Chapter 1 of this bill is about the imposition of a sales tax on the use or consumption of taxable property or services in the United States. The tax rate will be 23% in 2025 and will be the sum of the general revenue rate, the old-age, survivors and disability insurance rate, and the hospital insurance rate in years after 2025. It also notes that the tax is in addition to any import duties imposed by chapter 4 of title 19, United States Code. The chapter also mentions that the person using or consuming the taxable property or service is liable for the tax, but if the tax is paid to the seller and a receipt is received, the person is not liable for the tax.
Section 102 of this chapter is about exemptions from the tax for intermediate and export sales. The tax will not be imposed on taxable property or service purchased for a business purpose in a trade or business, for an investment purpose, or for State government functions that do not constitute the final consumption of property or services.
Section 103 of this chapter talks about the rules for collecting and remitting the tax. It states that except as provided otherwise by this section, the seller of taxable property or service is responsible for collecting and remitting the tax.
Chapter 2 of this bill is about credits and refunds that a person can claim to reduce their tax liability. Section 201 states that a person shall be allowed a credit for each month that is equal to the sum of their business use conversion credit, intermediate and export sales credit, administration credit, bad debt credit, insurance proceeds credit, and any amount paid in excess of the amount due. It also states that only one credit from chapter 2 can be taken for any particular gross payment.
Section 202 explains the business use conversion credit, which is the amount of tax paid on taxable property or services that are 95% or more used for business purposes in a particular month.
Section 203 explains the intermediate and export sales credit, which is the amount of sales tax paid on the purchase of taxable property or services purchased for a business purpose in a trade or business or for export from the United States.
Section 204 explains the administration credit, which is a credit that a person filing a timely monthly report in compliance with section 501 is entitled to. The credit is equal to the greater of $200 or one-quarter of 1 percent of the tax remitted, but it cannot exceed 20% of the tax due to be remitted before any other credits are applied.
Section 205 explains the bad debt credit, which is a credit that a person who has experienced a bad debt is entitled to. The credit is equal to the product of the rate imposed by section 101 and the quotient of the amount of the bad debt divided by one minus the rate imposed by section 101.
Section 206 explains the insurance proceeds credit, which is a credit for tax paid on taxable property or services that are replaced with insurance proceeds.
Section 207 explains the Refunds, which are the amount of tax paid on taxable property or services that are returned or refunded to the buyer.
Chapter 3 of this bill is about the Family Consumption Allowance, which is a sales tax rebate for qualified families.
Section 301 states that each qualified family will be eligible to receive a sales tax rebate each month. The rebate will be equal to the product of the rate of tax imposed by section 101 and the monthly poverty level.
Section 302 explains the qualifications for a family to be considered a "qualified family" for the purpose of this chapter. It states that a qualified family is one or more family members sharing a common residence. The section also explains how to determine the size of a qualified family, and includes provisions for children living away from home, such as students living away from home or children of divorced or separated parents.
Section 303 explains the calculation of the "monthly poverty level," which will be used to determine the amount of the sales tax rebate for each qualified family.
Section 304 explains the mechanism for providing the sales tax rebate to qualified families, which will be determined by the Secretary.
Section 305 explains the process for reporting changes in family circumstances, such as changes in the number of family members, to the sales tax administering authority. It also requires that a qualified family must register annually with the sales tax administering authority in order to receive the Family Consumption Allowance.
This chapter is about how sales tax will be collected and administered. The tax imposed by chapter 1 will be collected and remitted to the government by the states, if the state is an "administering state." This means that the state has a sales tax and has entered into a cooperative agreement with the government to collect and remit the taxes in a timely manner. The agreement will include provisions for how the money will be transferred, contact information for government officials, and other important details. The states will be able to keep a small percentage of the taxes collected as an administration fee. The government has the authority to step in and collect the taxes if a state is not meeting their responsibilities and a court agrees it is necessary.
Section 406 of the proposed legislation outlines various general administrative matters related to the collection and administration of the sales tax. This includes the authority for the Secretary and each sales tax administering authority to employ necessary personnel, the resolution of inconsistent rules and regulations, the requirement for adequate notice before new rules or regulations take effect, and the prohibition of rules, rulings, or regulations with retroactive effect. It also includes a review of the impact of regulations, rules, and rulings on small businesses and the requirement for small business regulatory safeguards to be applied. Section 407 states that the sales tax administering authority shall have jurisdiction over any gross payments made within the State of said sales tax administering authority, and this grant of jurisdiction is not exclusive of any other jurisdiction.
SEC. 501. MONTHLY REPORTS AND PAYMENTS, outlines the requirements for submitting monthly reports and making payments for the sales tax imposed by the subtitle. The section specifies that on the 15th day of each month, each person liable to collect and remit the tax or liable to pay tax that is not collected, must submit a report to the appropriate sales tax administering authority, detailing the gross payments, tax collected, credit claimed and any other information required by the Secretary or sales tax administering authority. The section also specifies that the tax is due and must be paid to the appropriate sales tax administering authority on the 15th day of the succeeding month, and that extensions for filing reports can be granted for up to 60 days for reasonable cause or to avoid hardship, but no extension can be granted for payment of taxes. The section also mentions that the Secretary must establish a system for reporting violations of the subtitle through a toll-free telephone number and that sellers, who are not small sellers, must deposit all sales taxes collected in a separate segregated account maintained at a bank or other financial institution within 3 business days of the end of the week.
