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106th CONGRESS
1st Session
H. R. 2525
To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing
the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.
IN THE HOUSE OF REPRESENTATIVES
July 14, 1999
Mr. LINDER (for himself, and Mr. PETERSON of Minnesota) introduced the
following bill; which was referred to the Committee on Ways and Means
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A BILL
To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national 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 `Fair Tax Act of 1999'.
(b) TABLE OF CONTENTS- The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Congressional findings.
TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT TAXES
Sec. 101. Income taxes repealed.
Sec. 102. Payroll taxes repealed.
Sec. 103. Estate and gift taxes repealed.
Sec. 104. Conforming amendments; effective date.
TITLE II--SALES TAX ENACTED
Sec. 201. Sales tax.
Sec. 202. Conforming and technical amendments.
TITLE III--OTHER MATTERS
Sec. 301. Phase-out of administration of repealed Federal taxes.
Sec. 302. Administration of other Federal taxes.
Sec. 303. Sales tax inclusive social security benefits indexation.
SEC. 2. CONGRESSIONAL FINDINGS.
(a) FINDINGS RELATING TO FEDERAL INCOME TAX- Congress finds that the Federal 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 by taxing income multiple times;
(4) slows the capital formation necessary for real wages to steadily increase;
(5) lowers productivity;
(6) imposes unacceptable and unnecessary administrative and compliance costs on individual and business taxpayers;
(7) is unfair and inequitable;
(8) unnecessarily intrudes upon the privacy and civil rights of United States citizens;
(9) hides the true cost of government by embedding taxes in the costs of everything Americans buy;
(10) is not being complied with at satisfactory levels and therefore raises the tax burden on law abiding citizens; and
(11) impedes upward social mobility.
(b) FINDINGS RELATING TO FEDERAL PAYROLL TAXES- Congress finds further that the social security and medicare payroll taxes and self-employment taxes--
(1) raise the cost of employment;
(2) destroy jobs and cause unemployment; and
(3) have a disproportionately adverse impact on lower income Americans.
(c) FINDINGS RELATING TO FEDERAL ESTATE AND GIFT TAXES- Congress finds further that the Federal estate and gift taxes--
(1) force family businesses and farms to be sold by the family to pay such taxes;
(2) discourages capital formation and entrepreneurship;
(3) fosters the continued dominance of large enterprises over small family-owned companies and farms; and
(4) imposes unacceptably high tax planning costs on small businesses and farms.
(d) FINDINGS RELATING TO NATIONAL SALES TAX- Congress finds further that a broad-based national sales tax on goods and services purchased for final consumption--
(1) is similar in many respects to the sales and use taxes in place in 45 of the 50 States;
(2) will promote savings and investment;
(3) will promote fairness;
(4) will promote economic growth;
(5) will raise the standard of living;
(6) will increase investment;
(7) will enhance productivity and international competitiveness;
(8) will reduce administrative burdens on the American taxpayer;
(9) will improve upward social mobility; and
(10) will respect the privacy interests and civil rights of taxpayers.
(e) FINDINGS RELATING TO ADMINISTRATION OF NATIONAL SALES TAX- 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 foster administration and collection of the Federal sales tax at the State level in return for a reasonable administration fee to the States; and
(4) businesses that must collect and remit taxes should receive reasonable compensation for the cost of doing so.
(f) FINDINGS RELATING TO REPEAL OF PRESENT FEDERAL TAX SYSTEM- Congress further finds that the 16th amendment to the United States Constitution should be repealed and that the repealing amendment should prohibit Federal taxation of incomes, wages, estates, and gifts.
TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT TAXES
SEC. 101. INCOME TAXES REPEALED.
Subtitle A of title 26 of the Internal Revenue Code of 1986 (relating to income taxes and self-employment taxes) is repealed.
SEC. 102. PAYROLL TAXES REPEALED.
(a) IN GENERAL- Subtitle C of title 26 of the Internal Revenue Code of 1986 (relating to payroll taxes and withholding of income taxes) is repealed.
