[Congressional Record Volume 151, Number 37 (Tuesday, April 5, 2005)]
[Senate]
[Pages S3206-S3207]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS (for himself, Mr. Bunning, Mr. Johnson, Mr. Talent, 
        and Mr. Craig):
  S. 702. A bill to amend the Internal Revenue Code of 1986 to repeal 
the occupational taxes relating to distilled spirits, wine, and beer; 
to the Committee on Finance.
  Mr. BAUCUS. Mr. President, it is with great pleasure that I join my 
colleagues Senators Bunning, Johnson and Talent today in introducing 
legislation that will repeal the special occupational tax on taxpayers 
who manufacture, distribute, and sell alcoholic beverages.
  The special occupational tax is not a tax on alcoholic products, but 
rather operates as a license fee on businesses. The tax is imposed on 
those engaged in the business of selling alcohol beverages. Believe it 
or not, this tax was originally established to help finance the Civil 
War. That war is over, and this inequitable tax has outlived its 
original purpose. Repealing the SOT will also simplify the tax code for 
thousands of small businesses.
  The SOT on alcohol dramatically increased during the budget process 
in 1988 and has unfairly burdened business owners across the country 
since. From Thompson Falls to Sidney, from Chinook to Billings, small 
businesses are burdened with yet another tax in the form of the SOT. 
According to the Alcohol and Tobacco, Tax and Trade Bureau, there are 
426,193 locations nationwide that pay the SOT every year, including 
399,657 retailers. These retail establishments account for $99 million 
out of $103 million collected in SOT revenues.
  In Montana, there are 2,969 locations which together pay nearly $1 
million in the SOT every year. Seasonal resorts in Whitefish and 
Yellowstone, ``mom and pop'' convenience stores in Butte, and bowling 
alleys, flower shops, and restaurants across Montana, and the United 
States, pay the Federal Government over $100 million per year for the 
privilege of running businesses that sell beer, wine, or alcoholic 
beverages.
  The SOT is extremely regressive. Retailers must annually pay $250 per 
location; wholesalers pay $500; vintners and distillers pay $1,000. 
Because the SOT is levied on a per location basis, a sole 
proprietorship must pay the same amount as one of the nation's largest 
retailers, and locally-owned chains having to pay per location, would 
have to pay as much as, if not more than, the nation's largest single 
site brewery. This is not what Congress had in mind 150 years ago, and 
I don't believe it's a situation we want today.
  Repealing the SOT on alcohol is supported by a broad-based group of 
business organizations and enjoys wide-spread bipartisan support on 
Capitol Hill. Last year, we made progress in ending this burdensome tax 
on small businesses. We repealed the tax for three years. More can be 
done. Business owners across the United States deserve assurance that 
they won't be hit with this antiquated tax down the line.
  The legislation preserves the TTB's record-keeping requirements, 
while removing the agency's enforcement burden, and will save over $2 
million per year. The GAO examined SOT efficacy several times, and 
found it fundamentally flawed. The Joint Committee on Taxation called 
for the elimination of SOT in its June 2001 simplification study.
  More than 90 percent of all SOT revenue comes from retailers--a great 
majority of those are small businesses. Our small business sector is a 
great strength of our economy. President Bush has said that the best 
way to encourage job growth is to let small businesses keep more of 
their own money, so they can invest in their business and make it 
easier for somebody to find work. Repealing the SOT would provide an 
immediate and visible tax cut to small business owners.
  In recent months, there has been much talk of tax reform inside the 
beltway. President Bush has made tax reform one of his key priorities 
and established a panel that will make recommendations to the 
Department of Treasury for a better tax system. Getting rid of a tax 
that has outlived its original purpose is one small step toward reform 
that makes sense for Montana and our country. We urge our colleagues to 
join us in this endeavor.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 702

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

     SECTION 1. REPEAL OF OCCUPATIONAL TAXES RELATING TO DISTILLED 
                   SPIRITS, WINE, AND BEER.

