[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3039 Introduced in House (IH)]







104th CONGRESS
  2d Session
                                H. R. 3039

To promote freedom, fairness, and economic opportunity for families by 
 repealing the income tax, abolishing the Internal Revenue Service and 
 enacting a national retail sales tax to be administered primarily by 
                              the States.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 6, 1996

  Mr. Schaefer (for himself, Mr. Tauzin, Mr. Chrysler, Mr. Bono, Mr. 
Hefley, Mr. Linder, and Mr. Stump) introduced the following bill; which 
            was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To promote freedom, fairness, and economic opportunity for families by 
 repealing the income tax, abolishing the Internal Revenue Service and 
 enacting a national retail sales tax to be administered primarily by 
                              the States.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``National Retail 
Sales Tax Act of 1996''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Congressional findings.
Sec. 3. Income tax, estate and gift and misc. excise taxes repealed.
Sec. 4. Sales and use tax.
        ``Sec. 1. Imposition of sales tax.
        ``Sec. 2. Exemptions.
        ``Sec. 3. Special rules.
        ``Sec. 11. Credits and refunds.
        ``Sec. 12. Special rules for residential real property.
        ``Sec. 15. Family consumption refund.
        ``Sec. 21. Definitions.
        ``Sec. 22. Special rules.
        ``Sec. 31. Authority for States to collect tax.
        ``Sec. 32. Federal administrative support for States.
        ``Sec. 33. Federal administration option for multistate 
                            vendors.
        ``Sec. 41. Monthly report and payment.
        ``Sec. 42. Records.
        ``Sec. 43. Registration.
        ``Sec. 44. Certificates.
        ``Sec. 45. Penalties.
        ``Sec. 46. Burden of persuasion and burden of production.
        ``Sec. 47. Attorneys and accountancy fees.
        ``Sec. 48. Appeals.
        ``Sec. 49. Subpoenas.
        ``Sec. 50. Tax court jurisdiction.
        ``Sec. 51. Power to levy.
        ``Sec. 52. Problem resolution offices.
        ``Sec. 53. Jurisdiction and interstate allocation.
        ``Sec. 54. Tax to be separately stated and charged.''
Sec. 5. IRS phase-out.
Sec. 6. Excise Tax Administration.
Sec. 7. Social Security Administration to collect payroll tax..
Sec. 8. Self employment tax.
Sec. 9. Interest.
Sec. 10. Supermajority required to raise rate.

SEC. 2. CONGRESSIONAL FINDINGS.

    (a) The Congress finds that the income tax--
            (1) retards economic growth and has reduced the standard of 
        living of the American public;
            (2) impedes the international competitiveness of United 
        States industry;
            (3) reduces savings and investment in the United States;
            (4) lowers productivity;
            (5) imposes unacceptable administrative costs on taxpayers, 
        individuals and businesses alike;
            (6) is unfair and inequitable; and
            (7) unnecessarily intrudes upon the privacy and civil 
        rights of United States citizens.
    (b) The Congress finds further that national sales, services and 
use tax on final consumption of goods and services--
            (1) is similar in many respects to those in place in 45 of 
        the 50 States;
            (2) will promote savings;
            (3) will promote fairness;
            (4) will promote economic growth;
            (5) will raise the standard of living;
            (6) will increase savings and investment;
            (7) will enhance productivity and international 
        competitiveness;
            (8) will reduce administrative burdens on the taxpayer; and
            (9) will respect the privacy interests and civil rights of 
        taxpayers.
    (c) The Congress further finds that--
            (1) most of the practical experience administering sales 
        taxes is found at the State Governmental level;
            (2) it is desirable to harmonize Federal and State 
        collection and enforcement efforts to the maximum extent 
        possible;
            (3) it is sound tax administration policy to administer and 
        collect the Federal sales and service tax at the State level in 
        return for a reasonable administration fee to the States;
            (4) businesses that must collect and remit taxes should 
        receive reasonable compensation for the cost of doing so; and
            (5) the sixteenth amendment to the Constitution should be 
        repealed.

SEC. 3. REPEAL OF THE INCOME TAX, ESTATE AND GIFT TAXES, AND CERTAIN 
              EXCISE TAXES.

    (a) In General.--The following provisions of the Internal Revenue 
Code of 1986 are hereby repealed:
            (1) Chapter 1 (relating to income tax).
            (2) Chapter 5 (relating to tax on transfers to avoid income 
        tax).
            (3) Chapter 6 (relating to consolidated returns).
            (4) Chapter 24 (relating to collection of income tax at 
        source).
            (5) Subtitle B (relating to estate and gift taxes).
            (6) Chapter 31 (relating to retail excise taxes).
            (7) Chapter 32 (relating to manufacturers excise taxes).
            (8) Subtitle E (relating to alcohol, tobacco, and certain 
        other excise taxes).
            (9) Subtitle F (relating to procedure and administration of 
        the income tax and certain other taxes) except for section 6103 
        (relating to confidentiality), chapter 66 (relating to 
        limitations), chapter 67 (relating to interest), section 6656 
        (relating to failure to make deposit of taxes), section 6657 
        (relating to bad checks), section 6658 (relating to 
        coordination with title 11), chapter 75 (relating to crimes), 
        chapter 76 (relating to Judicial Proceedings), section 7431 
        (relating to damages for unauthorized disclosure), section 7432 
        (relating to damages for failure to release lien), section 7433 
        (relating to damages for unauthorized collection data) and 
        chapter 77 (relating to miscellaneous provisions). References 
        to provisions repealed by the preceding sentence shall be 
        treated as references to such provisions as in effect on the 
        day before the date of the enactment of this Act.
    (b) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by subsection (a) shall take effect on January 
        1, 1998.
            (2) Income tax.--The amendment made by subsection (a)(1) 
        shall apply to taxable years beginning after December 31, 1997.
            (3) Sales tax.--The amendment made by section 4 shall take 
        effect on January 1, 1998.
            (4) Supermajority required.--The amendment made by section 
        5 shall take effect on January 1, 1998.

SEC. 4. SALES TAX.

    (a) In General.--Subtitle A of the Internal Revenue Code of 1986 is 
amended by inserting at the beginning the following new chapter:

                         ``CHAPTER 1--SALES TAX

                              ``Subchapter A. Imposition of tax.
                              ``Subchapter B. Credits; refunds; 
                                        deferred payment of tax on 
                                        sales of residences.
                              ``Subchapter C. Definitions and special 
                                        rules.
                              ``Subchapter D. Authority for States to 
                                        collect tax.
                              ``Subchapter E. Other administrative 
                                        provisions.

                   ``Subchapter A--Imposition of Tax

                              ``Sec. 1. Imposition of tax.
                              ``Sec. 2. Exemptions.
                              ``Sec. 3. Special rules relating to 
                                        collection and remittance of 
                                        tax.

``SECTION 1. IMPOSITION OF TAX.

    ``(a) In General.--There is hereby imposed a tax of 15 percent on 
the gross payments for the use, consumption or enjoyment in the United 
States of any taxable property or service, whether produced or rendered 
within or without the United States.
    ``(b) Coordination With Import Duties.--The taxes imposed by this 
section are in addition to any import duties imposed by law. The 
Secretary shall provide by regulation that, to the maximum extent 
practicable, the taxes imposed by this section on imported property and 
services are collected and administered in conjunction with any 
applicable import duties.
    ``(c) Liability for Collection and Remittance of the Tax.--
            ``(1) General rule.--The tax imposed by subsection (a) 
        shall be collected and remitted by the seller, except as 
        provided in subsection (2).
            ``(2) Tax to be paid by purchaser in certain 
        circumstances.--
                    ``(A) General rule.--In the case of taxable 
                property or services purchased outside of the United 
                States for use, consumption or enjoyment in the United 
                States, the purchaser shall remit the tax imposed by 
                subsection (a).
                    ``(B) In the case of a purchaser electing to pay 
                tax in installments pursuant to section 12, the 
                purchaser shall remit the tax imposed by subsection 
                (a).
                    ``(C) The Secretary may provide by regulation that 
                the tax imposed by subsection (a) is to be collected 
                and remitted by the purchaser rather than the seller.

