purposes of, and only to the extent necessary 
in, the structuring of censuses and national eco-
nomic accounts and conducting related statistical ac-
tivities authorized by law. 
‘‘(11) DEPARTMENT OF THE TREASURY.—Re-
turns and return information shall be open for in-
spection by officers and employees of the Depart-
ment of the Treasury whose official duties require 
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such inspection or disclosure for the purpose of, and 
only to the extent necessary for, preparing economic 
or financial forecasts, projections, analyses, or esti-
mates. Such inspection or disclosure shall be per-
mitted only upon written request that sets forth the 
reasons why such inspection or disclosure is nec-
essary and is signed by the head of the bureau or 
office of the Department of the Treasury requesting 
the inspection or disclosure. 
‘‘SEC. 606. INSTALLMENT AGREEMENTS; COMPROMISES. 
‘‘The sales tax administering authority is authorized 
to enter into written agreements with any person under 
which the person is allowed to satisfy liability for payment 
of any tax under this subtitle (and penalties and interest 
relating thereto) in installment payments if the sales tax 
administering authority determines that such agreement 
will facilitate the collection of such liability. The agree-
ment shall remain in effect for the term of the agreement 
unless the information that the person provided to the 
sales tax administering authority was materially inac-
curate or incomplete. The sales tax administering author-
ity may compromise any amounts alleged to be due. 
‘‘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. 
‘‘SEC. 701. HOBBY ACTIVITIES. 
‘‘(a) HOBBY ACTIVITIES.—Neither the exemption af-
forded by section 102 for intermediate sales nor the cred-
its available pursuant to section 202 or 203 shall be avail-
able for any taxable property or service purchased for use 
in an activity if that activity is not engaged in for-profit. 
‘‘(b) STATUS DEEMED.—If the activity has received 
gross payments for the sale of taxable property or services 
that exceed the sum of— 
‘‘(1) taxable property and services purchased; 
‘‘(2) wages and salary paid; and 
‘‘(3) taxes (of any type) paid, 
in 2 or more of the most recent 3 calendar years during 
which it operated when the business activity shall be con-
clusively deemed to be engaged in for profit. 
‘‘SEC. 702. GAMING ACTIVITIES. 
‘‘(a) REGISTRATION.—Any person selling 1 or more 
chances is a gaming sponsor and shall register, in a form 
prescribed by the Secretary, with the sales tax admin-
istering authority as a gaming sponsor. 
‘‘(b) CHANCE DEFINED.—For purposes of this sec-
tion, the term ‘chance’ means a lottery ticket, a raffle tick-
et, chips, other tokens, a bet or bets placed, a wager or 
wagers placed, or any similar device where the purchase 
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of the right gives rise to an obligation by the gaming spon-
sor to pay upon the occurrence of— 
‘‘(1) a random or unpredictable event; or 
‘‘(2) an event over which neither the gaming 
sponsor nor the person purchasing the chance has 
control over the outcome. 
‘‘(c) CHANCES NOT TAXABLE PROPERTY OR SERV-
ICE.—Notwithstanding any other provision in this sub-
title, a chance is not taxable property or services for pur-
poses of section 101. 
‘‘(d) TAX ON GAMING SERVICES IMPOSED.—A 23- 
percent tax is hereby imposed on the taxable gaming serv-
ices of a gaming sponsor. This tax shall be paid and remit-
ted by the gaming sponsor. The tax shall be remitted by 
the 15th day of each month with respect to taxable gaming 
services during the previous calendar month. 
‘‘(e) TAXABLE GAMING SERVICES DEFINED.—For 
purposes of this section, the term ‘taxable gaming services’ 
means— 
‘‘(1) gross receipts of the gaming sponsor from 
the sale of chances, minus 
‘‘(2) the sum of— 
‘‘(A) total gaming payoffs to chance pur-
chasers (or their designees); and 
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‘‘(B) gaming specific taxes (other than the 
tax imposed by this section) imposed by the 
Federal, State, or local government. 
‘‘SEC. 703. GOVERNMENT PURCHASES. 
‘‘(a) GOVERNMENT PURCHASES.— 
‘‘(1) PURCHASES BY THE FEDERAL GOVERN-
MENT.—Purchases by the Federal Government of 
taxable property and services shall be subject to the 
tax imposed by section 101. 
‘‘(2) PURCHASE BY STATE GOVERNMENTS AND 
THEIR
POLITICAL
SUBDIVISIONS.—Purchases by 
State governments and their political subdivisions of 
taxable property and services shall be subject to the 
tax imposed by section 101. 
‘‘(b) CROSS REFERENCES.—For purchases by gov-
ernment enterprises see section 704. 
‘‘SEC. 704. GOVERNMENT ENTERPRISES. 
