S 1433 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.