``SEC. 2. EXEMPTIONS.

    ``(a) In General.--No tax shall be imposed under this subtitle on 
any taxable property or service--
            ``(1) purchased for resale,
            ``(2) purchased to produce taxable property or services, or
            ``(3) exported from the United States for use, consumption 
        or enjoyment outside the United States.
    ``(b) Exception for DeMinimis Payments.--The tax imposed by section 
1 shall not apply to payments made by any person not engaged in an 
active trade or business at any time during a calendar year if in the 
case of any taxable property or service imported into the United States 
for use, consumption or enjoyment by such person--
            ``(1) the gross amount paid for such property or services 
        does not exceed $400 for any particular entry, and
            ``(2) the aggregate amount of payments during such year by 
        such person does not exceed $2,000.
    ``(c) Exception for DeMinimis Sales.--The tax imposed by section 1 
shall not apply to any gross payments received by any person not 
engaged in an active trade or business at any time during a calendar 
year in connection with a casual or isolated sale if--
            ``(1) the gross payments from each such sale to such person 
        during such year does not exceed $2,000, and
            ``(2) the aggregate gross payments from all such sales to 
        such person during such year does not exceed $5,000.
    ``(d) Seller Relieved of Liability in Certain Cases.--In the case 
of any property or service which is sold exempt from tax under 
subsection (a), if the seller--
            ``(1) has on file a copy of an exemption certificate from 
        the purchaser, and
            ``(2) did not have reasonable cause to believe that an 
        exemption from the tax imposed by subsection (a) was 
        unavailable to the purchaser with respect to such purchase,
then the seller shall be relieved of liability to collect and remit the 
tax imposed under subsection (a) on such purchase.
    ``(e) Affiliated Firms.--Firms that make purchases from, or sell 
to, affiliated firms which are exempt pursuant to subsection (a) shall 
not need to comply with the requirements of subsection (d) for said 
purchases to remain exempt. For purposes of this section, a firm is 
affiliated with another if one firm owns 50 percent or more of the 
voting shares or interests in the other.
    ``(f) Cross References.--

                                ``For option to collect tax on certain 
exempt purchases, see section 3(b).
                                ``For registration requirements, see 
section 43.
                                ``For certificate rules, see section 
44.

``SEC. 3. SPECIAL RULES RELATING TO COLLECTION AND REMITTANCE OF TAX.

    ``(a) Obligation of Governmental Units and Not-For-Profit 
Organizations To Collect, Remit and Pay Taxes.--
            ``(1) Governmental units.--Nothing in this subtitle shall 
        be construed to exempt any Federal, State, or local 
        governmental unit or political subdivision from paying any tax 
        imposed by this subtitle on any sale, purchase, use, 
        consumption or enjoyment by such a unit.
            ``(2) Not-for-profit organizations.--
                    ``(A) In general.--Dues, contributions and payments 
                to qualified not-for-profit organizations shall not be 
                considered gross payments for taxable property or 
                services for purposes of this subtitle.
                    ``(B) Exception.--Notwithstanding subparagraph 
                (2)(A), payments of any form to a not-for-profit 
                organization shall be considered gross payments for 
                taxable property or services if the property or service 
                provided in exchange is not substantially related to 
                the exempt purposes of the organization or is 
                commercially available.
                    ``(C) For purposes of this section, qualified not-
                for-profit organization means a not-for-profit 
                organization organized and operated exclusively--
                            ``(i) for religious, charitable, 
                        scientific, testing for public safety, literary 
                        or educational purposes;
                            ``(ii) as civic leagues or social welfare 
                        organizations;
                            ``(iii) as labor, agricultural or 
                        horticultural organizations;
                            ``(iv) as chambers of commerce, business 
                        leagues or trade associations; or
                            ``(v) 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.
                    ``(D) Upon application in a form prescribed by the 
                State Administrator, the State Administrator shall 
                provide qualification certificates to qualified not-
                for-profit organizations.
                    ``(E) If a not-for-profit organization provides 
                property or personal services in connection with 
                contributions or dues to the organizations, then it 
                shall be required to treat the provision of said 
                property or personal services as a purchase taxable 
                pursuant to this subtitle at the fair market value of 
                said property or personal services.
                    ``(F) Taxable property and services purchased by 
                not-for-profit organizations for resale or for use in 
                the production of taxable property or services shall be 
                eligible for the exemptions provided in section 2.
    ``(b) Option To Collect Tax on Certain Exempt Purchases.--
            ``(1) In general.--In the case of a purchase which would 
        (but for this subsection (b) be exempt from the tax imposed by 
        section 1 by reason of section 2(a), such subsection shall not 
        apply to such purchase if the seller--
                    ``(A) elects the application of this subsection, 
                and
                    ``(B) immediately provides the purchaser with a 
                receipt reflecting the information required by section 
                54. Seller may elect to exercise the application of 
                this section with respect to some or all purchases or 
                purchasers.
            ``(2) The Secretary may by regulation provide that certain 
        industries or specific products are such that the vendor must 
        collect the tax on otherwise exempt purchase if, in the 
        Secretary's judgment, said industry or products are such that 
        consumers buy 25 percent or more of the product sold by the 
        industry or the product. A registered vendor may by application 
        for good cause shown elect to opt out of the application of 
        this paragraph.
            ``(3) Cross reference.--

                                ``For credit to purchaser where seller 
collects tax on exempt purchase, see section 11(a)(3).
                                ``For Tax To Be Separately Stated and 
Charged, see section 59.

   ``Subchapter B--Credits; Refunds; Installment Payments of Tax on 
                        Purchases of Residences

                              ``Sec. 11. Credits and refunds.
                              ``Sec. 12. Installment payments of tax on 
                                        purchases of principal 
                                        residences.
                              ``Sec. 15. Family Consumption Refund.

``SEC. 11. CREDITS AND REFUNDS.

