I 
116TH CONGRESS 
1ST SESSION 
H. R. 25 
To promote freedom, fairness, and economic opportunity by repealing the 
income tax and other taxes, abolishing the Internal Revenue Service, 
and enacting a national sales tax to be administered primarily by the 
States. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 3, 2019 
Mr. WOODALL (for himself, Mr. BANKS, Mr. BILIRAKIS, Mr. BISHOP of Utah, 
Mr. BROOKS of Alabama, Mr. CARTER of Texas, Mr. CHABOT, Mr. CON-
AWAY, Mr. DESJARLAIS, Mr. DUNCAN, Ms. FOXX of North Carolina, Mr. 
GAETZ, Mr. GRAVES of Georgia, Mr. HICE of Georgia, Mr. KING of Iowa, 
Mr. LOUDERMILK, Mr. LUCAS, Mr. MASSIE, Mr. MULLIN, Mr. POSEY, 
Mr. DAVID P. ROE of Tennessee, Mr. WITTMAN, Mr. YOHO, Mr. YOUNG, 
Mr. COLLINS of Georgia, and Mr. WALBERG) introduced the following 
bill; which was referred to the Committee on Ways and Means 
A BILL 
To promote freedom, fairness, and economic opportunity by 
repealing the income tax and other taxes, abolishing the 
Internal Revenue Service, and enacting a national sales 
tax to be administered primarily by the States. 
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 
‘‘FairTax Act of 2019’’. 
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(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title; table of contents. 
Sec. 2. Congressional findings. 
TITLE I—REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND 
ESTATE AND GIFT TAXES 
Sec. 101. Income taxes repealed. 
Sec. 102. Payroll taxes repealed. 
Sec. 103. Estate and gift taxes repealed. 
Sec. 104. Conforming amendments; effective date. 
TITLE II—SALES TAX ENACTED 
Sec. 201. Sales tax. 
Sec. 202. Conforming and technical amendments. 
TITLE III—OTHER MATTERS 
Sec. 301. Phase-out of administration of repealed Federal taxes. 
Sec. 302. Administration of other Federal taxes. 
Sec. 303. Sales tax inclusive Social Security benefits indexation. 
TITLE IV—SUNSET OF SALES TAX IF SIXTEENTH AMENDMENT 
NOT REPEALED 
Sec. 401. Elimination of sales tax if Sixteenth Amendment not repealed. 
SEC. 2. CONGRESSIONAL FINDINGS. 
(a) FINDINGS
RELATING
TO
FEDERAL
INCOME 
TAX.—Congress finds the Federal 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 
United States by taxing income multiple times; 
(4) slows the capital formation necessary for 
real wages to steadily increase; 
(5) lowers productivity; 
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(6) imposes unacceptable and unnecessary ad-
ministrative and compliance costs on individual and 
business taxpayers; 
(7) is unfair and inequitable; 
(8) unnecessarily intrudes upon the privacy and 
civil rights of United States citizens; 
(9) hides the true cost of government by embed-
ding taxes in the costs of everything Americans buy; 
(10) is not being complied with at satisfactory 
levels and therefore raises the tax burden on law 
abiding citizens; and 
(11) impedes upward social mobility. 
(b) FINDINGS RELATING
TO FEDERAL PAYROLL 
TAXES.—Congress finds further that the Social Security 
and Medicare payroll taxes and self-employment taxes— 
(1) raise the cost of employment; 
(2) destroy jobs and cause unemployment; and 
(3) have a disproportionately adverse impact on 
lower income Americans. 
(c) FINDINGS RELATING TO FEDERAL ESTATE AND 
GIFT TAXES.—Congress finds further that the Federal es-
tate and gift taxes— 
(1) force family businesses and farms to be sold 
by the family to pay such taxes; 
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(2) discourage capital formation and entrepre-
neurship; 
(3) foster the continued dominance of large en-
terprises over small family-owned companies and 
farms; and 
(4) impose unacceptably high tax planning costs 
on small businesses and farms. 
(d) FINDINGS
RELATING
TO
NATIONAL
SALES 
TAX.—Congress finds further that a broad-based national 
sales tax on goods and services purchased for final con-
sumption— 
(1) is similar in many respects to the sales and 
use taxes in place in 45 of the 50 States; 
(2) will promote savings and investment; 
(3) will promote fairness; 
(4) will promote economic growth; 
(5) will raise the standard of living; 
(6) will increase investment; 
(7) will enhance productivity and international 
competitiveness; 
(8) will reduce administrative burdens on the 
American taxpayer; 
(9) will improve upward social mobility; and 
(10) will respect the privacy interests and civil 
rights of taxpayers. 
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(e) FINDINGS RELATING TO ADMINISTRATION OF 
NATIONAL SALES TAX.—Congress further finds that— 
(1) most of the practical experience admin-
istering sales taxes is found at the State govern-
mental level; 
(2) it is desirable to harmonize Federal and 
State collection and enforcement efforts to the max-
imum extent possible; 
(3) it is sound tax administration policy to fos-
ter administration and collection of the Federal sales 
tax at the State level in return for a reasonable ad-
ministration fee to the States; and 
(4) businesses that must collect and remit taxes 
should receive reasonable compensation for the cost 
of doing so. 
(f) FINDINGS RELATING TO REPEAL OF PRESENT 
FEDERAL TAX SYSTEM.—Congress further finds that the 
16th Amendment to the United States Constitution should 
be repealed. 
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TITLE I—REPEAL OF THE IN-
COME TAX, PAYROLL TAXES, 
AND ESTATE AND GIFT TAXES 
SEC. 101. INCOME TAXES REPEALED. 
Subtitle A of the Internal Revenue Code of 1986 (re-
lating to income taxes and self-employment taxes) is re-
pealed. 
SEC. 102. PAYROLL TAXES REPEALED. 
(a) IN GENERAL.—Subtitle C of the Internal Rev-
enue Code of 1986 (relating to payroll taxes and with-
holding of income taxes) is repealed. 
(b) FUNDING OF SOCIAL SECURITY.—For funding of 
the Social Security Trust Funds from general revenue, see 
section 201 of the Social Security Act (42 U.S.C. 401). 
SEC. 103. ESTATE AND GIFT TAXES REPEALED. 
Subtitle B of the Internal Revenue Code of 1986 (re-
lating to estate and gift taxes) is repealed. 
SEC. 104. CONFORMING AMENDMENTS; EFFECTIVE DATE. 
(a) CONFORMING AMENDMENTS.—The Internal Rev-
enue Code of 1986 is amended— 
(1) by striking subtitle H (relating to financing 
of Presidential election campaigns); and 
(2) by redesignating— 
(A) subtitle D (relating to miscellaneous 
excise taxes) as subtitle B; 
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(B) subtitle E (relating to alcohol, tobacco, 
and certain other excise taxes) as subtitle C; 
(C) subtitle F (relating to procedure and 
administration) as subtitle D; 
(D) subtitle G (relating to the Joint Com-
mittee on Taxation) as subtitle E; 
(E) subtitle I (relating to the Trust Fund 
Code) as subtitle F; 
(F) subtitle J (relating to coal industry 
health benefits) as subtitle G; and 
(G) subtitle K (relating to group health 
plan portability, access, and renewability re-
quirements) as subtitle H. 
(b) REDESIGNATION OF 1986 CODE.— 
(1) IN GENERAL.—The Internal Revenue Code 
of 1986 enacted on October 22, 1986, as heretofore, 
hereby, or hereafter amended, may be cited as the 
Internal Revenue Code of 2019. 
(2) REFERENCES IN LAWS, ETC.—Except when 
inappropriate, any reference in any law, Executive 
order, or other document— 
(A) to the Internal Revenue Code of 1986 
shall include a reference to the Internal Rev-
enue Code of 2019; and 
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(B) to the Internal Revenue Code of 2019 
shall include a reference to the provisions of law 
formerly known as the Internal Revenue Code 
of 1986. 
(c) ADDITIONAL AMENDMENTS.—For additional con-
forming amendments, see section 202 of this Act. 
(d) EFFECTIVE DATE.—Except as otherwise pro-
vided in this Act, the amendments made by this Act shall 
take effect on January 1, 2021. 
TITLE II—SALES TAX ENACTED 
SEC. 201. SALES TAX. 
(a) IN GENERAL.—The Internal Revenue Code of 
2019 is amended by inserting before subtitle B (as redes-
ignated by section 104(a)(2)(A)) the following new sub-
title: 
‘‘Subtitle A—Sales Tax 
‘‘Sec. 1. Principles of interpretation. 
‘‘Sec. 2. Definitions. 
‘‘CHAPTER 1. INTERPRETATION; DEFINITIONS; IMPOSITION OF TAX; ETC. 
‘‘CHAPTER 2. CREDITS; REFUNDS 
‘‘CHAPTER 3. FAMILY CONSUMPTION ALLOWANCE 
‘‘CHAPTER 4. FEDERAL AND STATE COOPERATIVE TAX ADMINISTRATION 
‘‘CHAPTER 5. OTHER ADMINISTRATIVE PROVISIONS 
‘‘CHAPTER 6. COLLECTIONS; APPEALS; TAXPAYER RIGHTS 
‘‘CHAPTER 7. SPECIAL RULES 
‘‘CHAPTER 8. FINANCIAL INTERMEDIATION SERVICES 
‘‘CHAPTER 9. ADDITIONAL MATTERS 
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‘‘SEC. 1. PRINCIPLES OF INTERPRETATION. 
‘‘(a) IN GENERAL.—Any court, the Secretary, and 
any sales tax administering authority shall consider the 
purposes of this subtitle (as set forth in subsection (b)) 
as the primary aid in statutory construction. 
‘‘(b) PURPOSES.—The purposes of this subtitle are 
as follows: 
‘‘(1) To raise revenue needed by the Federal 
Government in a manner consistent with the other 
purposes of this subtitle. 
‘‘(2) To tax all consumption of goods and serv-
ices in the United States once, without exception, 
but only once. 
‘‘(3) To prevent double, multiple, or cascading 
taxation. 
‘‘(4) To simplify the tax law and reduce the ad-
ministration costs of, and the costs of compliance 
with, the tax law. 
‘‘(5) To provide for the administration of the 
tax law in a manner that respects privacy, due proc-
ess, individual rights when interacting with the gov-
ernment, the presumption of innocence in criminal 
proceedings, and the presumption of lawful behavior 
in civil proceedings. 
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‘‘(6) To increase the role of State governments 
in Federal tax administration because of State gov-
ernment expertise in sales tax administration. 
‘‘(7) To enhance generally cooperation and co-
ordination among State tax administrators; and to 
enhance cooperation and coordination among Fed-
eral and State tax administrators, consistent with 
the principle of intergovernmental tax immunity. 
‘‘(c) SECONDARY AIDS TO STATUTORY CONSTRUC-
TION.—As a secondary aid in statutory construction, any 
court, the Secretary, and any sales tax administering au-
thority shall consider— 
‘‘(1) the common law canons of statutory con-
struction, 
‘‘(2) the meaning and construction of concepts 
and terms used in the Internal Revenue Code of 
1986 as in effect before the effective date of this 
subtitle, and 
‘‘(3) construe any ambiguities in this Act in 
favor of reserving powers to the States respectively, 
or to the people. 
‘‘SEC. 2. DEFINITIONS. 
‘‘(a) IN GENERAL.—For purposes of this subtitle— 
‘‘(1) AFFILIATED FIRMS.—A firm is affiliated 
with another if 1 firm owns 50 percent or more of— 
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‘‘(A) the voting shares in a corporation, or 
‘‘(B) the capital interests of a business 
firm that is not a corporation. 
‘‘(2) CONFORMING
STATE
SALES
TAX.—The 
term ‘conforming State sales tax’ means a sales tax 
imposed by a State that adopts the same definition 
of taxable property and services as adopted by this 
subtitle. 
‘‘(3) DESIGNATED COMMERCIAL PRIVATE COU-
RIER
SERVICE.—The term ‘designated commercial 
private courier service’ means a firm designated as 
such by the Secretary or any sales tax administering 
authority, upon application of the firm, if the firm— 
‘‘(A) provides its services to the general 
public, 
‘‘(B) records electronically to its data base 
kept in the regular course of its business the 
date on which an item was given to such firm 
for delivery, and 
‘‘(C) has been operating for at least 1 
year. 
‘‘(4) EDUCATION
AND
TRAINING.—The term 
‘education and training’ means tuition for primary, 
secondary, or postsecondary level education, and job- 
related training courses. Such term does not include 
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room, board, sports activities, recreational activities, 
hobbies, games, arts or crafts or cultural activities. 
‘‘(5) GROSS PAYMENTS.—The term ‘gross pay-
ments’ means payments for taxable property or serv-
ices, including Federal taxes imposed by this title. 