(b) FUNDING OF SOCIAL SECURITY- For funding of the Social Security Trust Funds from general revenue, see section 201 of the Social Security Act (42 U.S.C. 401).
SEC. 103. ESTATE AND GIFT TAXES REPEALED.
Subtitle B of title 26 of the Internal Revenue Code of 1986 (relating to estate and gift taxes) is repealed.
SEC. 104. CONFORMING AMENDMENTS; EFFECTIVE DATE.
(a) CONFORMING AMENDMENTS- The Internal Revenue Code of 1986 is amended--
(1) by striking subtitle H (relating to financing of Presidential election campaigns), and
(2) by redesignating--
(A) subtitle D (relating to miscellaneous excise taxes) as subtitle B,
(B) subtitle E (relating to alcohol, tobacco, and certain other excise taxes) as subtitle C,
(C) subtitle F (relating to procedure and administration) as subtitle D,
(D) subtitle G (relating to the Joint Committee on Taxation) as subtitle E,
(E) subtitle I (relating to the Trust Fund Code) as subtitle F,
(F) subtitle J (relating to coal industry health benefits) as subtitle G, and
(G) subtitle K (relating to group health plan portability, access, and renewability requirements) as subtitle H.
(b) REDESIGNATION OF 1986 CODE-
(1) IN GENERAL- The Internal Revenue Code of 1986 enacted on October 22, 1986, as heretofore, hereby, or hereafter amended, may be cited as the `Internal Revenue Code of 1999'.
(2) REFERENCES IN LAWS, ETC- Except when inappropriate, any reference in any law, Executive order, or other document--
(A) to the Internal Revenue Code of 1986 shall include a reference to the Internal Revenue Code of 1999, and
(B) to the Internal Revenue Code of 1999 shall include a reference to the provisions of law formerly known as the Internal Revenue Code of 1986.
(c) ADDITIONAL AMENDMENTS- For additional conforming amendments, see section 202 of this Act.
(d) EFFECTIVE DATE- Except as otherwise provided in this Act, the amendments made by this Act shall take effect on January 1, 2001.
TITLE II--SALES TAX ENACTED
SEC. 201. SALES TAX.
(a) IN GENERAL- The Internal Revenue Code of 1999 is amended by inserting before subtitle B (as redesignated by section 104(a)(2)(A)) the following new subtitle:
`Subtitle A--Sales Tax
`Sec. 1. Principles of interpretation.
`Sec. 2. Definitions.
`CHAPTER 1. Interpretation; definitions; imposition of tax; etc.
`CHAPTER 2. Credits; refunds.
`CHAPTER 3. Family consumption allowance.
`CHAPTER 4. State and Federal cooperative tax administration.
`CHAPTER 5. Other administrative provisions.
`CHAPTER 6. Collection; appeals; taxpayer rights.
`CHAPTER 7. Special rules.
`CHAPTER 8. Financial intermediation services.
`CHAPTER 9. Additional matters.
`SECTION 1. PRINCIPLES OF INTERPRETATION.
`(a) IN GENERAL- Any court, the Secretary, and any sales tax administering authority shall consider the purposes of this subtitle (as set forth in subsection (b)) as the primary aid in statutory construction.
`(b) PURPOSES- The purposes of this subtitle are as follows:
`(1) To raise revenue needed by the Federal Government in a manner consistent with the other purposes of this subtitle.
`(2) To tax all consumption of goods and services in the United States once, without exception, but only once.
`(3) To prevent double, multiple, or cascading taxation.
`(4) To simplify the tax law and reduce the administration costs of, and the costs of compliance with, the tax law.
`(5) To provide for the administration of the tax law in a manner that respects privacy, due process, individual rights when interacting with the government, the presumption of innocence in criminal proceedings, and the presumption of lawful behavior in civil proceedings.
`(6) To increase the role of State governments in Federal tax administration because of State government expertise in sales tax administration.