    ``(a) General Credits.--Each person shall be allowed a credit 
against the taxes imposed by section 1 for any month in an amount equal 
to the sum of--
            ``(1) such person's used property credit under subsection 
        (c) for such month,
            ``(2) such person's business use conversion credit under 
        subsection (d) for such month,
            ``(3) the amount paid by such person with respect to a 
        purchase during such month by reason of a tax collected on an 
        exempt purchase pursuant to section 3(b) (relating to election 
        to collect tax on certain nontaxable purchases),
            ``(4) the administration credit under section (e),
            ``(5) the compliance equipment cost credit under section 
        (f), and
            ``(6) any amount paid in excess of amount due.
    ``(b) Refunds.--
            ``(1) Filers.--If a person files two consecutive monthly 
        tax reports with a credit balance, then, upon application in a 
        form prescribed by the State Administrator, then the credit 
        balance shown on the second monthly report shall be refunded to 
        the taxpayer within 60 days of said application.
            ``(2) Nonfilers.--If a person other than a monthly-filer 
        has an excess credit for any month, then, upon application in a 
        form prescribed by the State Administrator, then the credit 
        balance due shall be refunded to the taxpayer within 60 days of 
        said application.
            ``(3) Interest.--No interest shall be required to be paid 
        on any overpayment under this subsection for any month if such 
        overpayment is paid within 60 days after the close of such 
        month.
            ``(4) Suspension of period to pay refund only if federal 
        court ruling.--The 60-day periods under paragraphs (1) and (2) 
        shall be suspended with respect to a purported credit balance 
        (or portion thereof) only during any period that there is in 
        effect a preliminary ruling from a Federal court that there is 
        reasonable cause to believe that such credit balance is not 
        actually the amount due.
            ``(5) Monthly-filer.--For purposes of this subsection, the 
        term `monthly-filer' means, with respect to any month, any 
        person required to register under section 43 for such month.
    ``(c) Used Property Credit.--
            ``(1) In general.--For purposes of subsection (a), a seller 
        shall receive credit for previous sales tax paid on the resale 
        of taxable property or services, as provided in this subsection 
        (c).
            ``(2) Determination of used property credit amount.--The 
        used property credit amount determined under this paragraph 
        with respect to any property is the lesser of--
                    ``(A) the amount of tax due and paid by virtue of 
                the present transaction (without regard to any 
                credits), or
                    ``(B) the most recent prior tax imposed by section 
                1 with respect to such property transaction (without 
                regard to any credits).
            ``(3) Transitional deemed paid rule for property owned on 
        effective date of act.--In the case of property which was 
        acquired by the seller before January 1, 1999, the amount under 
        paragraph (2)(B) shall be the amount which is the product of--
                    ``(A) that which would be determined under 
                paragraph (2)(B) as if this subtitle had been in effect 
                at the time of such acquisition, and
                    ``(B) the equity ratio (as defined in paragraph 
                (4)).
            ``(4) The equity ratio is the quotient of--
                            ``(i) the income tax basis in the property 
                        at the end of 1997, less the mortgage or debt 
                        secured by said property, divided by
                            ``(ii) the income tax basis in the property 
                        at the end of 1997:
        Provided, however, That the quantity defined in subparagraph 
        (1) can not be less than zero and further providing that the 
        equity ratio so calculated cannot be less than zero or greater 
        than one.
    ``(d) Business Use Conversion Credit.--
            ``(1) In general.--For purposes of subsection (a), a 
        person's business use conversion credit for any month is the 
        aggregate of the amounts determined under paragraph (2) with 
        respect to property--
                    ``(A) on which a prior tax was imposed by section 1 
                on the purchase by such person, and
                    ``(B) which commences to be exclusively used during 
                such month in the production by such person of other 
                taxable property or services.
            ``(2) Amount of credit.--The amount determined under this 
        paragraph with respect to any property is lesser of--
                    ``(A) the product of the rate imposed by section 1 
                and the fair market value of the property when its use 
                is converted, and
                    ``(B) the prior tax referred to in paragraph 
                (1)(A).
            ``(3) Property converted from business use to personal use 
        shall be subject to tax pursuant to section 1 on the book value 
        of the converted property as of the date of conversion, 
        provided that the books are kept in accordance with generally 
        accepted accounting principles.
    ``(e) Administration Credit.--Every taxpayer filing a timely 
monthly report in compliance with section 41 shall be entitled to a 
taxpayer administrative credit equal to the greater of--
            ``(1) $100, or
            ``(2) one-half of 1 percent of the tax remitted: Provided, 
        however, That in no event will the credit afforded by this 
        section exceed 20 percent of the tax due to be remitted prior 
        to the application of this credit.
    ``(f) Compliance Equipment Cost Credit.--Vendors required to 
purchase new equipment to comply with the provisions of section 54 
shall be entitled to a credit in the amount of 50 percent of the cost 
of such equipment.

``SEC. 12. INSTALLMENT PAYMENTS OF TAX ON PURCHASE OF PRINCIPAL 
              RESIDENCES.

    ``(a) In General.--If--
            ``(1) property is purchased and used as the principal 
        residence of any purchaser of such property, and
            ``(2) such purchaser elects the application of this 
        section, then the tax imposed by section 1 with respect to such 
        purchase shall be paid in equal annual installments over the 
        30-year period beginning on the date of such sale together with 
        simple interest at the rate imposed by section 6621 of the 
        Internal Revenue Code of 1986
    ``(b) Termination of Installments if Property Is Sold or Otherwise 
Ceases To Be Principal Residence.--
            ``(1) In general.--If, before the close of the 30-year 
        period referred to in subsection (a), any property to which an 
        election under subsection (a) applies--
                    ``(A) is sold, or
                    ``(B) otherwise ceases to be used as the principal 
                residence of any purchaser making such election,
        then the unpaid installments shall be due no later than two 
        years after the time of such sale or cessation. To the extent 
        that such sale or cessation is only of a portion of such 
        residential property, the preceding sentence shall apply only 
        to a like portion (based on value) of such unpaid installments.
            ``(2) Special rule.--In a case to which paragraph (1)(B) 
        applies with respect to any purchaser--
                    ``(A) if such purchaser purchases within two years 
                another property which property is purchased and used 
                as the principal residence of such purchaser, the 
                remaining unpaid installments shall be due at the time 
                of such purchase, and
                    ``(B) if subparagraph (A) does not apply to such 
                purchaser, the remaining unpaid installments shall be 
                due at the close of the two-year period beginning on 
                the date of the cessation referred to in paragraph 
                (1)(B).
                    ``(C) The two-year period referred to in 
                subparagraph (B) shall be suspended during any period 
                that such purchaser uses such property as his principal 
                residence.
            ``(3) If any purchaser exercises the right to installment 
        payments under this section, then the responsibility to remit 
        the tax due is the purchaser's rather than the seller's 
        provided that the seller has on file a copy of the election 
        form prescribed by the Secretary.

``SEC. 15. FAMILY CONSUMPTION REFUND.