‘‘(6) INTANGIBLE PROPERTY.— 
‘‘(A) IN GENERAL.—The term ‘intangible 
property’ includes copyrights, trademarks, pat-
ents, goodwill, financial instruments, securities, 
commercial paper, debts, notes and bonds, and 
other property deemed intangible at common 
law. The Secretary shall, by regulation resolve 
differences among the provisions of common 
law of the several States. 
‘‘(B) CERTAIN
TYPES
OF
PROPERTY.— 
Such term does not include tangible personal 
property (or rents or leaseholds of any term 
thereon), real property (or rents or leaseholds 
of any term thereon) and computer software. 
‘‘(7) PERSON.—The term ‘person’ means any 
natural person, and unless the context clearly does 
not allow it, any corporation, partnership, limited li-
ability company, trust, estate, government, agency, 
administration, organization, association, or other 
legal entity (foreign or domestic). 
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‘‘(8) PRODUCE, PROVIDE, RENDER, OR
SELL 
TAXABLE PROPERTY OR SERVICES.— 
‘‘(A) IN GENERAL.—A taxable property or 
service is used to produce, provide, render, or 
sell a taxable property or service if such prop-
erty or service is purchased by a person en-
gaged in a trade or business for the purpose of 
employing or using such taxable property or 
service in the production, provision, rendering, 
or sale of other taxable property or services in 
the ordinary course of that trade or business. 
‘‘(B) 
RESEARCH, 
EXPERIMENTATION, 
TESTING, AND DEVELOPMENT.—Taxable prop-
erty or services used in a trade or business for 
the purpose of research, experimentation, test-
ing, and development shall be treated as used to 
produce, provide, render, or sell taxable prop-
erty or services. 
‘‘(C) 
INSURANCE
PAYMENTS.—Taxable 
property or services purchased by an insurer on 
behalf of an insured shall be treated as used to 
produce, provide, render, or sell taxable prop-
erty or services if the premium for the insur-
ance contract giving rise to the insurer’s obliga-
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tion was subject to tax pursuant to section 801 
(relating to financial intermediation services). 
‘‘(D) EDUCATION
AND
TRAINING.—Edu-
cation and training shall be treated as services 
used to produce, provide, render, or sell taxable 
property or services. 
‘‘(9) REGISTERED
SELLER.—The term ‘reg-
istered seller’ means a person registered pursuant to 
section 502. 
‘‘(10) SALES
TAX
ADMINISTERING
AUTHOR-
ITY.—The term ‘sales tax administering authority’ 
means— 
‘‘(A) the State agency designated to collect 
and administer the sales tax imposed by this 
subtitle, in an administering State, or 
‘‘(B) the Secretary, in a State that is nei-
ther— 
‘‘(i) an administering State, nor 
‘‘(ii) a State that has elected to have 
its sales tax administered by an admin-
istering State. 
‘‘(11) 
SECRETARY.—The 
term 
‘Secretary’ 
means the Secretary of the Treasury. 
‘‘(12) TAXABLE EMPLOYER.— 
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‘‘(A) IN GENERAL.—The term ‘taxable em-
ployer’ includes— 
‘‘(i) any household employing domes-
tic servants, and 
‘‘(ii) any government except for gov-
ernment enterprises (as defined in section 
704). 
‘‘(B) EXCEPTIONS.—The term ‘taxable 
employer’ does not include any employer which 
is— 
‘‘(i) engaged in a trade or business, 
‘‘(ii) a not-for-profit organization (as 
defined in section 706), or 
‘‘(iii) a government enterprise (as de-
fined in section 704). 
‘‘(C) CROSS REFERENCE.—For rules relat-
ing to collection and remittance of tax on wages 
by taxable employers, see section 103(b)(2). 
‘‘(13) TAX INCLUSIVE FAIR MARKET VALUE.— 
The term ‘tax inclusive fair market value’ means the 
fair market value of taxable property or services plus 
the tax imposed by this subtitle. 
‘‘(14) TAXABLE PROPERTY OR SERVICE.— 
‘‘(A) GENERAL RULE.—The term ‘taxable 
property or service’ means— 
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‘‘(III) by an employer that is a 
government enterprise (as defined in 
section 704), and 
‘‘(IV) by taxable employers to 
employees directly providing education 
and training. 
‘‘(15) UNITED
STATES.—The term ‘United 
States’, when used in the geographical sense, means 
each of the 50 States, the District of Columbia, and 
any commonwealth, territory, or possession of the 
United States. 
‘‘(16) USED PROPERTY.—The term ‘used prop-
erty’ means— 
‘‘(A) property on which the tax imposed by 
section 101 has been collected and for which no 
credit has been allowed under section 202, 203, 
or 205, or 
‘‘(B) property that was held other than for 
a business purpose (as defined in section 
102(b)) on December 31, 2020. 
‘‘(17) WAGES AND SALARY.—The terms ‘wage’ 
and ‘salary’ mean all compensation paid for employ-
ment service including cash compensation, employee 
benefits, disability insurance, or wage replacement 
insurance payments, unemployment compensation 
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insurance, workers’ compensation insurance, and the 
fair market value of any other consideration paid by 
an employer to an employee in consideration for em-
ployment services rendered. 
‘‘(b) CROSS REFERENCES.— 
‘‘(1) For the definition of business purposes, 
see section 102(b). 
‘‘(2) For the definition of insurance contract, 
see section 206(e). 
‘‘(3) For the definition of qualified family, see 
section 302. 
‘‘(4) For the definition of monthly poverty level, 
see section 303. 
‘‘(5) For the definition of large seller, see sec-
tion 501(e)(3). 
‘‘(6) For the definition of hobby activities, see 
section 701. 
‘‘(7) For the definition of gaming sponsor, see 
section 701(a). 
‘‘(8) For the definition of a chance, see section 
701(b). 
‘‘(9) For the definition of government enter-
prise, see section 704(b). 
‘‘(10) For the definition of mixed use property, 
see section 705. 
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‘‘(11) For the definition of qualified not-for- 
profit organization, see section 706. 
‘‘(12) For the definition of financial intermedi-
ation services, see section 801. 
‘‘CHAPTER 1—INTERPRETATION; 
DEFINITIONS; IMPOSITION OF TAX; ETC. 
‘‘Sec. 101. Imposition of sales tax. 
‘‘Sec. 102. Intermediate and export sales. 
‘‘Sec. 103. Rules relating to collection and remittance of tax. 
‘‘SEC. 101. IMPOSITION OF SALES TAX. 
‘‘(a) IN GENERAL.—There is hereby imposed a tax 
on the use or consumption in the United States of taxable 
property or services. 
‘‘(b) RATE.— 
‘‘(1) FOR 2021.—In the calendar year 2021, the 
rate of tax is 23 percent of the gross payments for 
the taxable property or service. 
‘‘(2) FOR YEARS AFTER 2021.—For years after 
the calendar year 2021, the rate of tax is the com-
bined Federal tax rate percentage (as defined in 
paragraph (3)) of the gross payments for the taxable 
property or service. 
‘‘(3) COMBINED FEDERAL TAX RATE PERCENT-
AGE.—The combined Federal tax rate percentage is 
the sum of— 
‘‘(A) the general revenue rate (as defined 
in paragraph (4)), 
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‘‘(B) the old-age, survivors and disability 
insurance rate, and 
‘‘(C) the hospital insurance rate. 
‘‘(4) GENERAL REVENUE RATE.—The general 
revenue rate shall be 14.91 percent. 
‘‘(c) COORDINATION WITH IMPORT DUTIES.—The 
tax imposed by this section is in addition to any import 
duties imposed by chapter 4 of title 19, United States 
Code. The Secretary shall provide by regulation that, to 
the maximum extent practicable, the tax imposed by this 
section on imported taxable property and services is col-
lected and administered in conjunction with any applicable 
import duties imposed by the United States. 
‘‘(d) LIABILITY FOR TAX.— 
‘‘(1) IN GENERAL.—The person using or con-
suming taxable property or services in the United 
States is liable for the tax imposed by this section, 
except as provided in paragraph (2) of this sub-
section. 
‘‘(2) EXCEPTION WHERE TAX PAID TO SELL-
ER.—A person using or consuming a taxable prop-
erty or service in the United States is not liable for 
the tax imposed by this section if the person pays 
the tax to a person selling the taxable property or 
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service and receives from such person a purchaser’s 
receipt within the meaning of section 509. 
‘‘SEC. 102. INTERMEDIATE AND EXPORT SALES. 
‘‘(a) IN GENERAL.—For purposes of this subtitle— 
‘‘(1) BUSINESS AND EXPORT PURPOSES.—No 
tax shall be imposed under section 101 on any tax-
able property or service purchased for a business 
purpose in a trade or business. 
‘‘(2) INVESTMENT PURPOSE.—No tax shall be 
imposed under section 101 on any taxable property 
or service purchased for an investment purpose and 
held exclusively for an investment purpose. 
‘‘(3) STATE GOVERNMENT FUNCTIONS.—No tax 
shall be imposed under section 101 on State govern-
ment functions that do not constitute the final con-
sumption of property or services. 
‘‘(b) BUSINESS PURPOSES.—For purposes of this 
section, the term ‘purchased for a business purpose in a 
trade or business’ means purchased by a person engaged 
in a trade or business and used in that trade or business— 
‘‘(1) for resale, 
‘‘(2) to produce, provide, render, or sell taxable 
property or services, or 
‘‘(3) in furtherance of other bona fide business 
purposes. 
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‘‘(c) INVESTMENT PURPOSES.—For purposes of this 
section, the term ‘purchased for an investment purpose’ 
means property purchased exclusively for purposes of ap-
preciation or the production of income but not entailing 
more than minor personal efforts. 
‘‘SEC. 103. RULES RELATING TO COLLECTION AND REMIT-
TANCE OF TAX. 
‘‘(a) LIABILITY FOR COLLECTION AND REMITTANCE 
OF THE TAX.—Except as provided otherwise by this sec-
tion, any tax imposed by this subtitle shall be collected 
and remitted by the seller of taxable property or services 
(including financial intermediation services). 
‘‘(b) TAX TO BE REMITTED BY PURCHASER IN CER-
TAIN CIRCUMSTANCES.— 
‘‘(1) IN GENERAL.—In the case of taxable prop-
erty or services purchased outside of the United 
States and imported into the United States for use 
or consumption in the United States, the purchaser 
shall remit the tax imposed by section 101. 
‘‘(2) CERTAIN WAGES OR SALARY.—In the case 
of wages or salary paid by a taxable employer which 
are taxable services, the employer shall remit the tax 
imposed by section 101. 
‘‘(c) CONVERSION OF BUSINESS OR EXPORT PROP-
ERTY OR SERVICES.—Property or services purchased for 
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a business purpose in a trade or business or for export 
(sold untaxed pursuant to section 102(a)) that is subse-
quently converted to personal use shall be deemed pur-
chased at the time of conversion and shall be subject to 
the tax imposed by section 101 at the fair market value 
of the converted property as of the date of conversion. The 
tax shall be due as if the property had been sold at the 
fair market value during the month of conversion. The 
person using or consuming the converted property is liable 
for and shall remit the tax. 
‘‘(d) BARTER TRANSACTIONS.—If gross payment for 
taxable property or services is made in other than money, 
then the person responsible for collecting and remitting 
the tax shall remit the tax to the sales tax administering 
authority in money as if gross payment had been made 
in money at the tax inclusive fair market value of the tax-
able property or services purchased. 
‘‘CHAPTER 2—CREDITS; REFUNDS 
‘‘Sec. 201. Credits and refunds. 
‘‘Sec. 202. Business use conversion credit. 
‘‘Sec. 203. Intermediate and export sales credit. 
‘‘Sec. 204. Administration credit. 
‘‘Sec. 205. Bad debt credit. 
‘‘Sec. 206. Insurance proceeds credit. 
‘‘Sec. 207. Refunds. 
‘‘SEC. 201. CREDITS AND REFUNDS. 
‘‘(a) IN GENERAL.—Each person shall be allowed a 
credit with respect to the taxes imposed by section 101 
for each month in an amount equal to the sum of— 
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‘‘(1) such person’s business use conversion 
credit pursuant to section 202 for such month, 
‘‘(2) such person’s intermediate and export 
sales credit pursuant to section 203 for such month, 
‘‘(3) the administration credit pursuant to sec-
tion 204 for such month, 
‘‘(4) the bad debt credit pursuant to section 
205 for such month, 
‘‘(5) the insurance proceeds credit pursuant to 
section 206 for such month, 
‘‘(6) the transitional inventory credit pursuant 
to section 902, and 
‘‘(7) any amount paid in excess of the amount 
due. 
‘‘(b) CREDITS NOT ADDITIVE.—Only one credit al-
lowed by chapter 2 may be taken with respect to any par-
ticular gross payment. 
