I
103D CONGRESS
2D SESSION
H. R. 4420
To amend the Internal Revenue Code of 1986 to allow a deduction for
State and local general sales taxes and to compensate for the resulting
revenue loss by providing that only 75 percent of the amount of all
State and local taxes shall be allowed as a deduction.
IN THE HOUSE OF REPRESENTATIVES
MAY 12, 1994
Mr. SMITH of Michigan introduced the following bill; which was referred to
the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to allow a
deduction for State and local general sales taxes and
to compensate for the resulting revenue loss by providing
that only 75 percent of the amount of all State and
local taxes shall be allowed as a deduction.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. RESTORATION OF DEDUCTION FOR STATE AND
LOCAL GENERAL SALES TAXES; LIMITATION
ON DEDUCTION FOR ALL STATE AND LOCAL
TAXES.
(a) ALLOWANCE OF DEDUCTION FOR STATE AND
LOCAL GENERAL SALES TAXES.—
(1) IN
GENERAL.—Subsection (a) of section
164 of the Internal Revenue Code of 1986 (relating
to deduction for taxes) is amended by redesignating
paragraphs (4) and (5) as paragraphs (5) and (6),
respectively, and by inserting after paragraph (3)
the following new paragraph:
‘‘(4) 75 percent of the amount of State and
local general sales taxes.’’.
(2) DEFINITIONS.—Subsection (b) of section
164 of such Code is amended by adding at the end
thereof the following new paragraphs:
‘‘(5) DEFINITIONS
RELATING
TO
GENERAL
SALES TAXES.—For purposes of subsection (a)(4)—
‘‘(A) IN
GENERAL.—The term ‘general
sales tax’ means a tax imposed at one rate in
respect of the sale at retail of a broad range of
classes of items.
‘‘(B) SPECIAL RULES FOR FOOD, ETC.—In
the case of items of food, clothing, medical sup-
plies, and motor vehicles—
‘‘(i) the fact that the tax does not
apply in respect of some or all of such
items shall not be taken into account in
determining whether the tax applies in re-
spect of a broad range of classes of items,
and
‘‘(ii) the fact that the rate of tax ap-
plicable in respect of some or all of such
items is lower than the general rate of tax
shall not be taken into account in deter-
mining whether the tax is imposed at one
rate.
‘‘(C) 
ITEMS
TAXED
AT
DIFFERENT
RATES.—Except in the case of a lower rate of
tax applicable in respect of an item described in
subparagraph (B), no deduction shall be al-
lowed under this section for any general sales
tax imposed in respect of an item at a rate
other than the general rate of tax.
‘‘(D) COMPENSATING USE TAXES.—A com-
pensating use tax in respect of an item shall be
treated as a general sales tax. For purposes of
the preceding sentence, the term ‘compensating
use tax’ means, in respect of any item, a tax
which—
‘‘(i) is imposed on the use, storage, or
consumption of such item, and
‘‘(ii) is complementary to a general
sales tax, but only if a deduction is allow-
able under subsection (a)(4) in respect of
items sold at retail in the taxing jurisdic-
tion which are similar to such item.
‘‘(E) SPECIAL
RULE
FOR
MOTOR
VEHI-
CLES.—In the case of motor vehicles, if the rate
of tax exceeds the general rate, such excess
shall be disregarded and the general rate shall
be treated as the rate of tax.
‘‘(6) SEPARATELY
STATED
GENERAL
SALES
TAXES.—If the amount of any general sales tax is
separately stated, then, to the extent that the
amount so stated is paid by the consumer (otherwise
than in connection with the consumer’s trade or
business) to his seller, such amount shall be treated
as a tax imposed on, and paid by, such consumer.’’.
(b) LIMITATION ON DEDUCTIONS.—Paragraphs (1),
(2), and (3) of section 164(a) of such Code are each
amended by inserting ‘‘75 percent of the amount of’’ be-
fore ‘‘State and local’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
Æ