‘‘(a) GOVERNMENT ENTERPRISES TO COLLECT AND 
REMIT TAXES ON SALES.—Nothing in this subtitle shall 
be construed to exempt any Federal, State, or local gov-
ernmental unit or political subdivision (whether or not the 
State is an administering State) operating a government 
enterprise from collecting and remitting tax imposed by 
this subtitle on any sale of taxable property or services., 
Government enterprises shall comply with all duties im-
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posed by this subtitle and shall be liable for penalties and 
subject to enforcement action in the same manner as pri-
vate persons that are not government enterprises. 
‘‘(b) GOVERNMENT ENTERPRISE.—Any entity owned 
or operated by a Federal, State, or local governmental unit 
or political subdivision that receives gross payments from 
private persons is a government enterprise, except that a 
government-owned entity shall not become a government 
enterprise for purposes of this section unless in any quar-
ter it has revenues from selling taxable property or serv-
ices that exceed $2,500. 
‘‘(c) GOVERNMENT ENTERPRISES INTERMEDIATE 
SALES.— 
‘‘(1) IN
GENERAL.—Government enterprises 
shall not be subject to tax on purchases that would 
not be subject to tax pursuant to section 102(b) if 
the government enterprise were a private enterprise. 
‘‘(2) 
EXCEPTION.—Government 
enterprises 
may not use the exemption afforded by section 
102(b) to serve as a conduit for tax-free purchases 
by government units that would otherwise be subject 
to taxation on purchases pursuant to section 703. 
Transfers of taxable property or services purchased 
exempt from tax from a government enterprise to 
such government unit shall be taxable. 
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‘‘(d) SEPARATE BOOKS OF ACCOUNT.—Any govern-
ment enterprise must maintain books of account, separate 
from the nonenterprise government accounts, maintained 
in accordance with generally accepted accounting prin-
ciples. 
‘‘(e) TRADE OR BUSINESS.—A government enterprise 
shall be treated as a trade or business for purposes of this 
subtitle. 
‘‘(f) ENTERPRISE SUBSIDIES CONSTITUTE TAXABLE 
PURCHASE.—A transfer of funds to a government enter-
prise by a government entity without full consideration 
shall constitute a taxable government purchase with the 
meaning of section 703 to the extent that the transfer of 
funds exceeds the fair market value of the consideration. 
‘‘SEC. 705. MIXED USE PROPERTY. 
‘‘(a) MIXED USE PROPERTY OR SERVICE.— 
‘‘(1) MIXED USE PROPERTY OR SERVICE DE-
FINED.—For purposes of this section, the term 
‘mixed use property or service’ is a taxable property 
or taxable service used for both taxable use or con-
sumption and for a purpose that would not be sub-
ject to tax pursuant to section 102(a)(1). 
‘‘(2) TAXABLE THRESHOLD.—Mixed use prop-
erty or service shall be subject to tax notwith-
standing section 102(a)(1) unless such property or 
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service is used more than 95 percent for purposes 
that would give rise to an exemption pursuant to 
section 102(a)(1) during each calendar year (or por-
tions thereof) it is owned. 
‘‘(3) MIXED
USE
PROPERTY
OR
SERVICES 
CREDIT.—A person registered pursuant to section 
502 is entitled to a business use conversion credit 
(pursuant to section 202) equal to the product of— 
‘‘(A) the mixed use property amount; and 
‘‘(B) the business use ratio; and 
‘‘(C) the rate of tax imposed by section 
101. 
‘‘(4) MIXED
USE
PROPERTY
AMOUNT.—The 
mixed use property amount for each month (or frac-
tion thereof) in which the property was owned shall 
be— 
‘‘(A) 
one-three-hundred-sixtieth 
of 
the 
gross payments for real property for 360 
months or until the property is sold; 
‘‘(B) one-eighty-fourth of the gross pay-
ments for tangible personal property for 84 
months or until the property is sold; 
‘‘(C) one-sixtieth of the gross payments for 
vehicles for 60 months or until the property is 
sold; or 
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‘‘(D) for other types of taxable property or 
services, a reasonable amount or in accordance 
with regulations prescribed by the Secretary. 
‘‘(5) BUSINESS USE RATIO.—For purposes of 
this section, the term ‘business use ratio’ means the 
ratio of business use to total use for a particular cal-
endar month (or portion thereof if the property was 
owned for only part of said calendar month). For ve-
hicles, the business use ratio will be the ratio of 
business purpose miles to total miles in a particular 
calendar month. For real property, the business use 
ratio is the ratio of floor space used primarily for 
business purposes to total floor space in a particular 
calendar month. For tangible personal property (ex-
cept for vehicles), the business use ratio is the ratio 
of total time used for business purposes to total time 
used in a particular calendar year. For other prop-
erty or services, the business ratio shall be cal-
culated using a reasonable method. Reasonable 
records must be maintained to support a person’s 
business use of the mixed use property or service. 
