[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 1433 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                S. 1433

 To amend the Internal Revenue Code of 1986 to impose a retail excise 
  tax on merchandise sold via the Internet, through catalogs, or sold 
 other than through local merchants in order to supplement the funding 
         for elementary and secondary school teacher salaries.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 26, 1999

 Mr. Hollings introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to impose a retail excise 
  tax on merchandise sold via the Internet, through catalogs, or sold 
 other than through local merchants in order to supplement the funding 
         for elementary and secondary school teacher salaries.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sales Tax Safety Net and Teacher 
Funding Act''.

SEC. 2. RETAIL EXCISE TAX.

    (a) In General.--Chapter 31 of the Internal Revenue Code of 1986 is 
amended by adding at the end thereof the following:

         ``SUBCHAPTER D. CERTAIN NONLOCAL SALES OF MERCHANDISE

``Sec.
``4059. Imposition of tax.

``SEC. 4059. IMPOSITION OF TAX.

    ``(a) In General.--There is hereby imposed on the first retail sale 
of merchandise effected via the Internet, by mail order through a 
catalog, or by direct sales other than through a local merchant, a tax 
equal to 5 percent of the price for which so sold.
    ``(b) Exemption.--The tax imposed by subsection (a) does not apply 
to a sale to a purchaser who is exempt from any State or local sales 
tax imposed on sales of merchandise in the State or locality in which 
the merchandise is purchased.
    ``(c) Credit for Sales Tax Paid.--There is allowed as a credit 
against the tax imposed by subsection (a) an amount equal to so much of 
the State and local sales taxes paid by the purchaser with respect to 
the purchase of the merchandise as does not exceed 5 percent of the 
price for which the merchandise is sold.
    ``(d) Party Liable for Tax.--The tax imposed by subsection (a) 
shall be collected by the seller.
    ``(e) Definitions; Special Rules.--
            ``(1) First retail sale.--For purposes of this section, the 
        term `first retail sale' means the first sale, for a purpose 
        other than resale, after manufacture, production, or 
        importation.
            ``(2) Price.--In determining price for the purpose of 
        subsection (a), there shall be excluded--
                    ``(A) the amount of tax imposed by subsection (a); 
                and
                    ``(B) if stated as a separate charge and collected 
                by the seller for remission to the taxing authority, or 
                paid separately by the purchaser, the amount of any 
                retail sales tax imposed by any State or political 
                subdivision thereof, or the District of Columbia, 
                whether the liability for such tax imposed on the 
                seller or the purchaser.
            ``(3) Certain catalog sales excepted.--The tax imposed by 
        subsection (a) does not apply to the first retail sale of 
        merchandise ordered via the Internet, through a catalog, or 
        otherwise if--
                    ``(A) the merchandise is physically delivered to, 
                or picked up by, the customer by a local merchant; and
                    ``(B) the local merchant collects any retail sales 
                tax applicable to the local retail sale of the same or 
                similar merchandise sold in that locality.
            ``(4) Local merchant.--For purposes of this section, the 
        term `local merchant' means a seller (regardless of the form of 
        business organization) that--
                    ``(A) does business in the same State as the 
                purchaser;
                    ``(B) is subject to the taxing jurisdiction of that 
                State; and
                    ``(C) has a business location in that State.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the provisions of this section.''.
    (b) Conforming Amendment.--The subchapter analysis for chapter 31 
of such Code is amended by adding at the end thereof the following:

``D. Certain nonlocal sales of merchandise.''.

SEC. 3. SALES TAX SAFETY NET TRUST FUND.

    (a) In General.--Chapter 98 of the Internal Revenue Code of 1986 is 
amended by inserting after section 9510 the following:

``SEC. 9511. SALES TAX SAFETY NET TRUST FUND.