`(7) To enhance generally cooperation and coordination among State tax administrators; and to enhance cooperation and coordination among Federal and State tax administrators, consistent with the principle of intergovernmental tax immunity.
`(c) SECONDARY AIDS TO STATUTORY CONSTRUCTION- As a secondary aid in statutory construction, any court, the Secretary, and any sales tax administering authority shall consider--
`(1) the common law canons of statutory construction;
`(2) the meaning and construction of concepts and terms used in the Internal Revenue Code of 1986 as in effect before the effective date of this subtitle; and
`(3) construe any ambiguities in this Act in favor of reserving powers to the States respectively, or to the people.
`SEC. 2. DEFINITIONS AND SPECIAL RULES.
`(a) IN GENERAL- For purposes of this subtitle--
`(1) AFFILIATED FIRMS- A firm is affiliated with another if 1 firm owns 50 percent or more of--
`(A) the voting shares in a corporation, or
`(B) the capital interests of a business firm that is not a corporation.
`(2) CONFORMING STATE SALES TAX- The term `conforming State sales tax' means a sales tax imposed by a State that adopts the same definition of taxable property and services as adopted by this subtitle.
`(3) DESIGNATED COMMERCIAL PRIVATE COURIER SERVICE- The term `designated commercial private courier service' means a firm designated as such by the Secretary or any sales tax administering authority, upon application of the firm, if the firm--
`(A) provides its services to the general public,
`(B) records electronically to its data base kept in the regular course of its business the date on which an item was given to such firm for delivery, and
`(C) has been operating for at least 1 year.
`(4) EDUCATION AND TRAINING- The term `education and training' means tuition for primary, secondary, or postsecondary level education, and job-related training courses. Such term does not include room, board, sports activities, recreational activities, hobbies, games, arts or crafts or cultural activities.
`(5) GROSS PAYMENTS- The term `gross payments' means payments for taxable property or services, including Federal taxes imposed by this title.
`(6) INTANGIBLE PROPERTY-
`(A) IN GENERAL- The term `intangible property' includes copyrights, trademarks, patents, goodwill, financial instruments, securities, commercial paper, debts, notes and bonds, and other property deemed intangible at common law. The Secretary shall, by regulation resolve differences among the provisions of common law of the several States.
`(B) CERTAIN TYPES OF PROPERTY- Such term does not include tangible personal property (or rents or leaseholds of any term thereon), real property (or rents or leaseholds of any term thereon) and computer software.
`(7) PERSON- The term `person' means any natural person, and unless the context clearly does not allow it, any corporation, partnership, limited liability company, trust, estate, government, agency, administration, organization, association, or other legal entity (foreign or domestic).
`(8) PRODUCE, PROVIDE, RENDER, OR SELL TAXABLE PROPERTY OR SERVICES-
`(A) IN GENERAL- A taxable property or service is used to produce, provide, render, or sell a taxable property or service if such property or service is purchased by a person engaged in a trade or business for the purpose of employing or using such taxable property or service in the production, provision, rendering, or sale of other taxable property or services in the ordinary course of that trade or business.
`(B) RESEARCH, EXPERIMENTATION, TESTING, AND DEVELOPMENT- Taxable property or services used in a trade or business for the purpose of research, experimentation, testing, and development shall be treated as used to produce, provide, render, or sell taxable property or services.
`(C) INSURANCE PAYMENTS- Taxable property or services purchased by an insurer on behalf of an insured shall be treated as used to produce, provide, render, or sell taxable property or services if the premium for the insurance contract giving rise to the insurer's obligation was subject to tax pursuant to section 801 (relating to financial intermediation services).
`(D) EDUCATION AND TRAINING- Education and training shall be treated as services used to produce, provide, render, or sell taxable property or services.
`(9) REGISTERED SELLER- The term `registered seller' means a person registered pursuant to section 502.
