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. 
‘‘(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 
service is used more than 95 percent for purposes 
that would give rise to an exemption pursuant to 
section 102(a)(1) during each calendar year (or por-
tions thereof) it is owned. 
‘‘(3) MIXED
USE
PROPERTY
OR
SERVICES 
CREDIT.—A person registered pursuant to section 
502 is entitled to a business use conversion credit 
(pursuant to section 202) equal to the product of— 
‘‘(A) the mixed use property amount; and 
‘‘(B) the business use ratio; and 
‘‘(C) the rate of tax imposed by section 
101. 
‘‘(4) MIXED
USE
PROPERTY
AMOUNT.—The 
mixed use property amount for each month (or frac-
tion thereof) in which the property was owned shall 
be— 
‘‘(A) 
one-three-hundred-sixtieth 
of 
the 
gross payments for real property for 360 
months or until the property is sold;
‘‘(B) one-eighty-fourth of the gross pay-
ments for tangible personal property for 84 
months or until the property is sold; 
‘‘(C) one-sixtieth of the gross payments for 
vehicles for 60 months or until the property is 
sold; or 
‘‘(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 
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; 
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— 
‘‘(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.— 
‘‘(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—
100 
‘‘(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. 
‘‘(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.
101 
‘‘(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.— 
‘‘(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
102 
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 
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 512) plus 4 percent.
103 
‘‘(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 
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 512). 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
104 
have a reference interest rate, the applicable interest shall 
be the applicable interest rate for the reference interest 
rate for each month. 
‘‘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.
105 
‘‘(c) CROSS REFERENCES.—For definition of person, 
see section 901. 
‘‘CHAPTER 9—ADDITIONAL MATTERS 
‘‘Sec. 901. Additional matters. 
‘‘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.