‘‘SEC. 202. BUSINESS USE CONVERSION CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 201, a 
person’s business use conversion credit for any month is 
the aggregate of the amounts determined under subsection 
(b) with respect to taxable property and services— 
‘‘(1) on which tax was imposed by section 101 
(and actually paid), and 
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‘‘(2) which commenced to be 95 percent or 
more used during such month for business purposes 
(within the meaning of section 102(b)). 
‘‘(b) AMOUNT OF CREDIT.—The amount determined 
under this paragraph with respect to any taxable property 
or service is the lesser of— 
‘‘(1) the product of— 
‘‘(A) the rate imposed by section 101, and 
‘‘(B) the quotient that is— 
‘‘(i) the fair market value of the prop-
erty or service when its use is converted, 
divided by 
‘‘(ii) the quantity that is one minus 
the tax rate imposed by section 101, or 
‘‘(2) the amount of tax paid with respect to 
such taxable property or service, including the 
amount, if any, determined in accordance with sec-
tion 705 (relating to mixed use property). 
‘‘SEC. 203. INTERMEDIATE AND EXPORT SALES CREDIT. 
‘‘For purposes of section 201, a person’s intermediate 
and export sales credit is the amount of sales tax paid 
on the purchase of any taxable property or service pur-
chased for— 
‘‘(1) a business purpose in a trade or business 
(as defined in section 102(b)), or 
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‘‘(2) export from the United States for use or 
consumption outside the United States. 
‘‘SEC. 204. ADMINISTRATION CREDIT. 
‘‘(a) IN GENERAL.—Every person filing a timely 
monthly report (with regard to extensions) in compliance 
with section 501 shall be entitled to a taxpayer adminis-
trative credit equal to the greater of— 
‘‘(1) $200, or 
‘‘(2) one-quarter of 1 percent of the tax remit-
ted. 
‘‘(b) LIMITATION.—The credit allowed under this sec-
tion shall not exceed 20 percent of the tax due to be remit-
ted prior to the application of any credit or credits per-
mitted by section 201. 
‘‘SEC. 205. BAD DEBT CREDIT. 
‘‘(a) FINANCIAL INTERMEDIATION SERVICES.—Any 
person who has experienced a bad debt (other than unpaid 
invoices within the meaning of subsection (b)) shall be en-
titled to a credit equal to the product of— 
‘‘(1) the rate imposed by section 101, and 
‘‘(2) the quotient that is— 
‘‘(A) the amount of the bad debt (as de-
fined in section 802), divided by 
‘‘(B) the quantity that is one minus the 
rate imposed by section 101. 
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‘‘(b) UNPAID INVOICES.—Any person electing the ac-
crual method pursuant to section 503 that has with re-
spect to a transaction— 
‘‘(1) invoiced the tax imposed by section 101, 
‘‘(2) remitted the invoiced tax, 
‘‘(3) actually delivered the taxable property or 
performed the taxable services invoiced, and 
‘‘(4) not been paid 180 days after date the in-
voice was due to be paid, 
shall be entitled to a credit equal to the amount of tax 
remitted and unpaid by the purchaser. 
‘‘(c) SUBSEQUENT PAYMENT.—Any payment made 
with respect to a transaction subsequent to a section 205 
credit being taken with respect to that transaction shall 
be subject to tax in the month the payment was received 
as if a tax inclusive sale of taxable property and services 
in the amount of the payment had been made. 
‘‘(d) PARTIAL PAYMENTS.—Partial payments shall 
be treated as pro rata payments of the underlying obliga-
tion and shall be allocated proportionately— 
‘‘(1) for fully taxable payments, between pay-
ment for the taxable property and service and tax, 
and 
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‘‘(2) for partially taxable payments, among pay-
ment for the taxable property and service, tax and 
other payment. 
‘‘(e) RELATED PARTIES.—The credit provided by this 
section shall not be available with respect to sales made 
to related parties. For purposes of this section, related 
party means affiliated firms and family members (as de-
fined in section 302(b)). 
‘‘SEC. 206. INSURANCE PROCEEDS CREDIT. 
‘‘(a) IN GENERAL.—A person receiving a payment 
from an insurer by virtue of an insurance contract shall 
be entitled to a credit in an amount determined by sub-
section (b), less any amount paid to the insured by the 
insurer pursuant to subsection (c), if the entire premium 
(except that portion allocable to the investment account 
of the underlying policy) for the insurance contract giving 
rise to the insurer’s obligation to make a payment to the 
insured was subject to the tax imposed by section 101 and 
said tax was paid. 
‘‘(b) CREDIT AMOUNT.—The amount of the credit 
shall be the product of— 
‘‘(1) the rate imposed by section 101, and 
‘‘(2) the quotient that is— 
‘‘(A) the amount of the payment made by 
the insurer to the insured, divided by 
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‘‘(B) the quantity that is one minus the 
rate imposed by section 101. 
‘‘(c) ADMINISTRATIVE OPTION.—The credit deter-
mined in accordance with subsection (b) shall be paid by 
the insurer to the insured and the insurer shall be entitled 
to the credit in lieu of the insured, except that the insurer 
may elect, in a form prescribed by the Secretary, to not 
pay the credit and require the insured to make application 
for the credit. In the event of such election, the insurer 
shall provide to the Secretary and the insured the name 
and tax identification number of the insurer and of the 
insured and indicate the proper amount of the credit. 
‘‘(d) COORDINATION WITH RESPECT
TO EXEMP-
TION.—If taxable property or services purchased by an in-
surer on behalf of an insured are purchased free of tax 
by virtue of section 2(a)(8)(C), then the credit provided 
by this section shall not be available with respect to that 
purchase. 
‘‘(e) INSURANCE CONTRACT.—For purposes of sub-
section (a), the term ‘insurance contract’ shall include a 
life insurance contract, a health insurance contract, a 
property and casualty loss insurance contract, a general 
liability insurance contract, a marine insurance contract, 
a fire insurance contract, an accident insurance contract, 
a disability insurance contract, a long-term care insurance 
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contract, and an insurance contract that provides a com-
bination of these types of insurance. 
‘‘SEC. 207. REFUNDS. 
‘‘(a) REGISTERED SELLERS.—If a registered seller 
files a monthly tax report with an overpayment, then, 
upon application by the registered seller in a form pre-
scribed by the sales tax administering authority, the over-
payment shown on the report shall be refunded to the reg-
istered seller within 60 days of receipt of said application. 
In the absence of such application, the overpayment may 
be carried forward, without interest, by the person entitled 
to the credit. 
‘‘(b) OTHER PERSONS.—If a person other than a reg-
istered seller has an overpayment for any month, then, 
upon application by the person in a form prescribed by 
the sales tax administering authority, the credit balance 
due shall be refunded to the person within 60 days of re-
ceipt of said application. 
‘‘(c) INTEREST.—No interest shall be paid on any 
balance due from the sales tax administering authority 
under this subsection for any month if such balance due 
is paid within 60 days after the application for refund is 
received. Balances due not paid within 60 days after the 
application for refund is received shall bear interest from 
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the date of application. Interest shall be paid at the Fed-
eral short-term rate (as defined in section 511). 
‘‘(d) SUSPENSION
OF PERIOD TO PAY REFUND 
ONLY IF FEDERAL OR STATE COURT RULING.—The 60- 
day periods under subsections (a) and (b) shall be sus-
pended with respect to a purported overpayment (or por-
tion thereof) only during any period that there is in effect 
a preliminary, temporary, or final ruling from a Federal 
or State court that there is reasonable cause to believe 
that such overpayment may not actually be due. 
‘‘CHAPTER 3—FAMILY CONSUMPTION 
ALLOWANCE 
‘‘Sec. 301. Family consumption allowance. 
‘‘Sec. 302. Qualified family. 
‘‘Sec. 303. Monthly poverty level. 
‘‘Sec. 304. Rebate mechanism. 
‘‘Sec. 305. Change in family circumstances. 
‘‘SEC. 301. FAMILY CONSUMPTION ALLOWANCE. 
‘‘Each qualified family shall be eligible to receive a 
sales tax rebate each month. The sales tax rebate shall 
be in an amount equal to the product of— 
‘‘(1) the rate of tax imposed by section 101, 
and 
‘‘(2) the monthly poverty level. 
‘‘SEC. 302. QUALIFIED FAMILY. 
‘‘(a) GENERAL RULE.—For purposes of this chapter, 
the term ‘qualified family’ shall mean one or more family 
members sharing a common residence. All family members 
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sharing a common residence shall be considered as part 
of one qualified family. 
‘‘(b) FAMILY SIZE DETERMINATION.— 
‘‘(1) IN GENERAL.—To determine the size of a 
qualified family for purposes of this chapter, family 
members shall mean— 
‘‘(A) an individual, 
‘‘(B) the individual’s spouse, 
‘‘(C) all lineal ancestors and descendants 
of said individual (and such individual’s 
spouse), 
‘‘(D) all legally adopted children of such 
individual (and such individual’s spouse), and 
‘‘(E) all children under legal guardianship 
of such individual (or such individual’s spouse). 
‘‘(2) 
IDENTIFICATION
REQUIREMENTS.—In 
order for a person to be counted as a member of the 
family for purposes of determining the size of the 
qualified family, such person must— 
‘‘(A) have a bona fide Social Security num-
ber, and 
‘‘(B) be a lawful resident of the United 
States. 
‘‘(c) CHILDREN LIVING AWAY FROM HOME.— 
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‘‘(1) STUDENTS LIVING AWAY FROM HOME.— 
Any person who was a registered student during not 
fewer than 5 months in a calendar year while living 
away from the common residence of a qualified fam-
ily but who receives over 50 percent of such person’s 
support during a calendar year from members of the 
qualified family shall be included as part of the fam-
ily unit whose members provided said support for 
purposes of this chapter. 
‘‘(2) CHILDREN OF DIVORCED OR SEPARATED 
PARENTS.—If a child’s parents are divorced or le-
gally separated, a child for purposes of this chapter 
shall be treated as part of the qualified family of the 
custodial parent. In cases of joint custody, the custo-
dial parent for purposes of this chapter shall be the 
parent that has custody of the child for more than 
one-half of the time during a given calendar year. A 
parent entitled to be treated as the custodial parent 
pursuant to this paragraph may release this claim to 
the other parent if said release is in writing. 
‘‘(d) ANNUAL REGISTRATION.—In order to receive 
the family consumption allowance provided by section 301, 
a qualified family must register with the sales tax admin-
istering authority in a form prescribed by the Secretary. 
The annual registration form shall provide— 
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‘‘(1) the name of each family member who 
shared the qualified family’s residence on the family 
determination date, 
‘‘(2) the Social Security number of each family 
member on the family determination date who 
shared the qualified family’s residence on the family 
determination date, 
‘‘(3) the family member or family members to 
whom the family consumption allowance should be 
paid, 
‘‘(4) a certification that all listed family mem-
bers are lawful residents of the United States, 
‘‘(5) a certification that all family members 
sharing the common residence are listed, 
‘‘(6) a certification that no family members 
were incarcerated on the family determination date 
(within the meaning of subsection (l)), and 
‘‘(7) the address of the qualified family. 
Said registration shall be signed by all members of the 
qualified family that have attained the age of 21 years 
as of the date of filing. 
‘‘(e) REGISTRATION NOT MANDATORY.—Registra-
tion is not mandatory for any qualified family. 
‘‘(f) EFFECT
OF FAILURE TO PROVIDE ANNUAL 
REGISTRATION.—Any qualified family that fails to reg-
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ister in accordance with this section within 30 days of the 
family determination date, shall cease receiving the 
monthly family consumption allowance in the month be-
ginning 90 days after the family determination date. 
‘‘(g) EFFECT OF CURING FAILURE TO PROVIDE AN-
NUAL REGISTRATION.—Any qualified family that failed to 
timely make its annual registration in accordance with this 
section but subsequently cures its failure to register, shall 
be entitled to up to 6 months of lapsed sales tax rebate 
payments. No interest on lapsed payment amount shall be 
paid. 
‘‘(h) EFFECTIVE
DATE
OF
ANNUAL
REGISTRA-
TIONS.—Annual registrations shall take effect for the 
month beginning 90 days after the family registration 
date. 
‘‘(i) EFFECTIVE
DATE
OF
REVISED
REGISTRA-
TIONS.—A revised registration made pursuant to section 
305 shall take effect for the first month beginning 60 days 
after the revised registration was filed. The existing reg-
istration shall remain in effect until the effective date of 
the revised registration. 
‘‘(j) DETERMINATION
OF
REGISTRATION
FILING 
DATE.—An annual or revised registration shall be deemed 
filed when— 
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‘‘(1) deposited in the United States mail, post-
age prepaid, to the address of the sales tax admin-
istering authority, 
‘‘(2) delivered and accepted at the offices of the 
sales tax administering authority, or 
‘‘(3) provided to a designated commercial pri-
vate courier service for delivery within 2 days to the 
sales tax administering authority at the address of 
the sales tax administering authority. 