       (a) Repeal of Occupational Taxes.--
       (1) In general.--The following provisions of part II of 
     subchapter A of chapter 51 of the Internal Revenue Code of 
     1986 (relating to occupational taxes) are hereby repealed:
       (A) Subpart A (relating to proprietors of distilled spirits 
     plants, bonded wine cellars, etc.).
       (B) Subpart B (relating to brewer).
       (C) Subpart D (relating to wholesale dealers) (other than 
     sections 5114 and 5116).
       (D) Subpart E (relating to retail dealers) (other than 
     section 5124).
       (E) Subpart G (relating to general provisions) (other than 
     sections 5142, 5143, 5145, and 5146).
       (2) Nonbeverage domestic drawback.--Section 5131 of such 
     Code is amended by striking ``, on payment of a special tax 
     per annum,''.
       (3) Industrial use of distilled spirits.--Section 5276 of 
     such Code is hereby repealed.
       (b) Conforming Amendments.--
       (1)(A) The heading for part II of subchapter A of chapter 
     51 of the Internal Revenue Code of 1986 and the table of 
     subparts for such part are amended to read as follows:

                  ``PART II--MISCELLANEOUS PROVISIONS

``Subpart A. Manufacturers of stills. 
``Subpart B. Nonbeverage domestic drawback claimants. 
``Subpart C. Recordkeeping and registration by dealers. 
``Subpart D. Other provisions. ''.
       (B) The table of parts for such subchapter A is amended by 
     striking the item relating to part II and inserting the 
     following new item:

``Part II. Miscellaneous provisions. ''.

       (2) Subpart C of part II of such subchapter (relating to 
     manufacturers of stills) is redesignated as subpart A.
       (3)(A) Subpart F of such part II (relating to nonbeverage 
     domestic drawback claimants) is redesignated as subpart B and 
     sections 5131 through 5134 are redesignated as sections 5111 
     through 5114, respectively.
       (B) The table of sections for such subpart B, as so 
     redesignated, is amended--
       (i) by redesignating the items relating to sections 5131 
     through 5134 as relating to sections 5111 through 5114, 
     respectively, and
       (ii) by striking ``and rate of tax'' in the item relating 
     to section 5111, as so redesignated.
       (C) Section 5111 of such Code, as redesignated by 
     subparagraph (A), is amended--
       (i) by striking ``AND RATE OF TAX'' in the section heading,
       (ii) by striking the subsection heading for subsection (a), 
     and
       (iii) by striking subsection (b).
       (4) Part II of subchapter A of chapter 51 of such Code is 
     amended by adding after subpart B, as redesignated by 
     paragraph (3), the following new subpart:

                 ``Subpart C--Recordkeeping by Dealers

``Sec. 5121. Recordkeeping by wholesale dealers.
``Sec. 5122. Recordkeeping by retail dealers.
``Sec. 5123. Preservation and inspection of records, and entry of 
              premises for inspection.''.

       (5)(A) Section 5114 of such Code (relating to records) is 
     moved to subpart C of such part

[[Page S3207]]

     II and inserted after the table of sections for such subpart.
       (B) Section 5114 of such Code is amended--
       (i) by striking the section heading and inserting the 
     following new heading:

     ``SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.'',

     and
       (ii) by redesignating subsection (c) as subsection (d) and 
     by inserting after subsection (b) the following new 
     subsection:
       ``(c) Wholesale Dealers.--For purposes of this part--
       ``(1) Wholesale dealer in liquors.--The term `wholesale 
     dealer in liquors' means any dealer (other than a wholesale 
     dealer in beer) who sells, or offers for sale, distilled 
     spirits, wines, or beer, to another dealer.
       ``(2) Wholesale dealer in beer.--The term `wholesale dealer 
     in beer' means any dealer who sells, or offers for sale, 
     beer, but not distilled spirits or wines, to another dealer.
       ``(3) Dealer.--The term `dealer' means any person who 
     sells, or offers for sale, any distilled spirits, wines, or 
     beer.
       ``(4) Presumption in case of sale of 20 wine gallons or 
     more.--The sale, or offer for sale, of distilled spirits, 
     wines, or beer, in quantities of 20 wine gallons or more to 
     the same person at the same time, shall be presumptive 
     evidence that the person making such sale, or offer for sale, 
     is engaged in or carrying on the business of a wholesale 
     dealer in liquors or a wholesale dealer in beer, as the case 
     may be. Such presumption may be overcome by evidence 
     satisfactorily showing that such sale, or offer for sale, was 
     made to a person other than a dealer.''.
       (C) Paragraph (3) of section 5121(d) of such Code, as so 
     redesignated, is amended by striking ``section 5146'' and 
     inserting ``section 5123''.
       (6)(A) Section 5124 of such Code (relating to records) is 
     moved to subpart C of part II of subchapter A of chapter 51 
     of such Code and inserted after section 5121.
       (B) Section 5124 of such Code is amended--
       (i) by striking the section heading and inserting the 
     following new heading:

     ``SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.'',

       (ii) by striking ``section 5146'' in subsection (c) and 
     inserting ``section 5123'', and
       (iii) by redesignating subsection (c) as subsection (d) and 
     inserting after subsection (b) the following new subsection:
       ``(c) Retail Dealers.--For purposes of this section--
       ``(1) Retail dealer in liquors.--The term `retail dealer in 
     liquors' means any dealer (other than a retail dealer in beer 
     or a limited retail dealer) who sells, or offers for sale, 
     distilled spirits, wines, or beer, to any person other than a 
     dealer.
       ``(2) Retail dealer in beer.--The term `retail dealer in 
     beer' means any dealer (other than a limited retail dealer) 
     who sells, or offers for sale, beer, but not distilled 
     spirits or wines, to any person other than a dealer.
       ``(3) Limited retail dealer.--The term `limited retail 
     dealer' means any fraternal, civic, church, labor, 
     charitable, benevolent, or ex-servicemen's organization 
     making sales of distilled spirits, wine or beer on the 
     occasion of any kind of entertainment, dance, picnic, bazaar, 
     or festival held by it, or any person making sales of 
     distilled spirits, wine or beer to the members, guests, or 
     patrons of bona fide fairs, reunions, picnics, carnivals, or 
     other similar outings, if such organization or person is not 
     otherwise engaged in business as a dealer.
       ``(4) Dealer.--The term `dealer' has the meaning given such 
     term by section 5121(c)(3).''.
       (7) Section 5146 of such Code is moved to subpart C of part 
     II of subchapter A of chapter 51 of such Code, inserted after 
     section 5122, and redesignated as section 5123.
       (8) Subpart C of part II of subchapter A of chapter 51 of 
     such Code, as amended by paragraph (7), is amended by adding 
     at the end the following new section:

     ``SEC. 5124. REGISTRATION BY DEALERS.

       ``Every dealer who is subject to the recordkeeping 
     requirements under section 5121 or 5122 shall register with 
     the Secretary such dealer's name or style, place of 
     residence, trade or business, and the place where such trade 
     or business is to be carried on. In case of a firm or 
     company, the names of the several persons constituting the 
     same, and the places of residence, shall be so registered.''.
       (9) Section 7012 of such Code is amended by redesignating 
     paragraphs (4) and (5) as paragraphs (5) and (6), 
     respectively, and by inserting after paragraph (3) the 
     following new paragraph:
       ``(4) For provisions relating to registration by dealers in 
     distilled spirits, wines, and beer, see section 5124.''.
       (10) Part II of subchapter A of chapter 51 of such Code is 
     amended by inserting after subpart C the following new 
     subpart:

                     ``Subpart D--Other Provisions

``Sec. 5131. Packaging distilled spirits for industrial uses.
``Sec. 5132. Prohibited purchases by dealers.''.