‘‘(b) TIMING OF BUSINESS USE CONVERSION CRED-
IT ARISING OUT OF OWNERSHIP OF MIXED USE PROP-
ERTY.—A person entitled to a credit pursuant to sub-
section (a)(3) arising out of the ownership of mixed use 
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property must account for the mixed use on a calendar 
year basis, and may file for the credit with respect to 
mixed use property in any month following the calendar 
year giving rise to the credit. 
‘‘(c) CROSS REFERENCE.—For business use conver-
sion credit, see section 202. 
‘‘SEC. 706. NOT-FOR-PROFIT ORGANIZATIONS. 
‘‘(a) NOT-FOR-PROFIT ORGANIZATIONS.—Dues, con-
tributions, and similar payments to qualified not-for-profit 
organizations shall not be considered gross payments for 
taxable property or services for purposes of this subtitle. 
‘‘(b) DEFINITION.—For purposes of this section, the 
term ‘qualified not-for-profit organization’ means a not- 
for-profit organization organized and operated exclu-
sively— 
‘‘(1) for religious, charitable, scientific, testing 
for public safety, literary, or educational purposes; 
‘‘(2) as civic leagues or social welfare organiza-
tions; 
‘‘(3) as labor, agricultural, or horticultural or-
ganizations; 
‘‘(4) as chambers of commerce, business 
leagues, or trade associations; or 
‘‘(5) 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 individual. 
‘‘(c) QUALIFICATION CERTIFICATES.—Upon applica-
tion in a form prescribed by the Secretary, the sales tax 
administering authority shall provide qualification certifi-
cates to qualified not-for-profit organizations. 
‘‘(d) TAXABLE TRANSACTIONS.—If a qualified not- 
for-profit organization provides taxable property or serv-
ices in connection with contributions, dues, or similar pay-
ments to the organization, then it shall be required to 
treat the provision of said taxable property or services as 
a purchase taxable pursuant to this subtitle at the fair 
market value of said taxable property or services. 
‘‘(e) EXEMPTIONS.—Taxable property and services 
purchased by a qualified not-for-profit organization shall 
be eligible for the exemptions provided in section 102. 
‘‘CHAPTER 8—FINANCIAL 
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. 
‘‘SEC. 801. DETERMINATION OF FINANCIAL INTERMEDI-
ATION SERVICES AMOUNT. 
‘‘(a) FINANCIAL INTERMEDIATION SERVICES.—For 
purposes of this subtitle— 
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‘‘(1) IN GENERAL.—The term ‘financial inter-
mediation services’ means the sum of— 
‘‘(A) explicitly charged fees for financial 
intermediation services, and 
‘‘(B) implicitly charged fees for financial 
intermediation services. 
‘‘(2) EXPLICITLY CHARGED FEES FOR FINAN-
CIAL INTERMEDIATION SERVICES.—The term ‘explic-
itly charged fees for financial intermediation serv-
ices’ includes— 
‘‘(A) brokerage fees; 
‘‘(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). 
‘‘(3) IMPLICITLY CHARGED FEES FOR FINAN-
CIAL INTERMEDIATION SERVICES.— 
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‘‘(A) IN GENERAL.—The term ‘implicitly 
charged fees for financial intermediation serv-
ices’ includes the gross imputed amount in rela-
tion to any underlying interest-bearing invest-
ment, account, or debt. 
‘‘(B) GROSS IMPUTED AMOUNT.—For pur-
poses of subparagraph (A), the term ‘gross im-
puted amount’ means— 
‘‘(i) with respect to any underlying in-
terest-bearing investment or account, the 
product of— 
‘‘(I) the excess (if any) of the 
basic interest rate (as defined in sec-
tion 805) over the rate paid on such 
investment; and 
‘‘(II) the amount of the invest-
ment or account; 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 basic 
interest rate (as defined in section 
805); and 
‘‘(II) the amount of the debt. 
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‘‘(b) SELLER OF FINANCIAL INTERMEDIATION SERV-
ICES.—For purposes of section 103(a), the seller of finan-
cial intermediation services shall be— 
‘‘(1) in the case of explicitly charged fees for fi-
nancial intermediation services, the seller shall be 
the person who receives the gross payments for the 
charged financial intermediation services; 
‘‘(2) in the case of implicitly charged fees for fi-
nancial intermediation services with respect to any 
underlying interest-bearing investment or account, 
the person making the interest payments on the in-
terest-bearing investment or account; and 
‘‘(3) in the case of implicitly charged fees for fi-
nancial intermediation services with respect to any 
interest-bearing debt, the person receiving the inter-
est payments on the interest-bearing debt. 
‘‘SEC. 802. BAD DEBTS. 