‘‘(k) PROPOSED REGISTRATION TO BE PROVIDED.— 
Thirty or more days before the family registration date, 
the sales tax administering authority shall mail to the ad-
dress shown on the most recent rebate registration or 
change of address notice filed pursuant to section 305(d) 
a proposed registration that may be simply signed by the 
appropriate family members if family circumstances have 
not changed. 
‘‘(l) INCARCERATED INDIVIDUALS.—An individual 
shall not be eligible under this chapter to be included as 
a member of any qualified family if that individual— 
‘‘(1) is incarcerated in a local, State, or Federal 
jail, prison, mental hospital, or other institution on 
the family determination date, and 
‘‘(2) is scheduled to be incarcerated for 6 
months or more in the 12-month period following 
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the effective date of the annual registration or the 
revised registration of said qualified family. 
‘‘(m) FAMILY DETERMINATION DATE.—The family 
determination date is a date assigned to each family by 
the Secretary for purposes of determining qualified family 
size and other information necessary for the administra-
tion of this chapter. The Secretary shall promulgate regu-
lations regarding the issuance of family determination 
dates. In the absence of any regulations, the family deter-
mination date for all families shall be October 1. The Sec-
retary may assign family determination dates for adminis-
trative convenience. Permissible means of assigning family 
determination dates include a method based on the birth 
dates of family members. 
‘‘(n) CROSS REFERENCE.—For penalty for filing 
false rebate claim, see section 504(i). 
‘‘SEC. 303. MONTHLY POVERTY LEVEL. 
‘‘(a) IN GENERAL.—The monthly poverty level for 
any particular month shall be one-twelfth of the ‘annual 
poverty level’. For purposes of this section the ‘annual 
poverty level’ shall be the sum of— 
‘‘(1) the annual level determined by the Depart-
ment of Health and Human Services poverty guide-
lines required by sections 652 and 673(2) of the 
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Omnibus Reconciliation Act of 1981 for a particular 
family size, and 
‘‘(2) in case of families that include a married 
couple, the ‘annual marriage penalty elimination 
amount’. 
‘‘(b) ANNUAL MARRIAGE PENALTY ELIMINATION 
AMOUNT.—The annual marriage penalty elimination 
amount shall be the amount that is— 
‘‘(1) the amount that is two times the annual 
level determined by the Department of Health and 
Human Services poverty guidelines required by sec-
tions 652 and 673(2) of the Omnibus Reconciliation 
Act of 1981 for a family of one, less 
‘‘(2) the annual level determined by the Depart-
ment of Health and Human Services poverty guide-
lines required by sections 652 and 673(2) of the 
Omnibus Reconciliation Act of 1981 for a family of 
two. 
‘‘SEC. 304. REBATE MECHANISM. 
‘‘(a) GENERAL RULE.—The Social Security Adminis-
tration shall provide a monthly sales tax rebate to duly 
registered qualified families in an amount determined in 
accordance with section 301. 
‘‘(b) PERSONS RECEIVING REBATE.—The payments 
shall be made to the persons designated by the qualifying 
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family in the annual or revised registration for each quali-
fied family in effect with respect to the month for which 
payment is being made. Payments may only be made to 
persons 18 years or older. If more than 1 person is des-
ignated in a registration to receive the rebate, then the 
rebate payment shall be divided evenly between or among 
those persons designated. 
‘‘(c) WHEN REBATES MAILED.—Rebates shall be 
mailed on or before the first business day of the month 
for which the rebate is being provided. 
‘‘(d) SMART CARDS AND DIRECT ELECTRONIC DE-
POSIT PERMISSIBLE.—The Social Security Administration 
may provide rebates in the form of smart cards that carry 
cash balances in their memory for use in making pur-
chases at retail establishments or by direct electronic de-
posit. 
‘‘SEC. 305. CHANGE IN FAMILY CIRCUMSTANCES. 
‘‘(a) GENERAL RULE.—In the absence of the filing 
of a revised registration in accordance with this chapter, 
the common residence of the qualified family, marital sta-
tus and number of persons in a qualified family on the 
family registration date shall govern determinations re-
quired to be made under this chapter for purposes of the 
following calendar year. 
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‘‘(b) NO DOUBLE COUNTING.—In no event shall any 
person be considered part of more than one qualified fam-
ily. 
‘‘(c) REVISED
REGISTRATION
PERMISSIBLE.—A 
qualified family may file a revised registration for pur-
poses of section 302(d) to reflect a change in family cir-
cumstances. A revised registration form shall provide— 
‘‘(1) the name of each family member who 
shared the qualified family’s residence on the filing 
date of the revised registration, 
‘‘(2) the Social Security number of each family 
member who shared the qualified family’s residence 
on the filing date of the revised registration, 
‘‘(3) the family member or family members to 
whom the family consumption allowance should be 
paid, 
‘‘(4) a certification that all listed family mem-
bers are lawful residents of the United States, 
‘‘(5) a certification that all family members 
sharing the commoner residence are listed, 
‘‘(6) a certification that no family members 
were incarcerated on the family determination date 
(within the meaning of section 302(1)), and 
‘‘(7) the address of the qualified family. 
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Said revised registration shall be signed by all members 
of the qualified family that have attained the age of 21 
years as of the filing date of the revised registration. 
‘‘(d) CHANGE OF ADDRESS.—A change of address for 
a qualified family may be filed with the sales tax admin-
istering authority at any time and shall not constitute a 
revised registration. 
‘‘(e) REVISED REGISTRATION NOT MANDATORY.— 
Revised registrations reflecting changes in family status 
are not mandatory. 
‘‘CHAPTER 4—FEDERAL AND STATE 
COOPERATIVE TAX ADMINISTRATION 
‘‘Sec. 401. Authority for States to collect tax. 
‘‘Sec. 402. Federal administrative support for States. 
‘‘Sec. 403. Federal-State tax conferences. 
‘‘Sec. 404. Federal administration in certain States. 
‘‘Sec. 405. Interstate allocation and destination determination. 
‘‘Sec. 406. General administrative matters. 
‘‘Sec. 407. Jurisdiction. 
‘‘SEC. 401. AUTHORITY FOR STATES TO COLLECT TAX. 
‘‘(a) IN GENERAL.—The tax imposed by section 101 
on gross payments for the use or consumption of taxable 
property or services within a State shall be administered, 
collected, and remitted to the United States Treasury by 
such State if the State is an administering State. 
‘‘(b) ADMINISTERING STATE.—For purposes of this 
section, the term ‘administering State’ means any State— 
‘‘(1) which maintains a sales tax, and 
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‘‘(2) which enters into a cooperative agreement 
with the Secretary containing reasonable provisions 
governing the administration by such State of the 
taxes imposed by the subtitle and the remittance to 
the United States in a timely manner of taxes col-
lected under this chapter. 
‘‘(c) COOPERATIVE AGREEMENTS.—The agreement 
under subsection (b)(2) shall include provisions for the ex-
peditious transfer of funds, contact officers, dispute reso-
lution, information exchange, confidentiality, taxpayer 
rights, and other matters of importance. The agreement 
shall not contain extraneous matters. 
‘‘(d) TIMELY REMITTANCE OF TAX.— 
‘‘(1) IN GENERAL.—Administering States shall 
remit and pay over taxes collected under this subtitle 
on behalf of the United States (less the administra-
tion fee allowable under paragraph (2)) not later 
than 5 days after receipt. Interest at 150 percent of 
the Federal short-term rate shall be paid with re-
spect to amounts remitted after the due date. 
‘‘(2) ADMINISTRATION FEE.—An administering 
State may retain an administration fee equal to one- 
quarter of 1 percent of the amounts otherwise re-
quired to be remitted to the United States under 
this chapter by the administering State. 
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‘‘(e) LIMITATION ON ADMINISTRATION OF TAX BY 
UNITED STATES.—The Secretary may administer the tax 
imposed by this subtitle in an administering State only 
if— 
‘‘(1)(A) such State has failed on a regular basis 
to timely remit to the United States taxes collected 
under this chapter on behalf of the United States, 
or 
‘‘(B) such State has on a regular basis other-
wise materially breached the agreement referred to 
in subsection (b)(2), 
‘‘(2) the State has failed to cure such alleged 
failures and breaches within a reasonable time, 
‘‘(3) the Secretary provides such State with 
written notice of such alleged failures and breaches, 
and 
‘‘(4) a District Court of the United States with-
in such State, upon application of the Secretary, has 
rendered a decision— 
‘‘(A) making findings of fact that— 
‘‘(i) such State has failed on a regular 
basis to timely remit to the United States 
taxes collected under this chapter on behalf 
of the United States, or such State has on 
a 
regular 
basis 
otherwise 
materially 
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breached the agreement referred to in sub-
section (b)(2), 
‘‘(ii) the Secretary has provided such 
State with written notice of such alleged 
failures and breaches, and 
‘‘(iii) the State has failed to cure such 
alleged failures and breaches within a rea-
sonable time, and 
‘‘(B) making a determination that it is in 
the best interest of the citizens of the United 
States that the administering State’s authority 
to administer the tax imposed by this subtitle 
be revoked and said tax be administered di-
rectly by the Secretary. 
The order of the District Court revoking the author-
ity of an Administering State shall contain provi-
sions governing the orderly transfer of authority to 
the Secretary. 
‘‘(f) REINSTITUTION.—A State that has had its au-
thority revoked pursuant to subsection (e) shall not be an 
administering State for a period of not less than 5 years 
after the date of the order of revocation. For the first cal-
endar year commencing 8 years after the date of the order 
of revocation, the State shall be regarded without preju-
dice as eligible to become an administering State. 
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‘‘(g) THIRD
STATE
ADMINISTRATION
PERMIS-
SIBLE.—It shall be permissible for a State to contract with 
an administering State to administer the State’s sales tax 
for an agreed fee. In this case, the agreement con-
templated by subsection (c) shall have both the State and 
the Federal Government as parties. 
‘‘(h) INVESTIGATIONS AND AUDITS.—Administering 
States shall not conduct investigations or audits at facili-
ties in other administering States in connection with the 
tax imposed by section 101 or conforming State sales tax 
but shall instead cooperate with other administering 
States using the mechanisms established by section 402, 
by compact or by other agreement. 
‘‘SEC. 
402. 
FEDERAL 
ADMINISTRATIVE 
SUPPORT 
FOR 
STATES. 
‘‘(a) IN GENERAL.—The Secretary shall administer 
a program to facilitate information sharing among States. 
‘‘(b) STATE COMPACTS.—The Secretary shall facili-
tate, and may be a party to a compact among States for 
purposes of facilitating the taxation of interstate pur-
chases and for other purposes that may facilitate imple-
mentation of this subtitle. 
‘‘(c) AGREEMENT WITH CONFORMING STATES.—The 
Secretary is authorized to enter into and shall enter into 
an agreement among conforming States enabling con-
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forming States to collect conforming State sales tax on 
sales made by sellers without a particular conforming 
State to a destination within that particular conforming 
State. 
‘‘(d) SECRETARY’S AUTHORITY.—The Secretary shall 
have the authority to promulgate regulations, to provide 
guidelines, to assist States in administering the national 
sales tax, to provide for uniformity in the administration 
of the tax and to provide guidance to the public. 
‘‘SEC. 403. FEDERAL-STATE TAX CONFERENCES. 
‘‘Not less than once annually, the Secretary shall host 
a conference with the sales tax administrators from the 
various administering States to evaluate the state of the 
national sales tax system, to address issues of mutual con-
cern and to develop and consider legislative, regulatory, 
and administrative proposals to improve the tax system. 
‘‘SEC. 404. FEDERAL ADMINISTRATION IN CERTAIN STATES. 
‘‘The Secretary shall administer the tax imposed by 
this subtitle in any State or other United States jurisdic-
tion that— 
‘‘(1) is not an administering State, or 
‘‘(2) elected to have another State administer 
its tax in accordance with section 401(g). 
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‘‘SEC. 405. INTERSTATE ALLOCATION AND DESTINATION 
DETERMINATION. 
‘‘(a) DESTINATION GENERALLY.—The tax imposed 
by this subtitle is a destination principle tax. This section 
shall govern for purposes of determining— 
‘‘(1) whether the destination of taxable property 
and services is within or without the United States, 
and 
‘‘(2) which State or territory within the United 
States is the destination of taxable property and 
services. 
‘‘(b) TANGIBLE PERSONAL PROPERTY.—Except as 
provided in subsection (g) (relating to certain leases), the 
destination of tangible personal property shall be the State 
or territory in which the property was first delivered to 
the purchaser (including agents and authorized represent-
atives). 
‘‘(c) REAL PROPERTY.—The destination of real prop-
erty, or rents or leaseholds on real property, shall be the 
State or territory in which the real property is located. 
‘‘(d) OTHER PROPERTY.—The destination of any 
other taxable property shall be the residence of the pur-
chaser. 