    ``(a) General Rule.--Each qualified family unit (as defined in 
subsection (b)) shall be eligible to receive a sales tax rebate in an 
amount no greater than the product of--
            ``(1) the rate of tax imposed by section 1, and
            ``(2) the lesser of--
                    ``(A) the poverty level (as defined in subsection 
                (c)), or
                    ``(B) the wage income of the family unit,
in the manner prescribed and subject to the limitations set forth by 
this section.
    ``(b) Qualified Family Unit Defined.--For purposes of this section, 
the term qualified family unit shall mean any family sharing a common 
residence. Any family members (as defined in subsection (e)) sharing a 
common residence shall be considered part of one integrated family 
unit.
    ``(c) Poverty Level Defined.--The poverty level shall be the 
quotient that is--
            ``(1) the level determined by the Department of Health and 
        Human Services poverty guidelines required by sections 652 and 
        673(2) of the Omnibus Reconciliation Act of 1981 (all States 
        and the District of Columbia) for family units of a particular 
        size, divided by
            ``(2) the quantity that is one minus the tax rate imposed 
        by section 1.
    ``(d) Rebate Mechanism.--
            ``(1) General rule.--The rebate provided by section (a) 
        shall be provided to each qualified family unit by including 
        the pay period rebate amount in each paycheck.
            ``(2) Pay period rebate amount.--The pay period rebate 
        amount shall be the lesser of product of the rate of tax 
        imposed by the section 1 and--
                    ``(A) the wages paid during the pay period, or
                    ``(B) the quotient that is the poverty level for 
                the family unit (determined in accordance with 
                subsection (c)) divided by the number of pay periods in 
                a year.
            ``(3) Adjusted withholding tables to be provided to 
        employers.--The Social Security Administration shall publish 
        revised withholding tables for use by employers.
            ``(4) Coordination.--The family member receiving the family 
        consumption rebate shall set forth, in a form prescribed by the 
        Social Security Administration, the names and Social Security 
        numbers of all members of the family unit for which a rebate is 
        claimed. Employers shall provide this information in the form 
        prescribed to the Social Security Administration.
    ``(e) Family Members Defined.--For purposes of determining the size 
of the family unit, family members shall include each spouse or the 
head of household, children, grandchildren, parents and grandparents.
    ``(f) Disqualified Family Members.--In order for a family member to 
be counted for purposes of determining family unit size, said family 
member must--
            ``(1) if over the age of two years, have a bona fide Social 
        Security number; and
            ``(2) be a lawful resident of the United States.
    ``(g) Students Living Away From Home.--A student during each of 
five months in a calendar year living away from the common residence of 
a family unit but who receives over 50 percent of his support from the 
family unit shall be included as part of that family unit for purposes 
of this section.
    ``(h) Change in Family Circumstances.--The residence of family 
members, marital status and number of persons in a family unit on the 
first day of the calendar year shall govern determinations required to 
be made under this section for purposes of said calendar year.
    ``(i) Two or More Family Members Working.--The family unit may 
elect to divide the rebate between two family members. Family members 
shall make this election in a form prescribed by the Social Security 
Administration and shall when making said election disclose the name 
and Social Security number of the other family members. Creditable 
wages for families making this election shall not exceed one half of 
the poverty level for that family unit.
    ``(j) Employers to Adjust Remittances.--Employers shall reduce 
their payroll tax remittances to the Social Security Administration by 
the amount of Family Consumption Rebate provided in employee paychecks.
    ``(k) No Double Counting.--In no event shall any person be 
considered part of more than one family unit.
    ``(l) Social Security Administration.--The Social Security 
Administration shall provide to multiple wage-earner family units who 
received a lower rebate amount than that to which that were entitled 
under subsection (a) due to the application of the limitations in 
subsection (d)(2) and subsection (i) any payment due within 30 days of 
the close of the calendar year.

             ``Subchapter C--Definitions and Special Rules

                              ``Sec. 21. Definitions.
                              ``Sec. 22. Special rules.

``SEC. 21. DEFINITIONS.

    ``(a) Financial Intermediation Services.--For purposes of this 
subtitle--
            ``(1) In general.--The term `financial intermediation 
        services' means the sum of--
                    ``(A) explicitly charged financial intermediation 
                services, and
                    ``(B) implicitly charged financial intermediation 
                services.
            ``(2) Exceptions.--Nothing in this chapter shall be 
        construed to impose a tax under this subtitle on interest, 
        dividends, capital gains or other investment income.
            ``(3) Explicitly charged financial intermediation 
        services.--The term `explicitly charged financial 
        intermediation services' includes--
                    ``(A) brokerage fees (including the full amount of 
                stated commissions, and the spread between bid and 
                asked price on a particular executed trade),
                    ``(B) explicitly stated banking, loan origination, 
                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 investment account of 
                the underlying insurance policy,
                    ``(E) trustees' fees, and
                    ``(F) other financial services fees (including 
                mutual fund management, sales and exit fees).
            ``(4) Implicitly charged financial intermediation 
        services.--
                    ``(A) In general.--The term `implicitly charged 
                financial intermediation services' includes the gross 
                imputed amount in relation to any underlying interest 
                bearing investment, account or debt less any explicitly 
                stated amounts or fees in relation to such underlying 
                interest bearing investment, account or debt.
                    ``(B) Gross imputed amount.--For purposes of 
                subparagraph (A), the term `gross imputed amount' 
                means--
                            ``(i) with respect to any underlying 
                        interest bearing investment or account, the 
                        product of--
                                    ``(I) the excess (if any) of the 
                                applicable interest rate over the rate 
                                paid on such investment, and
                                    ``(II) such account balance; and
                            ``(ii) with respect to any underlying 
                        interest bearing debt, the product of--
                                    ``(I) the excess (if any) of the 
                                rate paid on such debt over the 
                                applicable interest rate, and
                                    ``(II) such debt balance.
                    ``(C) Applicable interest rate.--For purposes of 
                subparagraph (B), the applicable interest rate shall be 
                the sum of the--
                            ``(i) rate that the Federal Government 
                        generally pays when it issues securities of 
                        like-term and like-issuance date to the term 
                        and issuance date of the underlying investment 
                        or debt for which a gross imputed amount is 
                        being calculated and
                            ``(ii) 2 percent.
                The Secretary shall publish a table of applicable 
                interest rates to be used for purposes of this 
                paragraph for each month and for various terms.
    ``(b) Gross Payments.--For purposes of this subtitle, the term 
`gross payments' shall mean gross payments inclusive of Federal tax 
imposed by, and State taxes imposed in conformity with, this chapter 
but exclusive of customs duties. Gross payment shall be the product of 
the pre-tax factor and the payments for the taxable property or service 
exclusive of State and Federal taxes imposed by, and State taxes 
imposed in conformity with, this subtitle. For purposes of this 
section, the pre-tax factor shall be one divided by the quantity that 
is one minus the sum of--
            ``(1) the Federal tax rate imposed by section 1, and
            ``(2) the State tax rate imposed in conformity with this 
        subtitle.
    ``(c) Primary residence shall mean residential real property used 
predominantly as the place of abode for a person or persons. A person 
shall have only one primary residence for purposes of this section. A 
married couple shall have only one primary residence.
    ``(d) Purchased for Resale.--For purposes of section 2(a)(1), a 
property or service is purchased for resale if such property or service 
is purchased by a person in an active trade or business for the purpose 
of reselling the taxable property or service in the ordinary course of 
that active trade or business.
    ``(e) Purchased To Produce Taxable Property or Services.--For 
purposes of section 2(a)(2)--
            ``(1) In general.--A property or service is purchased to 
        produce a taxable property or service if such property or 
        service is purchased by a person in an active trade or business 
        for the purpose of employing or using such property or service 
        in the production or sale of other taxable property or services 
        in the ordinary course of that active trade or business.
            ``(2) Research experimentation and development.--Taxable 
        property or services used in an active trade or business for 
        the purpose of research, experimentation and development shall 
        be treated as purchased to produce taxable property or 
        services.
            ``(3) Insurance payments.--A property or service purchased 
        by an insurance company on behalf of an insured shall be 
        treated as a property or service purchased to produce a taxable 
        property or service if the entire premium for the insurance 
        contract giving rise to the insurer's obligation was subject to 
        tax in accordance with subsection (a) (relating to financial 
        intermediation services).
            ``(4) Education and training.--Education and training shall 
        be treated as purchased to produce taxable property or 
        services. For purposes of this section, education and training 
        shall mean tuition for general primary, secondary, or 
        university level education, and tuition for job-related 
        training courses. Tuition shall not include amounts 
        attributable to room or board for the student.
    ``(f) Qualified fixtures shall include only those fixtures that are 
a permanent, integral, incorporated and irremovable part of the 
structure and shall exclude furniture, furnishings, appliances or 
similar tangible personal property.
    ``(g) Real Property.--For purposes of this chapter, the term real 
property shall have the meaning ascribed to it at common law. The 
Secretary shall by regulation establish uniform national rules for 
purposes of administering this chapter to the extent that jurisdictions 
within the United States may provide different holdings as to the scope 
of the term real property.
    ``(h) Residence.--Whenever this chapter requires that the State of 
`residence' need be determined, it shall be determined in descending 
order of priority as the State of permanent abode, the center of vital 
interests, or the habitual abode. If the State of residence is still 
undetermined, if the person is a resident of the United States, the 
determination will be made by the Federal Office of Revenue Allocation.
    ``(i) Residential real property is real property, including 
structures, land, and qualified fixtures and appurtenances thereto 
that--
            ``(1) is held in fee simple and
            ``(2) is predominantly used as a residence or dwelling.
    ``(j) Secretary.--For purposes of this chapter, the term 
`Secretary' means the United States Secretary of Treasury.
    ``(k) State Administrator.--For purposes of this chapter, the term 
`State Administrator' shall mean the highest State official responsible 
for administering the taxes imposed by this subtitle in the conforming 
State. In States that are not conforming States, the `State 
Administrator' shall mean the person designated by the Secretary as the 
Federal official responsible for administering the taxes imposed by 
this chapter in a non-conforming State. State Administrator shall also 
mean, when the context so requires, the Federal official responsible 
for administering the multi-State vendor program.
    ``(l) Structures, for purposes of subsection (i) shall include 
homes that are manufactured housing but not self-propelled and not on 
wheels.
    ``(m) Tangible Personal Property.--For purposes of this chapter, 
the term tangible personal property shall have the meaning ascribed to 
it at common law. The Secretary shall by regulation establish uniform 
national rules for purposes of administering this chapter to the extent 
that jurisdictions within the United States may provide different 
holdings as to the scope of the term tangible personal property.
    ``(n) Taxable Property or Services.--
            ``(1) General rule.--For purposes of this chapter, the term 
        `taxable property or service' means--
                    ``(A) any property (including leaseholds of any 
                term or rents with respect to such property) other than 
                intangible property, and
                    ``(B) any service (including any financial 
                intermediation services).
            ``(2) Wages.--For purposes of the preceding sentence, 
        services shall not include wages paid by an employer engaged in 
        an active trade or business that is registered pursuant to 
        section 43. Services shall include wages paid by an employer 
        not engaged in an active trade or business unless--
                    ``(A) those wages are subject to tax pursuant to 
                section 22(i), or
                    ``(B) those wages are paid by a qualified not-for-
                profit organization (as defined in section 3(a)(iii)).
    ``(o) United States.--For purposes of this chapter, the term 
`United States', when used in the geographical sense, means the 50 
States, the District of Columbia, and any commonwealth, territory or 
possession of the United States.