‘‘(a) IN GENERAL.—For purposes of section 205(a), 
a bad debt shall be a business debt that becomes wholly 
or partially worthless to the payee. 
‘‘(b) BUSINESS LOAN.—For purposes of subsection 
(a), a business loan or debt is a bona fide loan or debt 
made for a business purpose that both parties intended 
be repaid. 
‘‘(c) DETERMINATION OF WORTHLESSNESS.— 
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‘‘(1) IN GENERAL.—No loan or debt shall be 
considered wholly or partially worthless unless it has 
been in arrears for 180 days or more, except that if 
a debt is discharged wholly or partially in bank-
ruptcy before 180 days has elapsed, then it shall be 
deemed wholly or partially worthless on the date of 
discharge. 
‘‘(2) DETERMINATION BY HOLDER.—A loan or 
debt that has been in arrears for 180 days or more 
may be deemed wholly or partially worthless by the 
holder unless a payment schedule has been entered 
into between the debtor and the lender. 
‘‘(d) CROSS REFERENCE.—See section 205(c) for tax 
on subsequent payments. 
‘‘SEC. 803. TIMING OF TAX ON FINANCIAL INTERMEDIATION 
SERVICES. 
‘‘The tax on financial intermediation services pro-
vided by section 801 with respect to an underlying invest-
ment account or debt shall be imposed and collected with 
the same frequency that statements are rendered by the 
financial institution in connection with the investment ac-
count or debt but not less frequently than quarterly. 
‘‘SEC. 804. FINANCING LEASES. 
‘‘(a) DEFINITION.—For purposes of this section, the 
term ‘financing lease’ means any lease under which the 
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100 
lessee has the right to acquire the property for 50 percent 
or less of its fair market value at the end of the lease 
term. 
‘‘(b) GENERAL RULE.—Financing leases shall be 
taxed in the method set forth in this section. 
‘‘(c) DETERMINATION OF PRINCIPAL AND INTEREST 
COMPONENTS
OF FINANCING LEASE.—The Secretary 
shall promulgate rules for disaggregating the principal 
and interest components of a financing lease. The prin-
cipal amount shall be determined to the extent possible 
by examination of the contemporaneous sales price or 
prices of property the same or similar as the leased prop-
erty. 
‘‘(d) ALTERNATIVE METHOD.—In the event that con-
temporaneous sales prices or property the same or similar 
as the leased property are not available, the principal and 
interest components of a financing lease shall be 
disaggregated using the applicable interest rate (as de-
fined in section 511) plus 4 percent. 
‘‘(e) PRINCIPAL COMPONENT.—The principal compo-
nent of the financing lease shall be subject to tax as if 
a purchase in the amount of the principal component had 
been made on the day on which said lease was executed. 
‘‘(f) INTEREST COMPONENT.—The financial inter-
mediation services amount with respect to the interest 
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101 
component of the financing lease shall be subject to tax 
under this subtitle. 
‘‘(g) COORDINATION.—If the principal component 
and financial intermediation services amount with respect 
to the interest component of a lease have been taxed pur-
suant to this section, then the gross lease or rental pay-
ments shall not be subject to additional tax. 
‘‘SEC. 805. BASIC INTEREST RATE. 
‘‘For purposes of this chapter, the basic interest rate 
with respect to a debt instrument, investment, financing 
lease, or account shall be the applicable interest rate (as 
determined in section 511). For debt instruments, invest-
ments, or accounts of contractually fixed interest, the ap-
plicable interest rate of the month of issuance shall apply. 
For debt instruments, investments, or accounts of variable 
interest rates and which have no reference interest rate, 
the applicable interest shall be the Federal short-term in-
terest rate for each month. For debt instruments, invest-
ments, or accounts of variable interest rates and which 
have a reference interest rate, the applicable interest shall 
be the applicable interest rate for the reference interest 
rate for each month. 
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‘‘SEC. 806. FOREIGN FINANCIAL INTERMEDIATION SERV-
ICES. 
‘‘(a) SPECIAL RULES RELATING TO INTERNATIONAL 
FINANCIAL
INTERMEDIATION
SERVICES.—Financial 
intermediation services shall be deemed as used or con-
sumed within the United States if the person (or any re-
lated party as defined in section 205(e)) purchasing the 
services is a resident of the United States. 
‘‘(b) DESIGNATION OF TAX REPRESENTATIVE.—Any 
person that provides financial intermediation services to 
United States residents must, as a condition of lawfully 
providing such services, designate, in a form prescribed 
by the Secretary, a tax representative for purposes of this 
subtitle. The tax representative shall be responsible for en-
suring that the taxes imposed by this subtitle are collected 
and remitted and shall be jointly and severally liable for 
collecting and remitting these taxes. The Secretary may 
require reasonable bond of the tax representative. The 
Secretary or a sales tax administering authority may bring 
an action seeking a temporary restraining order, an in-
junction, or such other order as may be appropriate to 
enforce this section. 