`(10) SALES TAX ADMINISTERING AUTHORITY- The term `sales tax administering authority' means--
`(A) the State agency designated to collect and administer the sales tax imposed by this subtitle, in an administering State, or
`(B) the Secretary, in a State that is neither--
`(i) an administering State, nor
`(ii) a State that has elected to have its sales tax administered by an administering State.
`(11) SECRETARY- The term `Secretary' means the Secretary of the Treasury.
`(12) TAXABLE EMPLOYER-
`(A) IN GENERAL- The term `taxable employer' includes--
`(i) any household employing domestic servants, and
`(ii) any government except for government enterprises (as defined in section 704).
`(B) EXCEPTIONS- The term `taxable employer' does not include any employer which is--
`(i) engaged in a trade or business,
`(ii) a not-for-profit organization (as defined in section 706), or
`(iii) a government enterprise (as defined in section 704).
`(C) Cross reference-
`For rules relating to collection and remittance of tax on wages by taxable employers, see section 103(b)(2).
`(13) TAX INCLUSIVE FAIR MARKET VALUE- The term `tax inclusive fair market value' means the fair market value of taxable property or services plus the tax imposed by this subtitle.
`(14) TAXABLE PROPERTY OR SERVICE-
`(A) GENERAL RULE- The term `taxable property or service' means--
`(i) any property (including leaseholds of any term or rents with respect to such property) but excluding--
`(I) intangible property, and
`(II) used property, and
`(ii) any service (including any financial intermediation services as determined by section 801).
`(B) SERVICE- For purposes of subparagraph (A), the term `service'--
`(i) shall include any service performed by an employee for which the employee is paid wages or a salary by a taxable employer, and
`(ii) shall not include any service performed by an employee for which the employee is paid wages or a salary--
`(I) by an employer in the regular course of the employer's trade or business,
`(II) by an employer that is a not-for-profit organization (as defined in section 706),
`(III) by an employer that is a government enterprise (as defined in section 704), and
`(IV) by taxable employers to employees directly providing education and training.
`(15) UNITED STATES- The term `United States', when used in the geographical sense, means each of the 50 States, the District of Columbia, and any commonwealth, territory, or possession of the United States.
`(16) USED PROPERTY- The term `used property' means--
`(A) property on which the tax imposed by section 101 has been collected and for which no credit has been allowed under section 203, and
`(B) property that was held other than for a business purpose (as defined in section 102(b)) on December 31, 2000.
`(17) WAGES AND SALARY- The terms `wage' and `salary' mean all compensation paid for employment service including cash compensation, employee benefits, disability insurance, or wage replacement insurance payments, unemployment compensation insurance, workers' compensation insurance, and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered.
`(b) Cross References-
`(1) For the definition of business purposes, see section 102(b).
`(2) For the definition of insurance contract, see section 206(e).
`(3) For the definition of qualified family, see section 302.
`(4) For the definition of monthly poverty level, see section 303.
`(5) For the definition of large seller, see section 501(e)(3).
`(6) For the definition of hobby activities, see section 701.
`(7) For the definition of gaming sponsor, see section 701(a).
`(8) For the definition of a chance, see section 701(b).
`(9) For the definition of government enterprise, see section 704(b).
`(10) For the definition of mixed use property, see section 705.
`(11) For the definition of qualified not-for-profit organization, see section 706.
`(12) For the definition of financial intermediation services, see section 801.
`CHAPTER 1--INTERPRETATION; DEFINITIONS; IMPOSITION OF TAX; ETC.
`Sec. 101. Imposition of sales tax.
`Sec. 102. Intermediate and export sales.
`Sec. 103. Rules relating to collection and remittance of tax.
`SEC. 101. IMPOSITION OF SALES TAX.
`(a) IN GENERAL- There is hereby imposed a tax on the use or consumption in the United States of taxable property or services.
`(b) RATE-
`(1) FOR 2001- In the calendar year 2001, the rate of tax is 23 percent of the gross payments for the taxable property or service.
`(2) FOR YEARS AFTER 2001- For years after the calendar year 2001, the rate of tax is the combined Federal tax rate percentage (as defined in paragraph 3) of the gross payments for the taxable property or service.