``SEC. 22. SPECIAL RULES.

    ``(a) Timing of Tax on Financial Intermediation Services.--The tax 
on financial intermediation services provided in connection to an 
underlying investment account or debt shall be calculated and collected 
with the same frequency that statements are rendered by the financial 
institution in connection with the investment account or debt but not 
less frequently than quarterly.
    ``(b) The financial institution need not calculate its liability on 
a transaction by transaction or account by account basis provided that 
the method used by the financial institution is--
            ``(1) reasonable, and
            ``(2) will lead to a tax liability that is substantially 
        similar to that projected under ordinary sales tax principles.
    ``(c) Special Rules Relating to International Financial 
Intermediation Services.--Financial intermediation services shall be 
deemed as used, consumed or enjoyed within the United States if the 
financial intermediation services provider or any related party has a 
permanent establishment in the United States and the person purchasing 
the services is a resident of the United States. For purposes of the 
preceding sentence, the term `related party' means, with respect to any 
financial institution, any corporation which is a member of a 
controlled group (as defined in former section 267(f)) which includes 
such institution.
    ``(d) Financing Leases.--The Secretary shall promulgate rules for 
disaggregating the principle and interest components of a financing 
lease. For purposes of this subsection, a financing lease shall be any 
lease under which the lessee shall have the right to acquire the 
property for 50 percent or less of its fair market value at the end of 
the lease term. The imputed interest rate to be employed by the 
Secretary when promulgating said regulations shall be the applicable 
rate (as defined in section 21(a)(4)(C)).
    ``(e) Installment Sales, Accounting, Returns.--
            ``(1) General rule.--Tax will be due when payment for the 
        taxable property and services sold, consumed, used or enjoyed 
        is actually received.
            ``(2) Alternative rule.--A vendor may elect to adopt the 
        accrual method of accounting for purposes of determining when 
        the tax will be due. Said election must apply to all sales made 
        by vendor in a particular calendar year.
            ``(3) Installment sales.--Tax will be due on taxable 
        property and services sold under the installment method when 
        payment for the taxable property and services sold is actually 
        received.
            ``(4) Returns.--A credit shall be provided to the vendor 
        for returned taxable property and services when actual payment 
        for the returned taxable property and services is made by the 
        vendor to the person returning the taxable property and 
        services.
    ``(f) Mixed Use Property or Services.--
            ``(1) Mixed use property or service defined.--Mixed Use 
        Property or Service is taxable property or services purchased 
        both for a purpose that would give rise to an exemption 
        pursuant to section 2 and for taxable use, consumption or 
        enjoyment.
            ``(2) Exemption threshold.--Mixed Use Property or Service 
        shall not be exempt pursuant to section 2 unless said property 
        is used more than 95 percent for purposes that would give rise 
        to an exemption pursuant to section 2.
            ``(3) Mixed use property or services credit.--A business 
        registered pursuant to section 43 is entitled to a business use 
        conversion credit (pursuant to section 11(d)) equal to product 
        of--
                    ``(A) the mixed use property amount,
                    ``(B) the business use ratio, and
                    ``(C) the rate of tax imposed by section 1.
            ``(4) Mixed use property amount.--The mixed use property 
        amount for each year shall be--
                    ``(A) one-thirtieth of the purchase price for real 
                property for thirty years or until the property is 
                sold,
                    ``(B) one-seventh of the purchase price for 
                tangible personal property for seven years or until the 
                property is sold,
                    ``(C) one-fifth of the purchase price for vehicles 
                for five years or until the property is sold, and
                    ``(D) a reasonable amount for other types of 
                taxable property or services or in accordance with 
                regulations.
            ``(5) Business use ratio.--The business use ratio is the 
        ratio of business use to total use for a particular year. For 
        vehicles, the business use ratio will be the ratio of business 
        purpose miles to total miles. For real property, the business 
        use ratio is the ratio of floor space used for business 
        purposes to total floor space. For tangible personal property 
        (except for vehicles), the business use ratio is the ratio of 
        total time used for business purposes to total time used. For 
        other property or services, the business ratio shall be 
        calculated using a reasonable method. Reasonable records must 
        be maintained to support a taxpayer's business use of the mixed 
        use property or service.
    ``(g) Hobby Activities.--The exemptions afforded by section 2 shall 
not be available for purchases made by a trade or business if that 
trade or business is an activity not engaged in for profit. If the 
business activity has received gross payments that exceed the sum of--
            ``(1) taxable property and services purchased,
            ``(2) wages paid, and
            ``(3) taxes paid,
in three or more of the most recent calendar years then the business 
activity shall be deemed to be engaged in for profit.
    ``(h) Gaming.--There is hereby imposed a 15-percent tax on taxable 
gaming services. Taxable gaming services shall be the gross gaming 
receipts less total gaming payoffs. This tax shall be paid and remitted 
by the person offering the gaming services.
    ``(i) Government Services.--There is hereby imposed an excise tax 
on the receipt of wages by Federal, State and local government 
employees equal to 15 percent of said wages. Said excise tax is to be 
withheld and remitted by the employer.