       (11) Section 5116 of such Code is moved to subpart D of 
     part II of subchapter A of chapter 51 of such Code, inserted 
     after the table of sections, redesignated as section 5131, 
     and amended by inserting ``(as defined in section 5121(c))'' 
     after ``dealer'' in subsection (a).
       (12) Subpart D of part II of subchapter A of chapter 51 of 
     such Code is amended by adding at the end the following new 
     section:

     ``SEC. 5132. PROHIBITED PURCHASES BY DEALERS.

       ``(a) In General.--Except as provided in regulations 
     prescribed by the Secretary, it shall be unlawful for a 
     dealer to purchase distilled spirits for resale from any 
     person other than a wholesale dealer in liquors who is 
     required to keep the records prescribed by section 5121.
       ``(b) Limited Retail Dealers.--A limited retail dealer may 
     lawfully purchase distilled spirits for resale from a retail 
     dealer in liquors.
       ``(c) Penalty and Forfeiture.--

``For penalty and forfeiture provisions applicable to violations of 
              subsection (a), see sections 5687 and 7302. ''.

       (13) Subsection (b) of section 5002 of such Code is 
     amended--
       (A) by striking ``section 5112(a)'' and inserting ``section 
     5121(c)(3)'',
       (B) by striking ``section 5112'' and inserting ``section 
     5121(c)'',
       (C) by striking ``section 5122'' and inserting ``section 
     5122(c)''.
       (14) Subparagraph (A) of section 5010(c)(2) of such Code is 
     amended by striking ``section 5134'' and inserting ``section 
     5114''.
       (15) Subsection (d) of section 5052 of such Code is amended 
     to read as follows:
       ``(d) Brewer.--For purposes of this chapter, the term 
     `brewer' means any person who brews beer or produces beer for 
     sale. Such term shall not include any person who produces 
     only beer exempt from tax under section 5053(e).''.
       (16) The text of section 5182 of such Code is amended to 
     read as follows:

``For provisions requiring recordkeeping by wholesale liquor dealers, 
              see section 5112, and by retail liquor dealers, see 
              section 5122. ''.

       (17) Subsection (b) of section 5402 of such Code is amended 
     by striking ``section 5092'' and inserting ``section 
     5052(d)''.
       (18) Section 5671 of such Code is amended by striking ``or 
     5091''.
       (19)(A) Part V of subchapter J of chapter 51 of such Code 
     is hereby repealed.
       (B) The table of parts for such subchapter J is amended by 
     striking the item relating to part V.
       (20)(A) Sections 5142, 5143, and 5145 of such Code are 
     moved to subchapter D of chapter 52 of such Code, inserted 
     after section 5731, redesignated as sections 5732, 5733, and 
     5734, respectively, and amended by striking ``this part'' 
     each place it appears and inserting ``this subchapter''.
       (B) Section 5732 of such Code, as redesignated by 
     subparagraph (A), is amended by striking ``(except the tax 
     imposed by section 5131)'' each place it appears.
       (C) Paragraph (2) of section 5733(c) of such Code, as 
     redesignated by subparagraph (A), is amended by striking 
     ``liquors'' both places it appears and inserting ``tobacco 
     products and cigarette papers and tubes''.
       (D) The table of sections for subchapter D of chapter 52 of 
     such Code is amended by adding at the end the following:

``Sec. 5732. Payment of tax.
``Sec. 5733. Provisions relating to liability for occupational taxes.
``Sec. 5734. Application of State laws.''.

       (E) Section 5731 of such Code is amended by striking 
     subsection (c) and by redesignating subsection (d) as 
     subsection (c).
       (21) Subsection (c) of section 6071 of such Code is amended 
     by striking ``section 5142'' and inserting ``section 5732''.
       (22) Paragraph (1) of section 7652(g) of such Code is 
     amended--
       (A) by striking ``subpart F'' and inserting ``subpart B'', 
     and
       (B) by striking ``section 5131(a)'' and inserting ``section 
     5111''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on July 1, 2005, but shall not apply to 
     taxes imposed for periods before such date.
                                 ______