‘‘(c) CROSS REFERENCES.—For definition of person, 
see section 901. 
‘‘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. 
‘‘SEC. 901. ADDITIONAL MATTERS. 
‘‘(a) 
INTANGIBLE
PROPERTY
ANTIAVOIDANCE 
RULE.—Notwithstanding section 2(a)(14)(a)(i), the sale 
of a copyright or trademark shall be treated as the sale 
of taxable services (within the meaning of section 101(a)) 
if the substance of the sales of copyright or trademark 
constituted the sale of the services that produced the copy-
righted material or the trademark. 
‘‘(b) DE MINIMIS PAYMENTS.—Up to $400 of gross 
payments per calendar year shall be exempt from the tax 
imposed by section 101 if— 
‘‘(1) made by a person not in connection with 
a trade or business at any time during such calendar 
year prior to making said gross payments, and 
‘‘(2) made to purchase any taxable property or 
service which is imported into the United States by 
such person for use or consumption by such person 
in the United States. 
‘‘(c) DE MINIMIS SALES.—Up to $1,200 per calendar 
year of gross payments shall be exempt from the tax im-
posed by section 101 if received— 
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‘‘(1) by a person not in connection with a trade 
or business during such calendar year prior to the 
receipt of said gross payments; and 
‘‘(2) in connection with a casual or isolated 
sale. 
‘‘(d) DE MINIMIS SALE OF FINANCIAL INTERMEDI-
ATION SERVICES.—Up to $10,000 per calendar year of 
gross payments received by a person from the sale of fi-
nancial intermediation services (as determined in accord-
ance with section 801) shall be exempt from the tax im-
posed by section 101. The exemption provided by this sub-
section is in addition to other exemptions afforded by this 
chapter. The exemption provided by this subsection shall 
not be available to large sellers (as defined in section 
501(e)(3)). 
‘‘(e) PROXY BUYING TAXABLE.—If a registered per-
son provides taxable property or services to a person either 
as a gift, prize, reward, or as remuneration for employ-
ment, and such taxable property or services were not pre-
viously subject to tax pursuant to section 101, then the 
provision of such taxable property or services by the reg-
istered person shall be deemed the conversion of such tax-
able property or services to personal use subject to tax 
pursuant to section 103(c) at the tax inclusive fair market 
value of such taxable property or services. 
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‘‘(f) SUBSTANCE OVER FORM.—The substance of a 
transaction will prevail over its form if the transaction has 
no bona fide economic purpose and is designed to evade 
tax imposed by this subtitle. 
‘‘(g) CERTAIN EMPLOYEE DISCOUNTS TAXABLE.— 
‘‘(1) EMPLOYEE DISCOUNT.—For purposes of 
this subsection, the term ‘employee discount’ means 
an employer’s offer of taxable property or services 
for sale to its employees or their families (within the 
meaning of section 302(b)) for less than the offer of 
such taxable property or services to the general pub-
lic. 
‘‘(2) EMPLOYEE DISCOUNT AMOUNT.—For pur-
poses of this subsection, the employee discount 
amount is the amount by which taxable property or 
services are sold pursuant to an employee discount 
below the amount for which such taxable property or 
services would have been sold to the general public. 
‘‘(3) TAXABLE AMOUNT.—If the employee dis-
count amount exceeds 20 percent of the price that 
the taxable property or services would have been sold 
to the general public, then the sale of such taxable 
property or services by the employer shall be deemed 
the conversion of such taxable property or services 
to personal use and tax shall be imposed on the tax-
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able employee discount amount. The taxable em-
ployee discount amount shall be— 
‘‘(A) the employee discount amount, minus 
‘‘(B) 20 percent of the amount for which 
said taxable property or services would have 
been sold to the general public. 
‘‘(h) SATURDAY, SUNDAY, OR LEGAL HOLIDAY.— 
When the last day prescribed for performing any act re-
quired by this subtitle falls on a Saturday, Sunday, or 
legal holiday (in the jurisdiction where the return is to 
be filed), the performance of such act shall be considered 
timely if it is performed on the next day which is not a 
Saturday, Sunday, or legal holiday (in the jurisdiction 
where the return is to be filed). 
‘‘SEC. 902. TRANSITION MATTERS. 
‘‘(a) INVENTORY.— 
‘‘(1) QUALIFIED
INVENTORY.—Inventory held 
by a trade or business on the close of business on 
December 31, 2012, shall be qualified inventory if it 
is sold— 
‘‘(A) before December 31, 2013; 
‘‘(B) by a registered person; and 
‘‘(C) subject to the tax imposed by section 
101. 