          ``Subchapter D--Authority for States to Collect Tax

                              ``Sec. 31. Authority for States to 
                                        collect tax.
                              ``Sec. 32. Federal administrative support 
                                        for States.
                              ``Sec. 33. Federal administration option 
                                        for multi-State vendors.

``SEC. 31. AUTHORITY FOR STATES TO COLLECT TAX.

    ``(a) In General.--The tax imposed by this chapter on gross 
payments for the use, consumption or enjoyment of taxable property or 
services within a State which is an administering State shall be 
administered, collected, and remitted to the United States Treasury by 
such State.
    ``(b) Administering State.--For purposes of this section, the term 
`administering State' means any State--
            ``(1) which maintains a conforming sales tax, and
            ``(2) which enters into a cooperative agreement with the 
        Secretary containing reasonable provisions, limited in scope 
        and detail, governing the administration by such State of the 
        taxes imposed by this chapter and the remittance to the United 
        States in a timely manner of taxes collected under this 
        chapter.
    ``(c) Conforming Sales Tax.--For purposes of subsection (b), a 
State maintains a conforming sales tax if such State imposes, 
administers, and collects a sales tax--
            ``(1) which conforms to the tax imposed by this chapter in 
        all significant respects (other than the rate of tax), 
        including--
                    ``(A) the same taxable property and services,
                    ``(B) the same exemptions, and
                    ``(C) the same credits and refunds (other than 
                section 11(a)(4) relating to the taxpayer 
                administrative credit and section 15 relating to the 
                family consumption refund), and
            ``(2) which is imposed at a rate of no less than 1 percent.
    ``(d) Cooperative Agreements.--The agreement under subsection 
(b)(2) shall be limited in scope and detail but include provisions for 
the expeditious transfer of funds, contact officers, dispute 
resolution, and other matters of importance.
    ``(e) Timely Remittance of Tax.--
            ``(1) In general.--Administering States shall remit and pay 
        over taxes collected under this chapter on behalf of the United 
        States (less the administration fee allowable under paragraph 
        (2)) no later than 15 days after receipt.
            ``(2) Administration fee.--Administering States may retain 
        an administration fee equal to one percent of the amounts 
        otherwise required to be remitted to the United States under 
        this chapter by the State.
    ``(f) Limitation on Administration of Tax by United States.--The 
Secretary may administer the tax imposed by this chapter in an 
administering State only if--
            ``(1)(A) such State has failed on a regular and sustained 
        basis to timely remit to the United States taxes collected 
        under this chapter on behalf of the United States, or
            ``(B) such State has on a regular and sustained basis 
        otherwise materially breached the agreement referred to in 
        subsection (b)(2),
            ``(2) the State has failed to cure such failures and 
        alleged breaches within a reasonable time,
            ``(3) the Secretary provides such State with written notice 
        of such failures and alleged breaches, and
            ``(4) a district court of the United States within such 
        State has rendered a decision permitting such administration.
    ``(g) The Secretary shall administer the tax imposed by this 
chapter in any State or other jurisdiction that is not an administering 
State.
    ``(h) It shall be permissible for a conforming State to contract 
with another conforming State to administer its sales tax for an agreed 
fee. In this case, the agreement contemplated by subsection (d) shall 
have both States and the Federal Government as parties.
    ``(i) Coordination Among Conforming States.--
            ``(1) Exemption certificates.--Conforming States shall 
        honor exemption certificates issued by other conforming States.
            ``(2) Audits.--Conforming States shall not conduct audits 
        at facilities in other Conforming States but shall instead 
        cooperate with other Conforming States using the mechanisms 
        established by section 32 of this subchapter or by other 
        agreement or Compact.

``SEC. 32. FEDERAL ADMINISTRATIVE SUPPORT FOR STATES.

    ``(a) The Secretary shall administer a program to facilitate 
information sharing among States.
    ``(b) The Secretary shall facilitate and may be a party to a 
Compact Among Conforming States for purposes of facilitating the 
taxation of interstate purchases and for other purposes that may 
facilitate implementation of this chapter.
    ``(c) The Secretary shall have the authority to promulgate 
regulations and 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 taxpayers and administrators.

``SEC. 33. FEDERAL ADMINISTRATION OPTION FOR MULTISTATE VENDORS.

    ``(a) In General.--Vendors that maintain retail establishments in 
five or more conforming States may elect, in a form prescribed by the 
Secretary, to have their sales tax obligations administered by the 
Federal Government under the multistate vendor program.
    ``(b) Federal Government To Collect and Remit State Sales Taxes.--
Under the multistate vendor program, the Federal Government will 
collect Federal and conforming State sales taxes and remit the State 
sales taxes to the States within 10 days of receiving said revenue.
    ``(c) Federal Administration.--The Federal Government will serve in 
the place of the State administrator with respect to multi-State 
vendors exercising the election under this section. With respect to 
electing multi-State vendors, the Federal Government exclusively will--
            ``(1) audit;
            ``(2) provide exemption certificates; and
            ``(3) otherwise administer the Federal and conforming State 
        sales tax in place of the administering State.

            ``Subchapter E--Other Administrative Provisions

                              ``Sec. 41. Monthly reports and payments.
                              ``Sec. 42. Records.
                              ``Sec. 43. Registration.
                              ``Sec. 44. Certificates.
                              ``Sec. 45. Penalties.
                              ``Sec. 46. Burden of persuasion and 
                                        burden of production.
                              ``Sec. 47. Attorneys and accountancy 
                                        fees.
                              ``Sec. 48. Appeals.
                              ``Sec. 49. Subpoenas.
                              ``Sec. 50. Tax court jurisdiction.
                              ``Sec. 51. Power to levy.
                              ``Sec. 52. Problem resolution officers.
                              ``Sec. 53. Interstate allocation.
                              ``Sec. 54. Tax to be separately stated 
                                        and charged.

``SEC. 41. MONTHLY REPORTS AND PAYMENTS.