`(3) COMBINED FEDERAL TAX RATE PERCENTAGE- The combined Federal tax rate percentage is the sum of--
`(A) the general revenue rate (as defined in paragraph 4), and
`(B) the old-age, survivors and disability insurance rate, and
`(C) the hospital insurance rate.
`(4) GENERAL REVENUE RATE- The general revenue rate shall be 14.91 percent.
`(c) COORDINATION WITH IMPORT DUTIES- The tax imposed by this section is in addition to any import duties imposed by chapter 4 of title 19. The Secretary shall provide by regulation that, to the maximum extent practicable, the tax imposed by this section on imported taxable property and services is collected and administered in conjunction with any applicable import duties imposed by the United States.
`(d) LIABILITY FOR TAX-
`(1) IN GENERAL- The person using or consuming taxable property or services in the United States is liable for the tax imposed by this section, and except as provided by subsection (e) of this section.
`(2) EXCEPTION WHERE TAX PAID TO SELLER- A person using or consuming a taxable property or service in the United States is not liable for the tax imposed by this section if the person pays the tax to a person selling the taxable property or service and receives from such person a purchaser's receipt within the meaning of section 510.
`SEC. 102. INTERMEDIATE AND EXPORT SALES.
`(a) IN GENERAL- For purposes of this subtitle--
`(1) BUSINESS AND EXPORT PURPOSES- No tax shall be imposed under section 101 on any taxable property or service purchased for--
`(A) a business purpose in a trade or business, or
`(B) export from the United States for use or consumption outside the United States, if, the purchaser provided the seller with a registration certificate, and the seller was a wholesale seller.
`(2) INVESTMENT PURPOSE- No tax shall be imposed under section 101 on any taxable property or service purchased for an investment purpose and held exclusively for an investment purpose.
`(3) STATE GOVERNMENT FUNCTIONS- No tax shall be imposed under section 101 on State government functions that do not constitute the final consumption of property or services.
`(b) BUSINESS PURPOSES- For purposes of this section, the term `purchased for a business purpose in a trade or business' means purchased by a person engaged in a trade or business and used in that trade or business--
`(1) for resale,
`(2) to produce, provide, render, or sell taxable property or services, or
`(3) in furtherance of other bona fide business purposes.
`(c) INVESTMENT PURPOSES- For purposes of this section, the term `purchased for an investment purpose' means property purchased exclusively for purposes of appreciation or the production of income but not entailing more than minor personal efforts.
`SEC. 103. RULES RELATING TO COLLECTION AND REMITTANCE OF TAX.
`(a) LIABILITY FOR COLLECTION AND REMITTANCE OF THE TAX- Except as provided otherwise by this section, any tax imposed by this subtitle shall be collected and remitted by the seller of taxable property or services (including financial intermediation services).
`(b) TAX TO BE REMITTED BY PURCHASER IN CERTAIN CIRCUMSTANCES-
`(1) IN GENERAL- In the case of taxable property or services purchased outside of the United States and imported into the United States for use or consumption in the United States, the purchaser shall remit the tax imposed by section 101.
`(2) CERTAIN WAGES OR SALARY- In the case of wages or salary paid by a taxable employer which are taxable services, the employer shall remit the tax imposed by section 101.
`(c) CONVERSION OF BUSINESS OR EXPORT PROPERTY OR SERVICES- Property or services purchased for a business purpose in a trade or business or for export (sold untaxed pursuant to section 102(a)) that is subsequently converted to personal use shall be deemed purchased at the time of conversion and shall be subject to the tax imposed by section 101 at the fair market value of the converted property as of the date of conversion. The tax shall be due as if the property had been sold at the fair market value during the month of conversion. The person using or consuming the converted property is liable for and shall remit the tax.