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‘‘(2) COSTS.—For purposes of this section, 
qualified inventory shall have the cost that it had for 
Federal income tax purposes for the trade or busi-
ness as of December 31, 2012 (including any 
amounts capitalized by reason of section 263A of the 
Internal Revenue Code of 1986 as in effect on De-
cember 31, 2012). 
‘‘(3) TRANSITIONAL INVENTORY CREDIT.—The 
trade or business which held the qualified inventory 
on the close of business on December 31, 2012, shall 
be entitled to a transitional inventory credit equal to 
the cost of the qualified inventory (determined in ac-
cordance with paragraph (2)) times the rate of tax 
imposed by section 101. 
‘‘(4) TIMING OF CREDIT.—The credit provided 
under paragraph (3) shall be allowed with respect to 
the month when the inventory is sold subject to the 
tax imposed by this subtitle. Said credit shall be re-
ported as an intermediate and export sales credit 
and the person claiming said credit shall attach sup-
porting schedules in the form that the Secretary 
may prescribe. 
‘‘(b) WORK-IN-PROCESS.—For purposes of this sec-
tion, inventory shall include work-in-process. 
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‘‘(c) QUALIFIED INVENTORY HELD BY BUSINESSES 
NOT SELLING SAID QUALIFIED INVENTORY
AT RE-
TAIL.— 
‘‘(1) IN GENERAL.—Qualified inventory held by 
businesses that sells said qualified inventory not sub-
ject to tax pursuant to section 102(a) shall be eligi-
ble for the transitional inventory credit only if that 
business (or a business that has successor rights 
pursuant to paragraph (2)) receives certification in 
a form satisfactory to the Secretary that the quali-
fied inventory was subsequently sold subject to the 
tax imposed by this subtitle. 
‘‘(2) TRANSITIONAL INVENTORY CREDIT RIGHT 
MAY BE SOLD.—The business entitled to the transi-
tional inventory credit may sell the right to receive 
said transitional inventory credit to the purchaser of 
the qualified inventory that gave rise to the credit 
entitlement. Any purchaser of such qualified inven-
tory (or property or services into which the qualified 
inventory has been incorporated) may sell the right 
to said transitional inventory credit to a subsequent 
purchaser of said qualified inventory (or property or 
services into which the qualified inventory has been 
incorporated). 
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109 
‘‘SEC. 903. WAGES TO BE REPORTED TO SOCIAL SECURITY 
ADMINISTRATION. 
‘‘(a) IN GENERAL.—Employers shall submit such in-
formation to the Social Security Administration as is re-
quired by the Social Security Administration to calculate 
Social Security benefits under title II of the Social Secu-
rity Act, including wages paid, in a form prescribed by 
the Secretary. A copy of the employer submission to the 
Social Security Administration relating to each employee 
shall be provided to each employee by the employer. 
‘‘(b) WAGES.—For purposes of this section, the term 
‘wages’ means all cash remuneration for employment (in-
cluding tips to an employee by third parties provided that 
the employer or employee maintains records documenting 
such tips) including self-employment income; except that 
such term shall not include— 
‘‘(1) any insurance benefits received (including 
death benefits); 
‘‘(2) pension or annuity benefits received; 
‘‘(3) tips received by an employee over $5,000 
per year; and 
‘‘(4) benefits received under a government enti-
tlement program (including Social Security benefits 
and unemployment compensation benefits). 
‘‘(c) SELF-EMPLOYMENT INCOME.—For purposes of 
subsection (b), the term ‘self-employment income’ means 
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110 
gross payments received for taxable property or services 
minus the sum of— 
‘‘(1) gross payments made for taxable property 
or services (without regard to whether tax was paid 
pursuant to section 101 on such taxable property or 
services), and 
‘‘(2) wages paid by the self-employed person to 
employees of the self-employed person. 
‘‘SEC. 904. TRUST FUND REVENUE. 
‘‘(a) SECRETARY TO MAKE ALLOCATION OF SALES 
TAX REVENUE.—The Secretary shall allocate the revenue 
received by virtue of the tax imposed by section 101 in 
accordance with this section. The revenue shall be allo-
cated among— 
‘‘(1) the general revenue, 
‘‘(2) the old-age and survivors insurance trust 
fund, 
‘‘(3) the disability insurance trust fund, 
‘‘(4) the hospital insurance trust fund, and 
‘‘(5) the Federal supplementary medical insur-
ance trust fund. 
‘‘(b) GENERAL RULE.— 
‘‘(1) GENERAL REVENUE.—The proportion of 
total revenue allocated to the general revenue shall 
be the same proportion as the rate in section 
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111 
101(b)(4) bears to the combined Federal tax rate 
percentage (as defined in section 101(b)(3)). 
‘‘(2) The amount of revenue allocated to the 
old-age and survivors insurance and disability insur-
ance trust funds shall be the same proportion as the 
old-age, survivors and disability insurance rate (as 
defined in subsection (d)) bears to the combined 
Federal tax rate percentage (as defined in section 
101(b)(3)). 