    ``(a) Reports.--On or before the 25th of each month, every person 
who is liable to collect and remit the tax imposed by this chapter, or 
pay the tax imposed by this chapter by reason of gross payments 
described in section (1) (hereafter in this section referred to as the 
`taxpayer'), shall submit to the appropriate tax authority (in a form 
satisfactory to the Secretary) a report relating to the previous month 
that sets forth--
            ``(1) the gross payments referred to in section 1,
            ``(2) the tax collected under this chapter in connection 
        with such payments, and
            ``(3) the amount and type of any credit claimed.
    ``(b) Payments of Tax.--The tax imposed by this chapter with 
respect to any use, consumption or enjoyment during any month shall be 
paid on or before the 25th of the succeeding month. One payment shall 
pay both Federal and conforming State tax liability.
    ``(c) Interest on Amounts Remitted Late.--
            ``(1) In general.--If any amount required to be paid on or 
        before the 25th of any month is paid after such 25th day, the 
        taxpayer shall pay simple interest from such 25th day at the 
        rate of--
                    ``(A) 1 percent per month (or any fraction thereof) 
                for the first month, and
                    ``(B) 1.5 percent per month (or any fraction 
                thereof) thereafter.
            ``(2) Amounts paid after collection action.--
                    ``(A) In general.--The rate of interest under 
                paragraph (1) shall be 2 percent per month (or any 
                fraction thereof) with respect to amounts paid only 
                after the commencement of a collection action with 
                respect to such amounts.
                    ``(B) Collection action.--For purposes of 
                subparagraph (A), the term `collection action' includes 
                administrative levies or garnishments and the 
                commencement of legal action in any court.
    ``(d) Penalty for Late Filing.--
            ``(1) In general.--In the case of a failure by any person 
        to file a report required by subsection (a) on or before due 
        date (determined with regard to any extension) for such report, 
        such person shall pay a penalty equal to the greater of--
                    ``(A) $50, or
                    ``(B) 0.5 percent of the gross payments referred to 
                in section 1 required to be shown on the report.
            ``(2) Increased penalty on returns filed after written 
        inquiry.--The amount of the penalty under paragraph (1) shall 
        be doubled with respect to any report filed after a written 
        inquiry with respect to such report is received by the taxpayer 
        from the State Administrator.
            ``(3) Exceptions.--
                    ``(A) Reasonable cause.--No penalty shall be 
                imposed under paragraph (1) with respect to any failure 
                if it is shown that such failure is due to reasonable 
                cause.
                    ``(B) Other waiver authority.--In addition to 
                penalties not imposed by reason of subparagraph (A), 
                the State Administrator, on application, shall waive 
                the penalty imposed by paragraph (1) once per taxpayer 
                per 2-year period. The preceding sentence shall not 
                apply to a penalty determined under paragraph (2).
    ``(e) Extensions for Filing Reports.--
            ``(1) Automatic extensions for less than 30 days.--On 
        application, extensions of less than 30 days to file reports 
        under subsection (a) shall be automatically granted.
            ``(2) Other extensions.--Extensions of 30 to 90 days to 
        file such reports shall be liberally granted by the State 
        Administrator for reasonable cause. Extensions greater than 90 
        days may be granted by the State Administrator to avoid 
        hardship.
            ``(3) No extension for payment of taxes.--Notwithstanding 
        paragraphs (1) and (2), no extension shall be granted with 
        respect to the time for paying the taxes under this chapter.
    ``(f) Penalty for Willfully or Recklessly Accepting a False 
Exemption Certificate.--A person who willingly or recklessly accepts a 
false exemption certificate shall pay a penalty equal to 20 percent of 
the tax not collected on gross payments for taxable property and 
services by virtue of said acceptance.
    ``(g) The Secretary shall establish a system whereby violation of 
the National Retail Sales Tax Act of 1996 can be brought to the 
attention of the Secretary for investigation through the use of a toll-
free telephone number and otherwise.

``SEC. 42. RECORDS.

    ``Any person liable to collect and remit taxes pursuant to this 
chapter or pay the tax imposed by this chapter by reason of gross 
payments described in section 1, shall keep records (including, but not 
limited to, copies of all section 54 receipts provided and complete 
records of exempt purchases including exempt purchaser's exemption 
certificates and tax number and the net of tax amount of purchase) 
sufficient to provide a reasonable basis for determining the amounts 
reported, collected, and remitted for a period of 3 years after the 
filing of the report for which the records formed the basis. Any 
purchaser who purchased taxable property or services but did not pay 
tax by reason of asserting an exemption shall keep records sufficient 
to provide a reasonable basis for determining whether the exemption was 
valid for a period of 3 years after the purchase of taxable property or 
services.

``SEC. 43. REGISTRATION.

    ``(a) In General.--Any person liable to collect and remit taxes 
pursuant to section 1 who is engaged in an active trade or business 
shall register with the State or Federal taxing authorities 
administering the taxes imposed by this chapter.
    ``(b) Designation of Tax Matters Person.--Every person registered 
pursuant to subsection (a) shall designate a tax matters person. Each 
person registered must provide notice of a change in the identity of 
the tax matters person within 30 days of said change.

``SEC. 44. CERTIFICATE.

    ``The State Administrator shall issue certificates of registration, 
exemption certificates, qualification certificates to qualified not-
for-profit organizations and may issue such other certificates as may 
prove useful in the administration of the taxes imposed by this 
chapter.

``SEC. 45. PENALTIES.

    ``(a) Failure To Register.--Each person who is required to register 
pursuant to section 43 but fails to do so prior to notification by the 
State Administrator shall be liable for a penalty of $500.
    ``(b) Failure To Collect or Remit Tax.--
            ``(1) Civil penalty.--Each person who recklessly or 
        willfully fails to collect or remit taxes imposed by section 1 
        shall be liable for a penalty equal to the greater of $500 or 
        20 percent of the tax not collected or remitted.
            ``(2) Criminal penalty.--Each person who willfully fails as 
        part of an active trade or business to collect or remit taxes 
        imposed by this chapter may be imprisoned for a period of up to 
        one year.
    ``(c) Failure To Pay Tax.--
            ``(1) Civil penalty.--Each person who willfully fails to 
        pay taxes imposed by section 1 shall be liable for a penalty 
        equal to the greater of $500 or 20 percent of the tax not paid.
            ``(2) Criminal penalty.--Each person who willfully fails to 
        pay taxes imposed by this chapter may be imprisoned for a 
        period of up to six months.

``SEC. 46. BURDEN OF PERSUASION AND BURDEN OF PRODUCTION.

    ``In all disputes concerning taxes imposed by this chapter, the 
person engaged in a dispute with the State Administrator shall have the 
burden of production of documents and records but the State 
Administrator shall have the burden of persuasion. In all disputes 
concerning the legitimacy of an exemption claimed by a purchaser, if 
the seller has on file a copy of a bona fide exemption certificate and 
did not have reasonable cause to believe that an exemption from the tax 
was unavailable to the purchaser with respect to such purchase, then 
the burden of production of documents and records relating to that 
exemption shall rest with the purchaser and not with the seller.

``SEC. 47. ATTORNEYS AND ACCOUNTANCY FEES.

    ``In all disputes concerning taxes imposed by this chapter, the 
person engaged in a dispute with the State Administrator shall be 
entitled to reasonable attorneys and accountancy fees incurred in 
direct relation to the dispute unless the State Administrator 
establishes that his position was substantially justified.

``SEC. 48. APPEALS.

    ``The State Administrator shall establish an administrative appeals 
process wherein the taxpayer is provided a full and fair hearing in 
connection with any disputes he has with the State Administrator.

``SEC. 49. TAXPAYER SUBJECT TO SUBPOENA ON PRODUCTION.

    ``Taxpayers are subject to subpoena for records and documents 
required by the State Administrator to accurately determine liability 
for tax under this chapter.

``SEC. 50. TAX COURT JURISDICTION.

    ``The United States Tax Court shall have jurisdiction pursuant to 
section 7442 of the Internal Revenue Code of 1986 in connection with 
all disputes with taxpayers arising under this chapter.

``SEC. 51. POWER TO LEVY.

    ``Pursuant to enforcement of a judgment duly rendered by a court of 
law, the State Administrator shall have the right to levy and seize 
property and garnish wages to collect amounts due under this chapter.

``SEC. 52. PROBLEM RESOLUTION OFFICERS.

    ``The State Administrator shall establish a Problem Resolution 
Office. Problem Resolution Officers shall have the authority to 
investigate taxpayer complaints and enjoin collection activity if, in 
the opinion of the Problem Resolution Officer, said collection activity 
is reasonably likely to not be in compliance with law. Said 
administrative injunction may only be reversed by the highest official 
in the relevant State or Federal taxing 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 
administrative injunction may not be delegated. Problem Resolution 
Officers shall not be disciplined or adversely affected for the 
issuance of administrative injunctions unless a pattern or issuing 
injunctions that are manifestly unreasonable is proven in an 
administrative hearing. Nothing in this section shall limit the 
authority of the State Administrators or the taxpayer to pursue any 
legal remedy in any court with jurisdiction over the dispute at issue.