`(d) SELLER RELIEVED OF LIABILITY IN CERTAIN CASES- In the case of any taxable property or service which is sold untaxed pursuant to section 102(a), the seller shall be relieved of the duty to collect and remit the tax imposed under section 101 on such purchase if the seller--
`(1) received in good faith, and retains on file for the period set forth in section 509, a copy of a registration certificate from the purchaser, and
`(2) did not, at the time of sale, have reasonable cause to believe that the buyer was not registered pursuant to section 502.
`(e) PURCHASER LIABLE TO COLLECT AND REMIT IN CERTAIN CASES- In the case of any taxable property or service which is sold untaxed pursuant to section 102, if the seller is relieved by reason of subsection (d) of the duty to collect and remit the tax imposed by section 101, then the duty to pay any tax due shall rest with the purchaser.
`(f) BARTER TRANSACTIONS- If gross payment for taxable property or services is made in other than money, then the person responsible for collecting and remitting the tax shall remit the tax to the sales tax administering authority in money as if gross payment had been made in money at the tax inclusive fair market value of the taxable property or services purchased.
`(g) INTERCOMPANY SALES- Firms that make purchases from affiliated firms that are untaxed pursuant to section 102, or make sales to affiliated firms that are untaxed pursuant to section 102, shall not need to comply with the requirements of subsection (d) (relating to certificates) for said purchases or sales to remain untaxed.
`CHAPTER 2--CREDITS; REFUNDS
`Sec. 201. Credits and refunds.
`Sec. 202. Business use conversion credit.
`Sec. 203. Intermediate and export sales credit.
`Sec. 204. Administration credit.
`Sec. 205. Bad debt credit.
`Sec. 206. Insurance proceeds credit.
`Sec. 207. Refunds.
`SEC. 201. CREDITS AND REFUNDS.
`(a) IN GENERAL- Each person shall be allowed a credit with respect to the taxes imposed by section 101 for each month in an amount equal to the sum of--
`(1) such person's business use conversion credit pursuant to section 202 for such month,
`(2) such person's intermediate and export sales credit pursuant to section 203 for such month,
`(3) the administration credit pursuant to section 204 for such month,
`(4) the bad debt credit pursuant to section 205 for such month,
`(5) the insurance proceeds credit pursuant to section 206 for such month,
`(6) the transitional inventory credit pursuant to section 902, and
`(7) any amount paid in excess of the amount due.
`(b) CREDITS NOT ADDITIVE- Only one credit allowed by chapter 2 may be taken with respect to any particular gross payment.
`SEC. 202. BUSINESS USE CONVERSION CREDIT.
`(a) IN GENERAL- For purposes of section 201, a person's business use conversion credit for any month is the aggregate of the amounts determined under subsection (b) with respect to taxable property and services--
`(1) on which tax was imposed by section 101 (and actually paid), and
`(2) which commenced to be 95 percent or more used during such month for business purposes (within the meaning of section 102(b)).
`(b) AMOUNT OF CREDIT- The amount determined under this paragraph with respect to any taxable property or service is the lesser of--
`(1) the product of--
`(A) the rate imposed by section 101, and
`(B) the quotient that is--
`(i) the fair market value of the property or service when its use is converted, divided by
`(ii) the quantity that is 1 minus the tax rate imposed by section 101, or
`(2) the amount of tax paid with respect to such taxable property or service, including the amount, if any, determined in accordance with section 705 (relating to mixed use property).
`SEC. 203. INTERMEDIATE AND EXPORT SALES CREDIT.
`For purposes of section 201, a person's intermediate and export sales credit is the amount of sales tax paid on the purchase of any taxable property or service purchased for--
`(1) a business purpose in a trade or business (as defined in section 102(b)), or
`(2) export from the United States for use or consumption outside the United States.
`SEC. 204. ADMINISTRATION CREDIT.
`(a) IN GENERAL- Every person filing a timely monthly report (with regard to extensions) in compliance with section 501 shall be entitled to a taxpayer administrative credit equal to the greater of--
`(1) $200, or
`(2) one-quarter of 1 percent of the tax remitted.
