The Fair Tax Act of 2005, Part IV
In this section we will cover about half of the definitions in SEC. 2.
`SEC. 2. DEFINITIONS.
`(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.
Affiliated firms are treated as one entity for tax registration purposes, which you will see later on in the bill.
`(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.
This means that if a state adopts a FairTax-style revenue system, the only real rule to obey is this one. They must adopt the same base of taxing all products and services, except used property and intangible property. However, there is no rule requiring a state-level prebate. That would be up to each state.
`(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.
More on this later, but the key thing to know about this definition is that the designated commercial private courier service must be a private business of some repute, as opposed to a government entity.
`(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.
In general, education is not taxed. Tuition (and supposedly books) are not taxed. However, most other school fees and expenses would be taxed, including your gym fees, class trips that cost money, etc.
`(5) GROSS PAYMENTS- The term `gross payments’ means payments for taxable property or services, including Federal taxes imposed by this title.
You could also just call this ‘gross sales.’ This should be the total of all the money you charged customers, including taxes.
`(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.
This is a clarification statement. It defines what intangible property is and is not. Section B includes items that might be confused as intangible, but which are directly taxable.
`(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.)
Legalese. Only important for certain elements in later portions of the bill.
`(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.
This specifically defines usage for property for businesses seeking exemption from the FairTax when they buy or use it for business purposes. Basically, if you buy items for a business, purchase services for a business, do research for a business, pay insurance for a business, or purchase training for a business, they all fall into the business use category.
`(9) REGISTERED SELLER- The term `registered seller’ means a person registered pursuant to section 502.
This basically means any business that has been registered with the state sales tax authority.
More to come!!
A format question...
Would you guys like for me to continue posting the bill text as I go, or would you rather I just post my inputs, reducing the post sizes?
They just seem long to me.
What do you guys think?
[...] Just want to pause for a second and state that the FairTax will apply to leases and rents of real estate and other property (like temporarily leasing a car for example, or renting an apartment). But it does not apply to intangible property described here, nor to used property (like previously owned homes, cars and whatever else). We’ll get into financial intermediation much later. But on to services: [...]