``SEC. 53. JURISDICTION AND INTERSTATE ALLOCATION.

    ``(a) Allocation Rules.--For purposes of allocating revenue between 
or among administering states from taxes imposed by this subtitle, the 
revenue shall be allocated to those states that are the destination of 
the taxable property or services. The destination of the purchase of 
taxable property and services shall be determined in accordance with 
this section.
    ``(b) Federal Office of Revenue Allocation.--The Secretary shall 
establish an Office of Revenue Allocation to arbitrate any claims or 
disputes among administering 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 Revenue Allocation shall be 
subject to judicial review in any federal court with competent 
jurisdiction provided, however, that the standard of review shall be 
abuse of discretion.
    ``(c) Tangible Personal Property.--The destination of tangible 
personal property shall be the state or territory in which the property 
was first delivered to the purchaser. Tangible personal property 
shipped by means of the mail or common carrier shall be deemed 
delivered to the location of the purchaser for purposes of this 
subsection upon shipment by mail or common carrier.
    ``(d) Real Property.--The destination of real property or rents or 
leaseholds on real property shall be state or territory in which the 
real property is located.
    ``(e) Other Property.--The destination of other property shall be 
residence of the purchaser.
    ``(f) Services.--
            ``(1) General rule.--The destination of services shall be 
        state or territory in which the use, consumption or enjoyment 
        of the services occurred. Allocation of service invoices 
        relating to more than one jurisdiction shall be on the basis of 
        time.
            ``(2) Telecommunications services.--The destination of 
        telecommunications services shall be the residence of the 
        purchaser. Telecommunications services shall include telephone, 
        telegraph, 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 destination of transportation services shall 
        be the final destination of the trip (in the case of round or 
        multiple trip fares, the services amount shall be equally 
        allocated among the final destinations).
            ``(4) International transportation services.--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 
        destination and origin.
    ``(g) Financial Intermediation Services.--The destination of 
financial intermediation services shall be the residence of the 
purchase.
    ``(h) A State Tax Administrator shall have jurisdiction over any 
gross payments made which have a destination (as determined in 
accordance with this section) within the state of said State Tax 
Administrator. This grant of jurisdiction is not exclusive of other 
jurisdiction that said State Tax Administrator may have.
    ``(i) Rents and Royalties Paid for the Lease of Tangible 
Property.--
            ``(1) General rule.--The destination of rents and royalties 
        paid for the lease of tangible property shall be where the 
        property is located.
            ``(2) Vehicles.--The destination of rent and lease payments 
        on vehicles shall be--
                    ``(A) in the case of rentals and leases of a term 
                one month or less, the location where the vehicle was 
                originally delivered to the lessee; and
                    ``(B) in the case of rentals and leases of a term 
                greater than one month, the residence of the lessee.
    ``(j) Royalties for the License of Intangible Property.--The 
destination of royalties for the license of intangible is where the 
property is used.

``SEC. 54. TAX TO BE STATED AND CHARGED SEPARATELY.

    ``(a) In General.--For each purchase of taxable property or 
services for which a tax is imposed pursuant to section 1, the sales 
tax shall be charged separately from the purchase price by the vendor 
or seller. For purchase of taxable property or services for which a tax 
is imposed pursuant to section 1, the vendor shall provide to the 
purchaser a receipt that sets forth at least the following 
information--
            ``(1) the property or services price exclusive of tax;
            ``(2) the amount of tax paid;
            ``(3) the property or service price inclusive of tax;
            ``(4) the tax rate (the amount of tax paid (per 
        subparagraph 2) divided by the property or service price 
        inclusive of tax (per subparagraph 3));
            ``(5) the date that the good or service was sold;
            ``(6) the name of the vendor; and
            ``(7) the vendor registration number.
    ``(b) Vending Machine Exception.--The requirements of subsection 
(a) shall be inapplicable in the case of sales by vending machines. 
Vending machines for purposes of this subsection shall mean machines--
            ``(1) that dispense taxable property in exchange for coins, 
        one, five, ten or twenty dollar bills, and
            ``(2) that sell no single item exceeding ten dollars per 
        unit in price.''

SEC. 5. PHASE-OUT OF THE INTERNAL REVENUE SERVICE.

    Appropriations for any expenses of the Internal Revenue Service 
including processing income tax returns for years prior to the repeal 
of the income tax, revenue accounting, management, transfer of payroll 
tax data to the Social Security Administration and otherwise for years 
after fiscal year 2000 are not authorized.

SEC. 6. EXCISE TAX ADMINISTRATION.

    The Secretary shall establish an Excise Tax Bureau to collect 
excise taxes formerly collected and administered by the Internal 
Revenue Service that are not repealed by this Act.

SEC. 7. SOCIAL SECURITY ADMINISTRATION TO COLLECT PAYROLL TAXES.

    (a) Commencing January 1, 1998, the Social Security Administration 
shall collect and administer the taxes imposed pursuant to chapter 2 of 
subtitle A (relating to self employment income taxes) and subtitle C 
(relating to employment taxes) of the Internal Revenue Code of 1986.
    (b) Cross References.--

                                For revised rules relating to the self-
employment tax, see section 57.
                                For rules relating to revised 
withholding tax schedules and family consumption refund, see section 
15.
                                For rules relating to trust fund 
accounting and payroll tax revenues, see section 6(b) of this act.

SEC. 8. SELF-EMPLOYMENT TAX.

    (a) Subsection 1402(a) of the Internal Revenue Code of 1986 is 
amended to read as follows:
    ``(a) In General.--`Self employment income' shall mean gross 
payments received in a calendar year from the sale of taxable property 
or services (without regard to exemption) less the sum in a calendar 
year of--
            ``(1) purchases of taxable property or services (without 
        regard to exemption) in furtherance of a business purpose,
            ``(2) any wages paid (whether to the self-employed person 
        or others) in furtherance of a business purpose,
            ``(3) unused transition amounts, and
            ``(4) undeducted negative self employment income amounts 
        from prior periods.
    ``(b) Transition Amounts.--
            ``(1) General rule.--The transition amount for the ten 
        calendar years commencing in 1998 shall be the unrecovered 
        basis amount as of the end of December 31, 1997 divided by ten.
            ``(2) Unrecovered basis amount.--The unrecovered basis 
        amount shall be remaining income tax basis relating to--
                    ``(A) prior law section 167 property placed in 
                service prior to January 1, 1998, and
                    ``(B) inventory held as of the end of 1997 
                (including any amounts capitalized in accordance with 
                prior law section 263A).''
    (b) Conforming Amendments.--Subsection 1402(b) and 1402(c) are 
hereby repealed. Subsections 1402(d) et seq. are hereby renumbered as 
subsections 1402(b) et seq.

SEC. 9. INTEREST.

    Section 6621 of the Internal Revenue Code of 1986 is amended by 
striking the last sentence in section 6621(a)(1) and by striking ``3'' 
in section 6621(a)(2)(B) and substituting in its stead ``2''.

SEC. 10. SUPERMAJORITY REQUIRED TO RAISE RATE.

    ``(a) In General.--It shall not be in order in the House of 
Representatives or the Senate to consider any bill, joint resolution, 
amendment thereto, or conference report thereon that includes any 
provision that--
            (1) increases any federal sales tax rate,
            (2) provides any exemption, deduction, credit or other 
        benefit which results in a reduction in federal revenues.
    (b) Waiver or Suspension.--This section may be waived or suspended 
in the House of Representatives or the Senate only by the affirmative 
vote of two-thirds of the Members, duly chosen and sworn.
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