‘‘(3) The amount of revenue allocated to the 
hospital insurance and Federal supplementary med-
ical insurance trust funds shall be the same propor-
tion as the hospital insurance rate (as defined in 
subsection (e)) bears to the combined Federal tax 
rate percentage (as defined in section 101(b)(3)). 
‘‘(c) CALENDAR YEAR 2013.—Notwithstanding sub-
section (b), the revenue allocation pursuant to subsection 
(a) for calendar year 2013 shall be as follows: 
‘‘(1) 64.83 percent of total revenue to general 
revenue, 
‘‘(2) 27.43 percent of total revenue to the old- 
age and survivors insurance and disability insurance 
trust funds, and 
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112 
‘‘(3) 7.74 percent of total revenue to the hos-
pital insurance and Federal supplementary medical 
insurance trust funds. 
‘‘(d) OLD-AGE, SURVIVORS AND DISABILITY INSUR-
ANCE RATE.—The old-age, survivors and disability insur-
ance rate shall be determined by the Social Security Ad-
ministration. The old-age, survivors and disability insur-
ance rate shall be that sales tax rate which is necessary 
to raise the same amount of revenue that would have been 
raised by imposing a 12.4 percent tax on the Social Secu-
rity wage base (including self-employment income) as de-
termined in accordance with chapter 21 of the Internal 
Revenue Code most recently in effect prior to the enact-
ment of this Act. The rate shall be determined using actu-
arially sound methodology and announced at least 6 
months prior to the beginning of the Calendar year for 
which it applies. 
‘‘(e) HOSPITAL INSURANCE RATE.—The hospital in-
surance rate shall be determined by the Social Security 
Administration. The hospital insurance rate shall be that 
sales tax rate which is necessary to raise the same amount 
of revenue that would have been raised by imposing a 2.9 
percent tax on the Medicare wage base (including self-em-
ployment income) as determined in accordance with chap-
ter 21 of the Internal Revenue Code most recently in effect 
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113 
prior to the enactment of this Act. The rate shall be deter-
mined using actuarially sound methodology and an-
nounced at least 6 months prior to the beginning of the 
calendar year for which it applies. 
‘‘(f) ASSISTANCE.—The Secretary shall provide such 
technical assistance as the Social Security Administration 
shall require to determine the old-age, survivors and dis-
ability insurance rate and the hospital insurance rate. 
‘‘(g) FURTHER ALLOCATIONS.— 
‘‘(1) OLD-AGE, SURVIVORS AND DISABILITY IN-
SURANCE.—The Secretary shall allocate revenue re-
ceived because of the old-age, survivors and dis-
ability insurance rate to the old-age and survivors 
insurance trust fund and the disability insurance 
trust fund in accordance with law or, in the absence 
of other statutory provision, in the same proportion 
that the old-age and survivors insurance trust fund 
receipts bore to the sum of the old-age and survivors 
insurance trust fund receipts and the disability in-
surance trust fund receipts in calendar year 2012 
(taking into account only receipts pursuant to chap-
ter 21 of the Internal Revenue Code). 
‘‘(2) HOSPITAL
INSURANCE.—The Secretary 
shall allocate revenue received because of the hos-
pital insurance rate to the hospital insurance trust 
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114 
fund and the Federal supplementary medical insur-
ance trust fund in accordance with law or, in the ab-
sence of other statutory provision, in the same pro-
portion that hospital insurance trust fund receipts 
bore to the sum of the hospital insurance trust fund 
receipts and Federal supplementary medical insur-
ance trust fund receipts in calendar year 2012 (tak-
ing into account only receipts pursuant to chapter 
21 of the Internal Revenue Code). 
‘‘SEC. 905. WITHHOLDING OF TAX ON NONRESIDENT ALIENS 
AND FOREIGN CORPORATIONS. 
‘‘(a) IN GENERAL.—All persons, in whatever capacity 
acting (including lessees or mortgagors or real or personal 
property, fiduciaries, employers, and all officers and em-
ployees of the United States) having control, receipt, cus-
tody, disposal, or payment of any income to the extent 
such income constitutes gross income from sources within 
the United States of any nonresident alien individual, for-
eign partnership, or foreign corporation shall deduct and 
withhold from that income a tax equal to 23 percent there-
of. 
‘‘(b) EXCEPTION.—No tax shall be required to be de-
ducted from interest on portfolio debt investments. 
‘‘(c) TREATY COUNTRIES.—In the case of payments 
to nonresident alien individuals, foreign partnerships, or 
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115 
foreign corporations that have a residence in (or the na-
tionality of a country) that has entered into a tax treaty 
with the United States, then the rate of withholding tax 
prescribed by the treaty shall govern.’’. 