This section describes various penalties that may be imposed for different types of noncompliance with the tax imposed by this subtitle. These penalties include failure to register ($500), reckless or willful failure to collect tax (greater of $500 or 20% of tax not collected), reckless or willful assertion of invalid exemption (greater of $500 or 20% of tax not collected or remitted), reckless or willful failure to remit tax collected (greater of $1000 or 50% of tax not remitted), reckless or willful failure to pay tax (greater of $500 or 20% of tax not paid), and penalty for late filing (greater of $50 or 0.5% of gross payments per month, with a maximum of 12%). The section also states that these penalties may be waived if it is shown that the failure was due to reasonable cause.
Section 507 of this proposed legislation deals with the authority of sales tax administering authorities to issue summons for records, documents, and testimony in order to accurately determine liability for tax under this subtitle. It also grants the authority to conduct examinations and audits of persons who may be liable to collect and remit tax imposed by this subtitle. The section also states that no administrative summons may be issued and no action can be taken to enforce an administrative summons if a Justice Department referral or referral to a State Attorney General's Office is in effect.
Section 508 states that any person liable to remit taxes pursuant to this subtitle shall keep records for a period of 6 years in order to determine the amounts reported, collected, and remitted. Purchasers who purchased taxable property or services but did not pay tax by reason of asserting an intermediate and export sales exemption shall keep records sufficient to determine whether the exemption was valid for a period of 7 years after the purchase.
Section 509 states that for each purchase of taxable property or services for which a tax is imposed by section 101, the seller shall charge the tax imposed by section 101 separately from the purchase and provide a receipt to the purchaser that includes information such as the property or services price exclusive of tax, the amount of tax paid, the property or service price inclusive of tax, the tax rate, and the date of the transaction.
Section 601 of this text states that the sales tax administering authority shall collect the taxes imposed by the subtitle, with the exception of certain cases provided in section 404. Section 602 states that the sales tax administering authority may use various methods, such as levying, seizing property, garnishing wages, and filing liens, to collect amounts due under the subtitle, in accordance with enforcement of judgments, failure to exercise appeals rights, and failure to petition the Tax Court for relief. It also states exemptions from these actions for certain items and income. Section 603 establishes the requirement for each sales tax administering authority to establish an independent Problem Resolution Office, with appointed problem resolution officers with the authority to investigate complaints and issue Taxpayer Assistance Orders to administratively enjoin any collection activities that are not in compliance with law or may cause hardship. It also includes the procedure for requesting and issuing these orders, and states that the authority to reverse these orders may not be delegated.
Section 605 of this subtitle outlines the rights of taxpayers in relation to the sales tax administering authority. Subsection (a) states that the sales tax administering authority must provide a document to any person against whom it has taken certain actions (such as an audit, investigation, or collection action) that explains the person's rights in plain English. These rights include the administrative appeals process, the authority of the Problem Resolution Office, the burden of proof in tax disputes, the right to professional fees, and the right to record interviews. Subsection (b) states that taxpayers have the right to assistance from one or more professional advisors in all dealings with the sales tax administering authority. Subsection (c) states that taxpayers have the right to video or audio tape interviews with agents of the sales tax administering authority. Subsection (d) states that no collection or enforcement action can be taken against a person until they have been provided with a final notice of amount due, which must be sent by certified mail and include the amount of tax, interest, and penalties due, as well as the basis for those amounts. Subsection (e) states that all reports and report information related to the internal revenue laws are confidential and cannot be disclosed except as authorized by the title, and sets out specific situations in which report information may be disclosed.
Section 701 of this hypothetical law states that the exemption and credits for intermediate sales and purchases will not be available for any taxable property or services purchased for use in a hobby activity that is not engaged in for-profit. It also states that if the activity has received gross payments for the sale of taxable property or services that exceed the sum of taxable property and services purchased, wages and salary paid, and taxes paid in two or more of the most recent three calendar years, then the activity shall be deemed to be engaged in for profit.
Section 702 states that any person selling one or more chances in a gaming activity must register as a gaming sponsor with the sales tax administering authority. It also states that a chance is not taxable property or service, but a 23% tax is imposed on the taxable gaming services of a gaming sponsor.
Section 703 states that purchases by the Federal Government and State governments and their political subdivisions of taxable property and services shall be subject to the tax imposed by section 101.
Section 704 states that government enterprises, such as Federal, State, or local governmental units or political subdivisions, operating a government enterprise, must collect and remit the tax imposed by the subtitle on any sale of taxable property or services. These enterprises must comply with all duties imposed by the subtitle and are subject to penalties and enforcement action in the same manner as private persons that are not government enterprises.
Section 801 of this hypothetical law pertains to the determination of the amount of financial intermediation services, which includes both explicitly charged fees (such as brokerage fees and loan origination fees) and implicitly charged fees (such as the gross imputed amount in relation to any underlying interest-bearing investment or debt). The seller of financial intermediation services is defined as the person who receives the gross payments for explicitly charged fees and the person making or receiving interest payments for implicitly charged fees. Section 802 deals with bad debts, stating that the tax imposed on financial intermediation services shall not be imposed on the amount of any bad debt that is charged off within the taxable year in which it becomes uncollectible. Section 803 pertains to the timing of the tax on financial intermediation services, and section 804 deals with financing leases. Section 805 defines the basic interest rate, and section 806 concerns foreign financial intermediation services.
This section is outlining additional rules and provisions related to the tax imposed by the subtitle. It includes provisions such as an anti-avoidance rule for intangible property, de minimis exemptions for small purchases and sales, exemptions for certain financial intermediation services, and rules for employee discounts. It also includes a provision stating that the substance of a transaction will prevail over its form if the transaction is designed to evade the tax imposed by the subtitle. Additionally, it mentions that certain employee discounts over 20% of the regular price, may be subject to tax.