‘‘(e) SERVICES.— 
‘‘(1) GENERAL RULE.—The destination of serv-
ices shall be the State or territory in which the use 
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or consumption of the services occurred. Allocation 
of service invoices relating to more than 1 jurisdic-
tion shall be on the basis of time or another method 
determined by regulation. 
‘‘(2) TELECOMMUNICATIONS
SERVICES.—The 
destination of telecommunications services shall be 
the residence of the purchaser. Telecommunications 
services include telephone, telegraph, beeper, radio, 
cable television, 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 each final destination). 
‘‘(4) INTERNATIONAL TRANSPORTATION SERV-
ICES.—For transportation services where the final 
destination or origin of the trip is without the 
United States, the service amount shall be deemed 
50 percent attributable to the United States destina-
tion or origin. 
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‘‘(5) ELECTRICAL SERVICE.—The destination of 
electrical services shall be the residence of the pur-
chaser. 
‘‘(f) FINANCIAL INTERMEDIATION SERVICES.—The 
destination of financial intermediation services shall be the 
residence of the purchaser. 
‘‘(g) RENTS PAID FOR THE LEASE OF TANGIBLE 
PROPERTY.— 
‘‘(1) GENERAL RULE.—Except as provided in 
paragraph (2), the destination of rents paid for the 
lease of tangible property and leaseholds on such 
property shall be where the property is located while 
in use. 
‘‘(2) 
LAND
VEHICLES; 
AIRCRAFT, 
WATER 
CRAFT.—The destination of rental and lease pay-
ments on land vehicles, aircraft and water craft shall 
be— 
‘‘(A) in the case of rentals and leases of a 
term of 1 month or less, the location where the 
land vehicle, aircraft, or water craft was origi-
nally delivered to the renter or lessee, and 
‘‘(B) in the case of rentals and leases of a 
term greater than 1 month, the residence of the 
renter or lessee. 
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‘‘(h) ALLOCATION RULES.—For purposes of allo-
cating revenue— 
‘‘(1) between or among administering States 
from taxes imposed by this subtitle or from State 
sales taxes administered by third-party admin-
istering States, or 
‘‘(2) between or among States imposing con-
forming State sales taxes, 
the revenue shall be allocated to those States that are the 
destination of the taxable property or service. 
‘‘(i) FEDERAL OFFICE OF REVENUE ALLOCATION.— 
The Secretary shall establish an Office of Revenue Alloca-
tion to arbitrate any claims or disputes among admin-
istering States as to the destination of taxable property 
and services for purposes of allocating revenue between or 
among the States from taxes imposed by this subtitle. The 
determination of the Administrator of the Office of Rev-
enue Allocation shall be subject to judicial review in any 
Federal court with competent jurisdiction. The standard 
of review shall be abuse of discretion. 
‘‘SEC. 406. GENERAL ADMINISTRATIVE MATTERS. 
‘‘(a) IN GENERAL.—The Secretary and each sales tax 
administering authority may employ such persons as may 
be necessary for the administration of this subtitle and 
may delegate to employees the authority to conduct inter-
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views, hearings, prescribe rules, promulgate regulations, 
and perform such other duties as are required by this sub-
title. 
‘‘(b) RESOLUTION OF ANY INCONSISTENT RULES 
AND REGULATIONS.—In the event that the Secretary and 
any sales tax administering authority have issued incon-
sistent rules or regulations, any lawful rule or regulation 
issued by the Secretary shall govern. 
‘‘(c) ADEQUATE NOTICE TO BE PROVIDED.—Except 
in the case of an emergency declared by the Secretary (and 
not his designee), no rule or regulation issued by the Sec-
retary with respect to any internal revenue law shall take 
effect before 90 days have elapsed after its publication in 
the Federal Register. Upon issuance, the Secretary shall 
provide copies of all rules or regulations issued under this 
title to each sales tax administering authority. 
‘‘(d) NO RULES, RULINGS, OR REGULATIONS WITH 
RETROACTIVE EFFECT.—No rule, ruling, or regulation 
issued or promulgated by the Secretary relating to any in-
ternal revenue law or by a sales tax administering author-
ity shall apply to a period prior to its publication in the 
Federal Register (or State equivalent) except that a regu-
lation may take retroactive effect to prevent abuse. 
‘‘(e) REVIEW OF IMPACT OF REGULATIONS, RULES, 
AND RULINGS ON SMALL BUSINESS.— 
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‘‘(1) SUBMISSION TO SMALL BUSINESS ADMIN-
ISTRATION.—After publication of any proposed or 
temporary regulation by the Secretary relating to in-
ternal revenue laws, the Secretary shall submit such 
regulation to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on the 
impact of such regulation on small businesses. Not 
later than the date 30 days after the date of such 
submission, the Chief Counsel for Advocacy of the 
Small Business Administration shall submit com-
ments on such regulation to the Secretary. 
‘‘(2) CONSIDERATION OF COMMENTS.—In pre-
scribing any final regulation which supersedes a pro-
posed or temporary regulation which had been sub-
mitted under this subsection to the Chief Counsel 
for Advocacy of the Small Business Administration, 
the Secretary shall— 
‘‘(A) consider the comments of the Chief 
Counsel for Advocacy of the Small Business 
Administration on such proposed or temporary 
regulation, and 
‘‘(B) in promulgating such final regulation, 
include a narrative that describes the response 
to such comments. 
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‘‘(3) SUBMISSION OF CERTAIN FINAL REGULA-
TION.—In the case of promulgation by the Secretary 
of any final regulations (other than a temporary reg-
ulation) which do not supersede a proposed regula-
tion, the requirements of paragraphs (1) and (2) 
shall apply, except that the submission under para-
graph (1) shall be made at least 30 days before the 
date of such promulgation, and the consideration 
and discussion required under paragraph (2) shall 
be made in connection with the promulgation of such 
final regulation. 
‘‘(f) SMALL BUSINESS REGULATORY SAFEGUARDS.— 
The Small Business Regulatory Enforcement Fairness Act 
(Public Law 104–121; 110 Stat. 857 (‘SBREFA’)) and 
the Regulatory Flexibility Act (5 U.S.C. 601–612 
(‘RFA’)) shall apply to regulations promulgated under this 
subtitle. 
‘‘SEC. 407. JURISDICTION. 
‘‘(a) STATE JURISDICTION.—A sales tax admin-
istering authority shall have jurisdiction over any gross 
payments made which have a destination (as determined 
in accordance with section 405) within the State of said 
sales tax administering authority. This grant of jurisdic-
tion is not exclusive of any other jurisdiction that such 
sales tax administering authority may have. 
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‘‘(b) FEDERAL JURISDICTION.—The grant of juris-
diction in subsection (a) shall not be in derogation of Fed-
eral jurisdiction over the same matter. The Federal Gov-
ernment shall have the right to exercise preemptive juris-
diction over matters relating to the taxes imposed by this 
subtitle. 
‘‘CHAPTER 5—OTHER ADMINISTRATIVE 
PROVISIONS 
‘‘Sec. 501. Monthly reports and payments. 
‘‘Sec. 502. Registration. 
‘‘Sec. 503. Accounting. 
‘‘Sec. 504. Penalties. 
‘‘Sec. 505. Burden of persuasion and burden of production. 
‘‘Sec. 506. Attorneys’ and accountancy fees. 
‘‘Sec. 507. Summons, examinations, audits, etc. 
‘‘Sec. 508. Records. 
‘‘Sec. 509. Tax to be separately stated and charged. 
‘‘Sec. 510. Coordination with title 11. 
‘‘Sec. 511. Applicable interest rate. 
‘‘SEC. 501. MONTHLY REPORTS AND PAYMENTS. 
‘‘(a) TAX REPORTS AND FILING DATES.— 
‘‘(1) IN GENERAL.—On or before the 15th day 
of each month, each person who is— 
‘‘(A) liable to collect and remit the tax im-
posed by this subtitle by reason of section 
103(a), or 
‘‘(B) liable to pay tax imposed by this sub-
title which is not collected pursuant to section 
103(a), 
shall submit to the appropriate sales tax admin-
istering authority (in a form prescribed by the Sec-
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retary) a report relating to the previous calendar 
month. 
‘‘(2) CONTENTS OF REPORT.—The report re-
quired under paragraph (1) shall set forth— 
‘‘(A) the gross payments referred to in sec-
tion 101, 
‘‘(B) the tax collected under chapter 4 in 
connection with such payments, 
‘‘(C) the amount and type of any credit 
claimed, and 
‘‘(D) other information reasonably required 
by the Secretary or the sales tax administering 
authority for the administration, collection, and 
remittance of the tax imposed by this subtitle. 
‘‘(b) TAX PAYMENTS DATE.— 
‘‘(1) GENERAL RULE.—The tax imposed by this 
subtitle during any calendar month is due and shall 
be paid to the appropriate sales tax administering 
authority on or before the 15th day of the suc-
ceeding month. Both Federal tax imposed by this 
subtitle and conforming State sales tax (if any) shall 
be paid in 1 aggregate payment. 
‘‘(2) CROSS
REFERENCE.—See subsection (e) 
relating to remitting of separate segregated funds 
for sellers that are not small sellers. 
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‘‘(c) EXTENSIONS FOR FILING REPORTS.— 
‘‘(1) AUTOMATIC EXTENSIONS FOR NOT MORE 
THAN 30 DAYS.—On application, an extension of not 
more than 30 days to file reports under subsection 
(a) shall be automatically granted. 
‘‘(2) OTHER EXTENSIONS.—On application, ex-
tensions of 30 to 60 days to file such reports shall 
be liberally granted by the sales tax administering 
authority for reasonable cause. Extensions greater 
than 60 days may be granted by the sales tax ad-
ministering authority 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 or remitting the taxes under this 
subtitle. 
‘‘(d) TELEPHONE REPORTING OF VIOLATIONS.—The 
Secretary shall establish a system under which a violation 
of this subtitle can be brought to the attention of the sales 
tax administering authority for investigation through the 
use of a toll-free telephone number and otherwise. 
‘‘(e) SEPARATE SEGREGATED ACCOUNTS.— 
‘‘(1) IN GENERAL.—Any registered seller that 
is not a small seller shall deposit all sales taxes col-
lected pursuant to section 103 in a particular week 
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in a separate segregated account maintained at a 
bank or other financial institution within 3 business 
days of the end of such week. Said registered seller 
shall also maintain in that account sufficient funds 
to meet the bank or financial institution minimum 
balance requirements, if any, and to pay account 
fees and costs. 
‘‘(2) SMALL
SELLER.—For purposes of this 
subsection, a small seller is any person that has not 
collected $20,000 or more of the taxes imposed by 
this subtitle in any of the previous 12 months. 
‘‘(3) LARGE SELLERS.—Any seller that has col-
lected $100,000 or more of the taxes imposed by 
this subtitle in any of the previous 12 months is a 
large seller. A large seller shall remit to the sales tax 
administering authority the entire balance of depos-
ited taxes in its separate segregated account on the 
first business day following the end of the calendar 
week. The Secretary may by regulation require the 
electronic transfer of funds due from large sellers. 
‘‘(4) WEEK.—For purposes of this subsection, 
the term ‘week’ shall mean the 7-day period ending 
on a Friday. 
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‘‘(f) DETERMINATION OF REPORT FILING DATE.— 
A report filed pursuant to subsection (a) shall be deemed 
filed when— 
‘‘(1) deposited in the United States mail, post-
age prepaid, addressed to the sales tax administering 
authority, 
‘‘(2) delivered and accepted at the offices of the 
sales tax administering authority, 
‘‘(3) provided to a designated commercial pri-
vate courier service for delivery within 2 days to the 
sales tax administering authority at the address of 
the sales tax administering authority, or 
‘‘(4) by other means permitted by the Sec-
retary. 
‘‘(g) SECURITY
REQUIREMENTS.—A large seller 
(within the meaning of subsection (e)(3)) shall be required 
to provide security in an amount equal to the greater of 
$100,000 or one and one-half times the seller’s average 
monthly tax liability during the previous 6 calendar 
months. Security may be a cash bond, a bond from a sur-
ety company approved by the Secretary, a certificate of 
deposit, or a State or United States Treasury bond. A 
bond qualifying under this subsection must be a con-
tinuing instrument for each calendar year (or portion 
thereof) that the bond is in effect. The bond must remain 
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in effect until the surety or sureties are released and dis-
charged. Failure to provide security in accordance with 
this section shall result in revocation of the seller’s section 
502 registration. If a person who has provided security 
pursuant to this subsection— 
‘‘(1) fails to pay an amount indicated in a final 
notice of amount due under this subtitle (within the 
meaning of section 605(d)), 
‘‘(2) no Taxpayer Assistance Order is in effect 
relating to the amount due, 
‘‘(3) either the time for filing an appeal pursu-
ant to section 604 has passed or the appeal was de-
nied, and 
‘‘(4) the amount due is not being litigated in 
any judicial forum, 
then the security or part of the security, as the case may 
be, may be forfeited in favor of the Secretary to the extent 
of such tax due (plus interest if any). 