`(b) LIMITATION- The credit allowed under this section shall not exceed 20 percent of the tax due to be remitted prior to the application of any credit or credits permitted by section 201.
`SEC. 205. BAD DEBT CREDIT.
`(a) FINANCIAL INTERMEDIATION SERVICES- Any person who has experienced a bad debt (other than unpaid invoices within the meaning of subsection (b)) shall be entitled to a credit equal to the product of--
`(1) the rate imposed by section 101, and
`(2) the quotient that is--
`(A) the amount of the bad debt (as defined in section 802), divided by
`(B) the quantity that is 1 minus the rate imposed by section 101.
`(b) UNPAID INVOICES- Any person electing the accrual method pursuant to section 503 that has with respect to a transaction--
`(1) invoiced the tax imposed by section 101,
`(2) remitted the invoiced tax,
`(3) actually delivered the taxable property or performed the taxable services invoiced, and
`(4) not been paid 180 days after date the invoice was due to be paid,
shall be entitled to a credit equal to the amount of tax remitted and unpaid by the purchaser.
`(c) SUBSEQUENT PAYMENT- Any payment made with respect to a transaction subsequent to a section 205 credit being taken with respect to that transaction shall be subject to tax in the month the payment was received as if a tax inclusive sale of taxable property and services in the amount of the payment had been made.
`(d) PARTIAL PAYMENTS- Partial payments shall be treated as pro rata payments of the underlying obligation and shall be allocated proportionately--
`(1) for fully taxable payments, between payment for the taxable property and service and tax, and
`(2) for partially taxable payments, among payment for the taxable property and service, tax and other payment.
`(e) RELATED PARTIES- The credit provided by this section shall not be available with respect to sales made to related parties. For purposes of this section, related party means affiliated firms and family members (as defined in section 302(b)).
`SEC. 206. INSURANCE PROCEEDS CREDIT.
`(a) IN GENERAL- A person receiving a payment from an insurer by virtue of an insurance contract shall be entitled to a credit in an amount determined by subsection (b), less any amount paid to the insured by the insurer pursuant to subsection (c), if the entire premium (except that portion allocable to the investment account of the underlying policy) for the insurance contract giving rise to the insurer's obligation to make a payment to the insured was subject to the tax imposed by section 101 and said tax was paid.
`(b) CREDIT AMOUNT- The amount of the credit shall be the product of--
`(1) the rate imposed by section 101, and
`(2) the quotient that is--
`(A) the amount of the payment made by the insurer to the insured, divided by
`(B) the quantity that is 1 minus the rate imposed by section 101.
`(c) ADMINISTRATIVE OPTION- The credit determined in accordance with subsection (b) shall be paid by the insurer to the insured and the insurer shall be entitled to the credit in lieu of the insured, except that the insurer may elect, in a form prescribed by the Secretary, to not pay the credit and require the insured to make application for the credit. In the event of such election, the insurer shall provide to the Secretary and the insured the name and tax identification number of the insurer and of the insured and indicate the proper amount of the credit.
`(d) COORDINATION WITH RESPECT TO EXEMPTION- If taxable property or services purchased by an insurer on behalf of an insured are purchased free of tax by virtue of section 2(a)(8)(C), then the credit provided by this section shall not be available with respect to that purchase.
`(e) INSURANCE CONTRACT- For purposes of subsection (a), the term `insurance contract' shall include a life insurance contract, a health insurance contract, a property and casualty loss insurance contract, a general liability insurance contract, a marine insurance contract, a fire insurance contract, an accident insurance contract, a disability insurance contract, a long-term care insurance contract, and an insurance contract that provides a combination of these types of insurance.
`SEC. 207. REFUNDS.
`(a) REGISTERED SELLERS- If a registered seller files a monthly tax report with an overpayment, then, upon application by the registered seller in a form prescribed by the sales tax administering authority, the overpayment shown on the report shall be refunded to the registered seller within 60 days of receipt of said application.
In the absence of such application, the overpayment may be carried forward, without intere |