    ``(a) Creation of Trust Fund.--There is established in the Treasury 
of the United States a trust fund to be known as the `Sales Tax Safety 
Net Trust Fund', consisting of such amounts as may be appropriated or 
credited pursuant to subsection (b).
    ``(b) Transfer to Sales Tax Safety Net Trust Fund Amounts 
Equivalent to Certain Taxes.--There are hereby appropriated to the 
Sales Tax Safety Net Trust Fund amounts equivalent to 100 percent of 
the taxes received in the Treasury after December 31, 1999, under 
section 4059 (relating to tax on certain nonlocal sales of 
merchandise).
    ``(c) Expenditures From Sales Tax Safety Net Trust Fund.--Amounts 
in the Sales Tax Safety Net Trust Fund shall be available for making 
expenditures to carry out the provisions of section 4 of the Sales Tax 
Safety Net and Teacher Funding Act.''.
    (b) Conforming Amendment.--The chapter analysis for chapter 98 is 
amended by inserting after the item relating to section 9510 the 
following:

``9511. Sales tax safety net trust fund.''.

SEC. 4. PROVISION OF ASSISTANCE TO STATES FOR TEACHER SALARIES.

    (a) Grants Authorized.--The Secretary of the Treasury shall award a 
grant for each fiscal year to each of the 50 States, the District of 
Columbia, and the Commonwealth of Puerto Rico to be used to supplement 
State and local funding for compensation and benefits payable to 
elementary and secondary school teachers. If a State establishes to the 
satisfaction of the Secretary of Education that the compensation and 
benefits payable to elementary and secondary school teachers in the 
State exceeds the average compensation and benefits paid to such 
teachers in the United States, then the State may request, and the 
Secretary may grant, authority to use amounts received under this 
subsection for other educational purposes approved by the Secretary of 
Education.
    (b) Allocation of Funds.--From amounts appropriated pursuant to 
subsection (b), the Secretary shall allocate to each of the 50 States, 
the District of Columbia, and the Commonwealth of Puerto Rico as 
follows, except that no State shall receive less than \1/2\ of 1 
percent of such amount:
            (1) Population.--50 percent shall be allocated among such 
        jurisdictions on the basis of their relative populations of 
        individuals aged 5 through 17, as determined by the Secretary 
        on the basis of the most recent satisfactory data.
            (2) Poverty.--50 percent shall be allocated among such 
        jurisdictions in accordance with the relative amounts such 
        jurisdictions received under part A of title I of the 
        Elementary and Secondary Education Act of 1965 for the 
        preceding fiscal year.
    (c) State Maintenance of Effort Requirement.--The amount of any 
grant allocable to a jurisdiction eligible under subsection (b) for any 
fiscal year after the first year in which it receives such a grant 
shall be reduced by any amount determined by the Secretary, after 
consultation with the Secretary of Education, to represent a reduction 
in that jurisdiction's level of effort to fund compensation and 
benefits for elementary and secondary school teachers, unless the 
Secretary, after such consultation, finds that--
            (1) the reduction in effort was justifiable;
            (2) the reduction in effort did not reflect an offset of 
        amounts made available under this Act; or
            (3) the reduction would be so detrimental to the quality of 
        education and related services provided in that jurisdiction to 
        elementary and secondary school students as to be unwarranted.
    (d) Definition of Elementary and Secondary Schools.--The terms 
``elementary schools'' and ``secondary schools'' have the same meanings 
given those terms in paragraphs (14) and (25), respectively, of section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801).
    (e) Expenditure Authority.--
            (1) Appropriations from trust fund.--There are authorized 
        to be appropriated from the Sales Tax Safety Net Trust Fund, 
        established pursuant to section 9511 of the Internal Revenue 
        Code of 1986, such funds as may be necessary to fund--
                    (A) the grants authorized by section (a)(1); and
                    (B) such expenditures as may be necessary to 
                administer the programs established by this section.
            (2) Limitation.--No amount may be appropriated under 
        paragraph (1) for a fiscal year for grants under subsection (a) 
        that in the aggregate exceed 100 percent of the trust fund 
        receipts credited to the Sales Tax Safety Net Trust Fund with 
        respect to the preceding fiscal year.

SEC. 5. EFFECTIVE DATE.

    The amendments made by this Act apply with respect to sales 
occurring more than 90 days after the date of enactment of this Act.
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