‘‘(h) REWARDS PROGRAM.—The Secretary is author-
ized to maintain a program of awards wherein individuals 
that assist the Secretary or sales tax administering au-
thorities in discovering or prosecuting tax fraud may be 
remunerated. 
‘‘(i) CROSS REFERENCE.—For interest due on taxes 
remitted late, see section 6601. 
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‘‘SEC. 502. REGISTRATION. 
‘‘(a) IN GENERAL.—Any person liable to collect and 
remit taxes pursuant to section 103(a) who is engaged in 
a trade or business shall register as a seller with the sales 
tax administering authority administering the taxes im-
posed by this subtitle. 
‘‘(b) AFFILIATED FIRMS.—Affiliated firms shall be 
treated as 1 person for purposes of this section. Affiliated 
firms may elect, upon giving notice to the Secretary in 
a form prescribed by the Secretary, to treat separate firms 
as separate persons for purposes of this subtitle. 
‘‘(c) DESIGNATION
OF TAX MATTERS PERSON.— 
Every person registered pursuant to subsection (a) shall 
designate a tax matters person who shall be an individual 
whom the sales tax administering authority may contact 
regarding tax matters. Each person registered must pro-
vide notice of a change in the identity of the tax matters 
person within 30 days of said change. 
‘‘(d) EFFECT OF FAILURE TO REGISTER.—Any per-
son that is required to register and who fails to do so is 
prohibited from selling taxable property or services. 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. 
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‘‘SEC. 503. ACCOUNTING. 
‘‘(a) CASH METHOD TO BE USED GENERALLY.— 
Registered sellers and other persons shall report trans-
actions using the cash method of accounting unless an 
election to use the accrual method of accounting is made 
pursuant to subsection (b). 
‘‘(b) ELECTION TO USE ACCRUAL METHOD.—A per-
son may elect with respect to a calender year to remit 
taxes and report transactions with respect to the month 
where a sale was invoiced and accrued. 
‘‘(c) CROSS REFERENCE.—See section 205 for rules 
relating to bad debts for sellers electing the accrual meth-
od. 
‘‘SEC. 504. PENALTIES. 
‘‘(a) FAILURE TO REGISTER.—Each person who is 
required to register pursuant to section 502 but fails to 
do so prior to notification by the sales tax administering 
authority shall be liable for a penalty of $500. 
‘‘(b) RECKLESS OR WILLFUL FAILURE TO COLLECT 
TAX.— 
‘‘(1) CIVIL
PENALTY; FRAUD.—Each person 
who is required to and recklessly or willfully fails to 
collect taxes imposed by this subtitle shall be liable 
for a penalty equal to the greater of $500 or 20 per-
cent of tax not collected. 
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‘‘(2) CRIMINAL PENALTY.—Each person who is 
required to and willfully fails as part of a trade or 
business to collect taxes imposed by this subtitle 
may be fined an amount up to the amount deter-
mined in accordance with paragraph (1) or impris-
oned for a period of not more than 1 year or both. 
‘‘(c) RECKLESS OR WILLFUL ASSERTION OF INVALID 
EXEMPTION.— 
‘‘(1) CIVIL
PENALTY; FRAUD.—Each person 
who recklessly or willfully asserts an invalid inter-
mediate or export sales exemption from the taxes 
imposed by this subtitle 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 asserts an invalid intermediate or export 
sales exemption from the taxes imposed by this sub-
title may be fined an amount up to the amount de-
termined in accordance with paragraph (1) or im-
prisoned for a period of not more than 1 year or 
both. 
‘‘(d) RECKLESS OR WILLFUL FAILURE TO REMIT 
TAX COLLECTED.— 
‘‘(1) CIVIL
PENALTY; FRAUD.—Each person 
who is required to and recklessly or willfully fails to 
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remit taxes imposed by this subtitle and collected 
from purchasers shall be liable for a penalty equal 
to the greater of $1,000 or 50 percent of the tax not 
remitted. 
‘‘(2) CRIMINAL
PENALTY.—Each person who 
willfully fails to remit taxes imposed by this subtitle 
and collected from purchasers may be fined an 
amount up to the amount determined in accordance 
with paragraph (1) or imprisoned for a period of not 
more than 2 years or both. 
‘‘(e) RECKLESS
OR WILLFUL FAILURE TO PAY 
TAX.—Each person who is required to and recklessly or 
willfully fails to pay taxes imposed by this subtitle shall 
be liable for a penalty equal to the greater of $500 or 
20 percent of the tax not paid. 
‘‘(f) PENALTY FOR LATE FILING.— 
‘‘(1) IN GENERAL.—In the case of a failure by 
any person who is required to and fails to file a re-
port required by section 501 on or before the due 
date (determined with regard to any extension) for 
such report, such person shall pay a penalty for each 
month or fraction thereof that said report is late 
equal to the greater of— 
‘‘(A) $50, or 
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‘‘(B) 0.5 percent of the gross payments re-
quired to be shown on the report. 
‘‘(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 sales tax administering authority. 
‘‘(3) LIMITATION.—The penalty imposed under 
this subsection shall not exceed 12 percent. 
‘‘(4) EXCEPTIONS.— 
‘‘(A) REASONABLE
CAUSE.—No penalty 
shall be imposed under this subsection 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 sales tax administering 
authority, on application, shall waive the pen-
alty imposed by paragraph (1) once per reg-
istered person per 24-month period. The pre-
ceding sentence shall not apply to a penalty de-
termined under paragraph (2). 
‘‘(g) PENALTY FOR WILLFULLY OR RECKLESSLY AC-
CEPTING A FALSE INTERMEDIATE OR EXPORT SALES 
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CERTIFICATE.—A person who willingly or recklessly ac-
cepts a false intermediate or export sales certificate shall 
pay a penalty equal to 20 percent of the tax not collected 
by reason of said acceptance. 
‘‘(h) PENALTY FOR LATE REMITTANCE OF TAXES.— 
‘‘(1) IN GENERAL.—A person who is required 
to timely remit taxes imposed by this subtitle and 
remits taxes more than 1 month after such taxes are 
due shall pay a penalty equal to 1 percent per month 
(or fraction thereof) from the due date. 
‘‘(2) LIMITATION.—The penalty imposed under 
this subsection shall not exceed 24 percent. 
‘‘(3) EXCEPTIONS FOR REASONABLE CAUSE.— 
No penalty shall be imposed under paragraph (1) 
with respect to any late remittance if it is shown 
that such late remittance is due to reasonable cause. 
‘‘(i) PENALTY FOR FILING FALSE REBATE CLAIM.— 
‘‘(1) CIVIL PENALTY; FRAUD.—A person who 
willingly or recklessly files a false claim for a family 
consumption allowance rebate (within the meaning 
of chapter 3) shall— 
‘‘(A) pay a penalty equal to the greater of 
$500 or 50 percent of the claimed annual re-
bate amount not actually due, and 
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‘‘(B) repay any rebates received as a result 
of the false rebate claim (together with inter-
est). 
‘‘(2) CRIMINAL PENALTY.—A person who will-
ingly files a false claim for a family consumption al-
lowance rebate (within the meaning of chapter 3) 
may be fined an amount up to the amount deter-
mined in accordance with paragraph (1) or impris-
oned for a period not more than 1 year or both. 
‘‘(j) PENALTY FOR BAD CHECK.—If any check or 
money order in payment of any amount receivable under 
this subtitle is not duly paid, in addition to other penalties 
provided by law, the person who tendered such check shall 
pay a penalty equal to the greater of— 
‘‘(1) $25, or 
‘‘(2) two percent of the amount of such check. 
‘‘(k) PENALTY FOR FAILURE TO MAINTAIN A SEPA-
RATE SEGREGATED ACCOUNT.—Any person required to 
maintain a separate segregated account pursuant to sec-
tion 501(e) that fails to maintain such a separate seg-
regated account shall pay a penalty of $1,000. 
‘‘(l) PENALTY
FOR FAILURE TO DEPOSIT COL-
LECTED
TAXES
IN
A
SEPARATE
SEGREGATED
AC-
COUNT.—Any person required to deposit collected taxes 
into a separate segregated account maintained pursuant 
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to section 501(e) that fails to timely deposit said taxes 
into the separate segregated account shall pay a penalty 
equal to 1 percent of the amount required to be deposited. 
The penalty imposed by the previous sentence shall be tri-
pled unless said taxes have been deposited in the separate 
segregated account or remitted to the sales tax admin-
istering authority within 16 days of the date said deposit 
was due. 
‘‘(m) JOINT AND SEVERAL LIABILITY FOR TAX MAT-
TERS PERSON AND RESPONSIBLE OFFICERS.—The tax 
matters person (designated pursuant to section 502(c)) 
and responsible officers or partners of a firm shall be 
jointly and severally liable for the tax imposed by this sub-
title and penalties imposed by this subtitle. 
‘‘(n) RIGHT OF CONTRIBUTION.—If more than 1 per-
son is liable with respect to any tax or penalty imposed 
by this subtitle, each person who paid such tax or penalty 
shall be entitled to recover from other persons who are 
liable for such tax or penalty an amount equal to the ex-
cess of the amount paid by such person over such person’s 
proportionate share of the tax or penalty. 
‘‘(o) CIVIL PENALTIES AND CRIMINAL FINES NOT 
EXCLUSIVE.— 
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‘‘(1) CIVIL
PENALTY.—The fact that a civil 
penalty has been imposed shall not prevent the im-
position of a criminal fine. 
‘‘(2) CRIMINAL FINE.—The fact that a criminal 
fine has been imposed shall not prevent the imposi-
tion of a civil penalty. 
‘‘(p) CONFIDENTIALITY.—Any person who violates 
the requirements relating to confidentiality of tax informa-
tion (as provided in section 605(e)) may be fined up to 
$10,000 or imprisoned for a period of not more than 1 
year, or both. 
‘‘(q) CROSS REFERENCE.—For interest due on late 
payments, see section 6601. 
‘‘SEC. 505. BURDEN OF PERSUASION AND BURDEN OF PRO-
DUCTION. 
‘‘In all disputes concerning taxes imposed by this sub-
title, the person engaged in a dispute with the sales tax 
administering authority or the Secretary, as the case may 
be, shall have the burden of production of documents and 
records but the sales tax administering authority or the 
Secretary shall have the burden of persuasion. In all dis-
putes concerning an exemption claimed by a purchaser, 
if the seller has on file an intermediate sale or export sale 
certificate from the purchaser and did not have reasonable 
cause to believe that the certificate was improperly pro-
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vided by the purchaser with respect to such purchase 
(within the meaning of section 103), then the burden of 
production of documents and records relating to that ex-
emption shall rest with the purchaser and not with the 
seller. 
‘‘SEC. 506. ATTORNEYS’ AND ACCOUNTANCY FEES. 
‘‘In all disputes concerning taxes imposed by this sub-
title, the person engaged in a dispute with the sales tax 
administering authority or the Secretary, as the case may 
be, shall be entitled to reasonable attorneys’ fees, account-
ancy fees, and other reasonable professional fees incurred 
in direct relation to the dispute unless the sales tax admin-
istering authority or the Secretary establishes that its po-
sition was substantially justified. 
‘‘SEC. 507. SUMMONS, EXAMINATIONS, AUDITS, ETC. 
‘‘(a) SUMMONS.—Persons are subject to administra-
tive summons by the sales tax administering authority for 
records, documents, and testimony required by the sales 
tax administering authority to accurately determine liabil-
ity for tax under this subtitle. A summons shall be served 
by the sales tax administering authority by an attested 
copy delivered in hand to the person to whom it is directed 
or left at his last known address. The summons shall de-
scribe with reasonable certainty what is sought. 
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‘‘(b) EXAMINATIONS AND AUDITS.—The sales tax ad-
ministering authority has the authority to conduct at a 
reasonable time and place examinations and audits of per-
sons who are or may be liable to collect and remit tax 
imposed by this subtitle and to examine the books, papers, 
records, or other data of such persons which may be rel-
evant or material to the determination of tax due. 
‘‘(c) LIMITATION ON AUTHORITY IN CASE OF REFER-
RAL.—No administrative summons may be issued by the 
sales tax administering authority and no action be com-
menced to enforce an administrative summons with re-
spect to any person if a Justice Department referral or 
referral to a State Attorney General’s Office is in effect 
with respect to such person relating to a tax imposed by 
this subtitle. Such referral is in effect with respect to any 
person if the sales tax administering authority or the Sec-
retary has recommended to the Justice Department or a 
State Attorney General’s Office a grand jury investigation 
of such person or a criminal prosecution of such person 
that contemplates criminal sanctions under this title. A 
referral shall be terminated when— 
‘‘(1) the Justice Department or a State Attor-
ney General’s Office notifies the sales tax admin-
istering authority or the Secretary that he will not— 
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‘‘(A) prosecute such person for any offense 
connected with the internal revenue laws, 
‘‘(B) authorize a grand jury investigation 
of such person with respect to such offense, or 
‘‘(C) continue such a grand jury investiga-
tion, or 
‘‘(2) a final disposition has been made of any 
criminal proceeding connected with the internal rev-
enue laws, or conforming State sales tax, against 
such person. 