SEC. 202. CONFORMING AND TECHNICAL AMENDMENTS. 
(a) REPEALS.—The following provisions of the Inter-
nal Revenue Code of 1986 are repealed: 
(1) Subchapter A of chapter 61 of subtitle D 
(as redesignated by section 104) (relating to infor-
mation and returns). 
(2) Sections 6103 through 6116 of subchapter 
B of chapter 61 of subtitle D (as so redesignated). 
(3) Section 6157 (relating to unemployment 
taxes). 
(4) Section 6163 (relating to estate taxes). 
(5) Section 6164 (relating to corporate taxes). 
(6) Section 6166 (relating to estate taxes). 
(7) Section 6167 (relating to foreign expropria-
tion losses). 
(8) Sections 6201, 6205, and 6207 (relating to 
assessments). 
(9) Subchapter C of chapter 63 of subtitle D 
(as so redesignated) (relating to tax treatment of 
partnership items). 
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116 
(10) Section 6305 (relating to collections of cer-
tain liabilities). 
(11) Sections 6314, 6315, 6316, and 6317 (re-
lating to payments of repealed taxes). 
(12) Sections 6324, 6324A, and 6324B (relat-
ing to liens for estate and gift taxes). 
(13) Section 6344 (relating to cross references). 
(14) Section 6411 (relating to carrybacks). 
(15) Section 6413 (relating to employment 
taxes). 
(16) Section 6414 (relating to withheld income 
taxes). 
(17) Section 6422 (relating to cross references). 
(18) Section 6425 (relating to overpayment of 
corporate estimated taxes). 
(19) Section 6504 (relating to cross references). 
(20) Section 6652 (relating to failure to file 
certain information returns). 
(21) Sections 6654 and 6655 (relating to fail-
ure to payment estimated income tax). 
(22) Section 6662 (relating to penalties). 
(23) Sections 6677 through 6711 (relating to 
income tax related penalties). 
(24) Part II of subchapter B of chapter 68 (re-
lating to certain information returns). 
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(25) Part I of subchapter A of chapter 70 (re-
lating to termination of taxable year). 
(26) 
Section 
6864 
(relating 
to 
certain 
carrybacks). 
(27) Section 7103 (relating to cross references). 
(28) Section 7204 (relating to withholding 
statements). 
(29) Section 7211 (relating certain statements). 
(30) Section 7231 (relating to failure to obtain 
certain licenses). 
(31) Section 7270 (relating to insurance poli-
cies). 
(32) Section 7404 (relating to estate taxes). 
(33) Section 7404 (relating to income tax pre-
parers). 
(34) Section 7408 (relating to income tax shel-
ters). 
(35) Section 7409 (relating to 501(c)(3) organi-
zations). 
(36) Section 7427 (relating to income tax pre-
parers). 
(37) Section 7428 (relating to 501(c)(3) organi-
zations). 
(38) Section 7476 (relating to declaratory judg-
ments relating to retirement plans). 
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(39) Section 7478 (relating to declaratory judg-
ments relating to certain tax-exempt obligations). 
(40) Section 7508 (relating to postponing time 
for certain actions required by the income, estate, 
and gift tax). 
(41) Section 7509 (relating to Postal Service 
payroll taxes). 
(42) Section 7512 (relating to payroll taxes). 
(43) Section 7517 (relating to estate and gift 
tax evaluation). 
(44) Section 7518 (relating to Merchant Marine 
tax incentives). 
(45) Section 7519 (relating to taxable years). 
(46) Section 7520 (relating to insurance and 
annuity valuation tables). 
(47) Section 7523 (relating to reporting Fed-
eral income and outlays on Form 1040s). 
(48) Section 7611 (relating to church income 
tax exemptions and church unrelated business in-
come tax inquiries). 
(49) Section 7654 (relating to possessions’ in-
come taxes). 
(50) Section 7655 (relating to cross references). 
(51) Section 7701(a)(16). 
(52) Section 7701(a)(19). 
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119 
(53) Section 7701(a)(20). 
(54) Paragraphs (32) through (38) of section 
7701(a). 
(55) Paragraphs (41) through (46) of section 
7701(a). 
(56) Section 7701(b). 
(57) Subsections (e) through (m) of section 
7701. 
(58) Section 7702 (relating to life insurance 
contracts). 
(59) Section 7702A (relating to modified en-
dowment contracts). 
(60) Section 7702B (relating to long-term care 
insurance). 
(61) Section 7703 (relating to the determina-
tion of marital status). 
(62) Section 7704 (relating to publicly traded 
partnerships). 
(63) Section 7805. 
(64) Section 7851. 
(65) Section 7872. 
(66) Section 7873. 
(b) OTHER CONFORMING AND TECHNICAL AMEND-
MENTS.— 
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