‘‘SEC. 508. RECORDS. 
‘‘Any person liable to remit taxes pursuant to this 
subtitle shall keep records (including a record of all section 
509 receipts provided, complete records of intermediate 
and export sales, including purchaser’s intermediate and 
export sales certificates and tax number and the net of 
tax amount of purchase) sufficient to determine the 
amounts reported, collected, and remitted for a period of 
6 years after the latter of the filing of the report for which 
the records formed the basis or when the report was due 
to be filed. Any purchaser who purchased taxable property 
or services but did not pay tax by reason of asserting an 
intermediate and export sales exemption shall keep records 
sufficient to determine whether said exemption was valid 
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for a period of 7 years after the purchase of taxable prop-
erty or services. 
‘‘SEC. 509. TAX TO BE SEPARATELY STATED AND CHARGED. 
‘‘(a) IN GENERAL.—For each purchase of taxable 
property or services for which a tax is imposed by section 
101, the seller shall charge the tax imposed by section 101 
separately from the purchase. For purchase of taxable 
property or services for which a tax is imposed by section 
101, the seller shall provide to the purchaser a receipt for 
each transaction that includes— 
‘‘(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 
paragraph (2)) divided by the property or service 
price inclusive of tax (per paragraph (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 are machines— 
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‘‘(1) that dispense taxable property in exchange 
for coins or currency, and 
‘‘(2) that sell no single item exceeding $10 per 
unit in price. 
‘‘(c) FINANCIAL INTERMEDIATION SERVICES EXCEP-
TION.—The requirements of subsection (a) shall be inap-
plicable in the case of sales financial intermediation serv-
ice. Receipts shall be issued when the tax is imposed (in 
accordance with section 803 (relating to timing of tax on 
financial intermediation services)). 
‘‘SEC. 510. COORDINATION WITH TITLE 11. 
‘‘No addition to tax shall be made under section 504 
with respect to a period during which a case is pending 
under title 11, United States Code— 
‘‘(1) if such tax was incurred by the estate and 
the failure occurred pursuant to an order of the 
court finding probable insufficiency of funds of the 
estate to pay administrative expenses, or 
‘‘(2) if— 
‘‘(A) such tax was incurred by the debtor 
before the earlier of the order for relief or (in 
the involuntary case) the appointment of a 
trustee, and 
‘‘(B) the petition was filed before the due 
date prescribed by law (including extensions) 
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for filing a return of such tax, or the date for 
making the addition to tax occurs on or after 
the date the petition was filed. 
‘‘SEC. 511. APPLICABLE INTEREST RATE. 
‘‘(a) IN GENERAL.— 
‘‘(1) FEDERAL
SHORT-TERM
RATE.—In the 
case of a debt instrument, investment, financing 
lease, or account with a term of not over 3 years, 
the applicable interest rate is the Federal short-term 
rate. 
‘‘(2) FEDERAL MID-TERM RATE.—In the case 
of a debt instrument, investment, financing lease, or 
account with a term of over 3 years but not over 9 
years, the applicable interest rate is the Federal 
mid-term rate. 
‘‘(3) FEDERAL LONG-TERM RATE.—In the case 
of a debt instrument, investment, financing lease, or 
account with a term of over 9 years, the applicable 
interest rate is the Federal long-term rate. 
‘‘(b) FEDERAL SHORT-TERM RATE.—The Federal 
short-term rate shall be the rate determined by the Sec-
retary based on the average market yield (selected by the 
Secretary and ending in the calendar month in which the 
determination is made during any one month) on out-
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standing marketable obligations of the United States with 
remaining periods to maturity of 3 years or fewer. 
‘‘(c) FEDERAL MID-TERM RATE.—The Federal mid- 
term rate shall be the rate determined by the Secretary 
based on the average market yield (selected by the Sec-
retary and ending in the calendar month in which the de-
termination is made during any 1 month) on outstanding 
marketable obligations of the United States with remain-
ing periods to maturity of more than 3 years and not over 
9 years. 
‘‘(d) FEDERAL LONG-TERM RATE.—The Federal 
long-term rate shall be the rate determined by the Sec-
retary based on the average market yield (selected by the 
Secretary and ending in the calendar month in which the 
determination is made during any 1 month) on out-
standing marketable obligations of the United States with 
remaining periods to maturity of over 9 years. 
‘‘(e) DETERMINATION OF RATES.—During each cal-
endar month, the Secretary shall determine the Federal 
short-term rate, the Federal mid-term rate and the Fed-
eral long-term rate which shall apply during the following 
calendar month. 
‘‘CHAPTER 6—COLLECTIONS; APPEALS; 
TAXPAYER RIGHTS 
‘‘Sec. 601. Collections. 
‘‘Sec. 602. Power to levy, etc. 
‘‘Sec. 603. Problem resolution offices. 
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‘‘Sec. 604. Appeals. 
‘‘Sec. 605. Taxpayer rights. 
‘‘Sec. 606. Installment agreements compromises. 
‘‘SEC. 601. COLLECTIONS. 
‘‘The sales tax administering authority shall collect 
the taxes imposed by this subtitle, except as provided in 
section 404 (relating to Federal administration in certain 
States). 
‘‘SEC. 602. POWER TO LEVY, ETC. 
‘‘(a) IN GENERAL.—The sales tax administering au-
thority may levy and seize property, garnish wages or sal-
ary and file liens to collect amounts due under this sub-
title, pursuant to enforcement of— 
‘‘(1) a judgment duly rendered by a court of 
law, 
‘‘(2) an amount due if the taxpayer has failed 
to exercise his appeals rights under section 604, or 
‘‘(3) an amount due if the appeals process de-
termined that an amount remained due and the tax-
payer has failed to timely petition the Tax Court for 
relief. 
‘‘(b) EXEMPTION FROM LEVY, SEIZURE, AND GAR-
NISHMENTS.—There shall be exempt from levy, seizure, 
and garnishment or penalty in connection with any tax 
imposed by this subtitle— 
‘‘(1) wearing apparel, school books, fuel, provi-
sions, furniture, personal effects, tools of a trade or 
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profession, livestock in a household up to an aggre-
gate value of $15,000, and 
‘‘(2) monthly money income equal to 150 per-
cent of the monthly poverty level (as defined in sec-
tion 303). 
‘‘(c) LIENS TO BE TIMELY RELEASED.—Subject to 
such reasonable regulations as the Secretary may provide, 
any lien imposed with respect to a tax imposed by this 
title shall be released not later than 30 days after— 
‘‘(1) the liability was satisfied or became unen-
forceable, or 
‘‘(2) a bond was accepted as security. 
‘‘SEC. 603. PROBLEM RESOLUTION OFFICES. 
‘‘(a) PROBLEM RESOLUTION OFFICE TO BE ESTAB-
LISHED.—Each sales tax administering authority shall es-
tablish an independent Problem Resolution Office and ap-
point an adequate number of problem resolution officers. 
The head of the problem resolution office must be ap-
pointed by, and serve at the pleasure of either the State 
Governor (in the case of an administering State) or the 
President of the United States. 
‘‘(b) AUTHORITY OF PROBLEM RESOLUTION OFFI-
CERS.—Problem resolution officers shall have the author-
ity to investigate complaints and issue a Taxpayer Assist-
ance Order to administratively enjoin any collection activ-
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ity if, in the opinion of the problem resolution officer, said 
collection activity is reasonably likely to not be in compli-
ance with law or to prevent hardship (other than by reason 
of having to pay taxes lawfully due). Problem resolution 
officers shall also have the authority to issue Taxpayer As-
sistance Orders releasing or returning property that has 
been levied upon or seized, ordering that a lien be released 
and that garnished wages be returned. A Taxpayer Assist-
ance Order may only be rescinded or modified by the prob-
lem resolution officer that issued it, by the highest official 
in the relevant sales tax administering authority or by its 
general counsel upon a finding that the collection activity 
is justified by clear and convincing evidence. The authority 
to reverse this Taxpayer Assistance Order may not be del-
egated. 
‘‘(c) FORM OF REQUEST FOR TAXPAYER ASSISTANCE 
ORDER.—The Secretary shall establish a form and proce-
dure to aid persons requesting the assistance of the Prob-
lem Resolution Office and to aid the Problem Resolution 
Office in understanding the needs of the person seeking 
assistance. The use of this form, however, shall not be a 
prerequisite to a problem resolution officer taking action, 
including issuing a Taxpayer Assistance Order. 
‘‘(d) CONTENT OF TAXPAYER ASSISTANCE ORDER.— 
A Taxpayer Assistance Order shall contain the name of 
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the problem resolution officer, any provision relating to 
the running of any applicable period of limitation, the 
name of the person that the Taxpayer Assistance Order 
assists, the government office (or employee or officer of 
said government office) to whom it is directed and the ac-
tion or cessation of action that the Taxpayer Assistance 
Order requires of said government officer (or employee or 
officer of said government office). The Taxpayer Assist-
ance Order need not contain findings of fact or its legal 
basis; however, the problem resolution officer must provide 
findings of fact and the legal basis for the issuance of the 
Taxpayer Assistance Order to the sales tax administering 
authority upon the request of an officer of said authority 
within 2 weeks of the receipt of such request. 
‘‘(e) INDEPENDENCE PROTECTED.—Problem resolu-
tion officers shall not be disciplined or adversely affected 
for the issuance of administrative injunctions unless a pat-
tern of issuing injunctions that are manifestly unreason-
able is proven in an administrative hearing by a prepon-
derance of the evidence. 
‘‘(f) OTHER RIGHTS NOT LIMITED.—Nothing in this 
section shall limit the authority of the sales tax admin-
istering authority, the registered person or other person 
from pursuing any legal remedy in any court with jurisdic-
tion over the dispute at issue. 
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‘‘(g) LIMITATIONS.—The running of any applicable 
period of limitation shall be suspended for a period of 8 
weeks following the issuance of a Taxpayer Assistance 
Order or, if specified, for a longer period set forth in the 
Taxpayer Assistance Order provided the suspension does 
not exceed 6 months. 
‘‘SEC. 604. APPEALS. 
‘‘(a) ADMINISTRATIVE APPEALS.—The sales tax ad-
ministering authority shall establish an administrative ap-
peals process wherein the registered person or other per-
son in disagreement with a decision of the sales tax admin-
istering authority asserting liability for tax is provided a 
full and fair hearing in connection with any disputes said 
person has with the sales tax administering authority. 
‘‘(b) TIMING OF ADMINISTRATIVE APPEALS.—Said 
administrative appeal must be made within 60 days of re-
ceiving a final notice of amount due pursuant to section 
605(d) unless leave for an extension is granted by the ap-
peals officer in a form prescribed by the Secretary. Leave 
shall be granted to avoid hardship. 
‘‘SEC. 605. TAXPAYER RIGHTS. 
‘‘(a) RIGHTS TO BE DISCLOSED.—The sales tax ad-
ministering authority shall provide to any person against 
whom it has— 
‘‘(1) commenced an audit or investigation, 
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‘‘(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 one 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 two or more of the most recent 3 calendar years during 
which it operated then the business activity shall be con-
clusively deemed to be engaged in for profit. 
‘‘SEC. 702. GAMING ACTIVITIES. 
‘‘(a) REGISTRATION.—Any person selling one or 
more chances is a gaming sponsor and shall register, in 
a form prescribed by the Secretary, with the sales tax ad-
ministering 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, 
‘‘(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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102 
‘‘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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103 
‘‘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, 2020, shall be qualified inventory if it 
is sold— 
‘‘(A) before December 31, 2021, 
‘‘(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, 2020 (including any 
amounts capitalized by reason of section 263A of the 
Internal Revenue Code of 1986 as in effect on De-
cember 31, 2020). 
‘‘(3) TRANSITIONAL INVENTORY CREDIT.—The 
trade or business which held the qualified inventory 
on the close of business on December 31, 2020, 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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‘‘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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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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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 2021.—Notwithstanding sub-
section (b), the revenue allocation pursuant to subsection 
(a) for calendar year 2021 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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‘‘(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 2020 
(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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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 2020 (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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(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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(1) Section 6151 of such Code is amended by 
striking subsection (b) and by redesignating sub-
section (c) as subsection (b). 
(2) Section 6161 of such Code is amended to 
read as follows: 
‘‘SEC. 6161. EXTENSION OF TIME FOR PAYING TAX. 
‘‘The Secretary, except as otherwise provided in this 
title, may extend the time for payment of the amount of 
the tax shown or required to be shown on any return, re-
port, or declaration required under authority of this title 
for a reasonable period not to exceed 6 months (12 months 
in the case of a taxpayer who is abroad).’’. 
(3) Section 6211(a) of such Code is amended— 
(A) by striking ‘‘income, estate, and gift 
taxes imposed by subtitles A and B and’’, 
(B) by striking ‘‘subtitle A or B, or’’, and 
(C) by striking ‘‘, as defined in subsection 
(b)(2),’’ in paragraph (2). 
(4) Section 6211(b) of such Code is amended to 
read as follows: 
‘‘(b) REBATE DEFINED.—For purposes of subsection 
(a)(2), the term ‘rebate’ means so much of an abatement, 
credit, refund, or other payment, as was made on the 
ground that the tax imposed by chapter 41, 42, 43, or 
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44 was less than the excess of the amount specified in 
subsection (a)(1) over the rebates previously made.’’. 
(5) Section 6212(b) of such Code is amended to 
read as follows: 
‘‘(b) ADDRESS FOR NOTICE OF DEFICIENCY.—In the 
absence of notice to the Secretary under section 6903 of 
the existence of a fiduciary relationship, notice of a defi-
ciency in respect of a tax imposed by chapter 42, 43, or 
44 if mailed to the taxpayer at his last known address, 
shall be sufficient for purposes of such chapter and this 
chapter even if such taxpayer is deceased, or is under a 
legal disability, or, in the case of a corporation has termi-
nated its existence.’’. 
(6) Section 6302(b) of such Code is amended 
by striking ‘‘21,’’. 
(7) Section 6302 of such Code is amended by 
striking subsections (g) and (i) and by redesignating 
subsection (h) as subsection (g). 
(8) Section 6325 of such Code is amended by 
striking subsection (c) and by redesignating sub-
sections (d) through (h) as subsections (c) through 
(g), respectively. 
(9) Section 6402(d) of such Code is amended 
by striking paragraph (3). 
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122 
(10) Section 6402 of such Code is amended by 
striking subsection (j) and by redesignating sub-
section (k) as subsection (j). 
(11) Section 6501(b) of such Code is amend-
ed— 
(A) by striking ‘‘except tax imposed by 
chapter 3, 4, 21, or 24,’’ in paragraph (1), and 
(B) by striking paragraph (2) and by re-
designating paragraphs (3) and (4) as para-
graphs (2) and (3), respectively. 
(12) Section 6501(c) of such Code is amended 
by striking paragraphs (5) through (9). 
(13) Section 6501(e) of such Code is amended 
by striking ‘‘subsection (c)—’’ and all that follows 
through ‘‘subtitle D’’ in paragraph (3) and inserting 
‘‘subsection (c), in the case of a return of a tax im-
posed under a provision of subtitle B’’. 
(14) Section 6501 of such Code is amended by 
striking subsections (f) through (k) and subsections 
(m) and (n) and by redesignating subsection (1) as 
subsection (f). 
(15) Section 6503(a) of such Code is amend-
ed— 
(A) by striking paragraph (2), 
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(B) by striking ‘‘DEFICIENCY.—’’ and all 
that follows through ‘‘The running’’ and insert-
ing ‘‘DEFICIENCY.—The running’’, and 
(C) by striking ‘‘income, estate, gift and’’. 
(16) Section 6503 of such Code is amended by 
striking subsections (e), (f), (i), and (k) and by re-
designating subsections (g), (h), and (j) as sub-
sections (e), (f), and (g), respectively. 
(17) Section 6511 of such Code is amended by 
striking subsections (d) and (g) and by redesig-
nating subsections (f) and (h) as subsections (d) and 
(e), respectively. 
(18) Section 6512(b)(1) of such Code is amend-
ed by striking ‘‘of income tax for the same taxable 
year, of gift tax for the same calendar year or cal-
endar quarter, of estate tax in respect of the taxable 
estate of the same decedent, or’’. 
(19) Section 6513 of such Code is amended— 
(A) by striking ‘‘(a) EARLY RETURN OR 
ADVANCE PAYMENT OF TAX.—’’, and 
(B) by striking subsections (b) and (e). 
(20) Chapter 67 of such Code is amended by 
striking subchapters A through D and inserting the 
following: 
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‘‘SEC. 6601. INTEREST ON OVERPAYMENTS AND UNDER-
PAYMENT. 
‘‘(a) UNDERPAYMENTS.—If any amount of tax im-
posed by this title is not paid on or before the last date 
prescribed for payment, interest on such amount at the 
Federal short-term rate (as defined in section 511(b)) 
shall be paid from such last date to the date paid. 
‘‘(b) OVERPAYMENTS.—Interest shall be allowed and 
paid upon any overpayment in respect of any internal rev-
enue tax at the Federal short-term rate (as defined in sec-
tion 511(b)) from 60 days after the date of the overpay-
ment until the date the overpayment is refunded.’’. 
(21) Section 6651(a)(1) of such Code is amend-
ed by striking ‘‘subchapter A of chapter 61 (other 
than part III thereof),’’. 
(22) Section 6656 of such Code is amended by 
striking subsection (c) and by redesignating sub-
section (d) as subsection (c). 
(23) Section 6663 of such Code is amended by 
striking subsection (c). 
(24) Section 6664(c) of such Code is amend-
ed— 
(A) by striking ‘‘Exception.—’’ and all 
that follows through ‘‘No penalty’’ and insert-
ing ‘‘Exception.—No penalty’’, and 
(B) by striking paragraphs (2) and (3). 
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(25) Chapter 72 of such Code is amended by 
striking all matter preceding section 7011. 
(26) Section 7422 of such Code is amended by 
striking subsections (h) and (i) and by redesignating 
subsections (j) and (k) as subsections (h) and (i), re-
spectively. 
(27) Section 7451 of such Code is amended to 
read as follows: 
‘‘SEC. 7451. FEE FOR FILING PETITION. 
‘‘The Tax Court is authorized to impose a fee in an 
amount not in excess of $60 to be fixed by the Tax Court 
for the filing of any petition for the redetermination of 
a deficiency.’’. 
(28) Section 7454 of such Code is amended by 
striking subsection (b) and by redesignating sub-
section (c) as subsection (b). 
(29) Section 7463(a) of such Code is amend-
ed— 
(A) by striking paragraphs (2) and (3), 
(B) by redesignating paragraph (4) as 
paragraph (2), and 
(C) by striking ‘‘D’’ in paragraph (2) (as 
so redesignated) and inserting ‘‘B’’. 
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(30) Section 7463(c) of such Code is amended 
by striking ‘‘sections 6214(a) and’’ and inserting 
‘‘section’’. 
(31) Section 7463(e) of such Code is amended 
by striking ‘‘, to the extent that the procedures de-
scribed in subchapter B of chapter 63 apply’’. 
(32) Section 7481 of such Code is amended by 
striking subsection (d). 
(33) Section 7608 of such Code is amended by 
striking ‘‘subtitle E’’ each place it appears and in-
serting ‘‘subtitle C’’. 
(34) Section 7701(a)(29) of such Code is 
amended by striking ‘‘1986’’ and inserting ‘‘2019’’. 
(35) Section 7809(c) of such Code is amended 
by striking paragraphs (1) and (4) and by redesig-
nating paragraphs (2) and (3) as paragraphs (1) 
and (2), respectively. 
(36) Section 7871(a) of such Code is amended 
by striking paragraphs (1) and (3) through (6) and 
by redesignating paragraphs (2) and (7) as para-
graphs (1) and (2), respectively. 
(37) Section 7871 of such Code is amended by 
striking subsection (c) and by redesignating sub-
sections (d) and (e) as subsections (c) and (d), re-
spectively. 
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TITLE III—OTHER MATTERS 
SEC. 301. PHASE-OUT OF ADMINISTRATION OF REPEALED 
FEDERAL TAXES. 
(a) APPROPRIATIONS.—Appropriations for any ex-
penses of the Internal Revenue Service including proc-
essing tax returns for years prior to the repeal of the taxes 
repealed by title I of this Act, revenue accounting, man-
agement, transfer of payroll and wage data to the Social 
Security Administration for years after fiscal year 2023 
shall not be authorized. 
(b) RECORDS.—Federal records related to the admin-
istration of taxes repealed by title I of this Act shall be 
destroyed by the end of fiscal year 2023, except that any 
records necessary to calculate Social Security benefits 
shall be retained by the Social Security Administration 
and any records necessary to support ongoing litigation 
with respect to taxes owed or refunds due shall be retained 
until final disposition of such litigation. 
(c) CONFORMING AMENDMENTS.—Section 7802 of 
the Internal Revenue Code of 1986 is amended— 
(1) by striking subsections (a) and (b) and by 
redesignating subsections (c) and (d) as subsections 
(a) and (b), 
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129 
(2) by striking ‘‘Internal Revenue Service’’ each 
place it appears and inserting ‘‘Department of the 
Treasury’’, and 
(3) by striking ‘‘Commissioner’’ or ‘‘Commis-
sioner of Internal Revenue’’ each place they appear 
and inserting ‘‘Secretary’’. 
(d) EFFECTIVE DATE.—The amendments made by 
subsection (c) shall take effect on January 1, 2023. 
SEC. 302. ADMINISTRATION OF OTHER FEDERAL TAXES. 
(a) IN GENERAL.—Section 7801 of the Internal Rev-
enue Code of 1986 (relating to the authority of the De-
partment of the Treasury) is amended by adding at the 
end the following: 
‘‘(d) EXCISE TAX BUREAU.—There shall be in the 
Department of the Treasury an Excise Tax Bureau to ad-
minister those excise taxes not administered by the Bu-
reau of Alcohol, Tobacco and Firearms. 
‘‘(e) SALES TAX BUREAU.—There shall be in the De-
partment of the Treasury a Sales Tax Bureau to admin-
ister the national sales tax in those States where it is re-
quired pursuant to section 404, and to discharge other 
Federal duties and powers relating to the national sales 
tax (including those required by sections 402, 403, and 
405). The Office of Revenue Allocation shall be within the 
Sales Tax Bureau.’’. 
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(b) 
ASSISTANT
GENERAL
COUNSELS.—Section 
7801(a)(2) of such Code is amended to read as follows: 
‘‘(2) ASSISTANT
GENERAL
COUNSELS.—The 
Secretary of the Treasury may appoint, without re-
gard to the provisions of the civil service laws, and 
fix the duties of not more than 5 assistant general 
counsels.’’. 
SEC. 303. SALES TAX INCLUSIVE SOCIAL SECURITY BENE-
FITS INDEXATION. 
Subparagraph (D) of section 215(i)(1) of the Social 
Security Act (42 U.S.C. 415(i)(1)) (relating to cost-of-liv-
ing increases in Social Security benefits) is amended to 
read as follows: 
‘‘(D)(i) the term ‘CPI increase percentage’, 
with respect to a base quarter or cost-of-living quar-
ter in any calendar year, means the percentage 
(rounded to the nearest one-tenth of 1 percent) by 
which the Consumer Price Index for that quarter (as 
prepared by the Department of Labor) exceeds such 
index for the most recent prior calendar quarter 
which was a base quarter under subparagraph 
(A)(ii) or, if later, the most recent cost-of-living 
computation quarter under subparagraph (B), 
‘‘(ii) if the Consumer Price Index (as so pre-
pared) does not include the national sales tax paid, 
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then the term ‘CPI increase percentage’, with re-
spect to a base quarter or cost-of-living quarter in 
any calendar year, means the percentage (rounded 
to the nearest one-tenth of 1 percent) by which the 
product of— 
‘‘(I) the Consumer Price Index for that 
quarter (as so prepared), and 
‘‘(II) the national sales tax factor, 
exceeds such index for the most recent prior cal-
endar quarter which was a base quarter under sub-
paragraph (A)(ii) or, if later, the most recent cost 
of living computation quarter under subparagraph 
(B), and 
‘‘(iii) the national sales tax factor is equal to 
one plus the quotient that is— 
‘‘(I) the sales tax rate imposed by section 
101 of the Internal Revenue Code of 2019, di-
vided by 
‘‘(II) the quantity that is one minus such 
sales tax rate.’’. 
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132 
TITLE 
IV—SUNSET 
OF 
SALES 
TAX IF SIXTEENTH AMEND-
MENT NOT REPEALED 
SEC. 401. ELIMINATION OF SALES TAX IF SIXTEENTH 
AMENDMENT NOT REPEALED. 
If the Sixteenth Amendment to the Constitution of 
the United States is not repealed before the end of the 
7-year period beginning on the date of the enactment of 
this Act, then all provisions of, and amendments made by, 
this Act shall not apply to any use or consumption in any 
year beginning after December 31 of the calendar year 
in which or with which such period ends, except that the 
Sales Tax Bureau of the Department of the Treasury shall 
not be terminated until 6 months after such December 31. 
Æ 
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