TAXES ON LU)(URY ITEMS.

SEC. 11221. TAXES ON LU)(URY ITEMS. (a) In General.— Chapter 31 (relating to retail excise taxes) is amended by redesignating subchapters A and B as subchapters B and C, respectively, and by inserting before subchapter B (as so redesignated) the following new subchapter: “Subchapter A— Certain Luxury Items “Part I. Imposition of taxes. “Part II. Rules of general applicability. 104 STAT. 1388–439 “PART I. IMPOSITION OF TAXES “Subpart A. Passenger vehicles, boats, and aircraft. “Subpart B. Jewelry and furs. “Subpart A— Passenger Vehicles, Boats, and Aircraft “Sec. 4001. Passenger vehicles. “Sec. 4002. Boats. “Sec. 4003. Aircraft. “Sec. 4004. Rules applicable to Subpart A. “SEC. 4001. PASSENGER VEHICLES. “(a) Imposition of Tax.— There is hereby imposed on the 1st retail sale of any passenger vehicle a tax equal to 10 percent of the price for which so sold to the extent such price exceeds $30,000. “(b) Passenger Vehicle.— “(1) In general.— For purposes of subsection (a), the term ‘passenger vehicle’ means any 4-wheeled vehicle— “(A) which is manufactured primarily for use on public streets, roads, and highways, and “(B) which is rated at 6,000 pounds unloaded gross vehicle weight or less. “(2) Special rules.— “(A) Trucks and vans.—In the case of a truck or van, paragraph (1)(B) shall be applied by substituting ‘gross vehicle weight’ for ‘unloaded gross vehicle weight’. “(B) Limousines.— In the case of a limousine, paragraph (1) shall be applied without regard to subparagraph (B) thereof. “(c) Exceptions for Taxicabs, Etc.— The tax imposed by this section shall not apply to the sale of any passenger vehicle for use by the purchaser exclusively in the active conduct of a trade or business of transporting persons or property for compensation or hire. “SEC. 4002. BOATS. “(a) Imposition of Tax.— There is hereby imposed on the 1st retail sale of any boat a tax equal to 10 percent of the price for which so sold to the extent such price exceeds $100,000. “(b) Exceptions.— The tax imposed by this section shall not apply to the sale of any boat for use by the purchaser exclusively in the active conduct of— “(1) a trade or business of commercial fishing or transporting persons or property for compensation or hire, or “(2) any other trade or business unless the boat is to be used predominantly in any activity which is of a type generally considered to constitute entertainment, amusement, or recreation. “SEC. 4003. AIRCRAFT. “(a) Imposition of Tax.— There is hereby imposed on the 1st retail sale of any aircraft a tax equal to 10 percent of the price for which so sold to the extent such price exceeds $250,000. “(b) Aircraft.— For purposes of this section, the term ‘aircraft’ means any aircraft— “(1) which is propelled by a motor, and “(2) which is capable of carrying 1 or more individuals. “(c) 80 Percent General Business Use.— 104 STAT. 1388–440 “(1) In general.— The tax imposed by this section shall not apply to the sale of any aircraft if 80 percent of the use by the purchaser is in any trade or business. “(2) Proof of business use.— On the income tax return for each of the 1st 2 taxable years ending after the date an aircraft on which no tax was imposed by this section by reason of paragraph (1) was placed in service, the taxpayer filing such return shall demonstrate to the satisfaction of the Secretary that the use of such aircraft during each such year met the requirement of paragraph (1). “(3) Imposition of luxury tax where failure of proof.— If the requirement of paragraph (2) is not met for either of the taxable years referred to therein, the taxpayer filing such re-turns shall pay the tax which would (but for paragraph (1)) have been imposed on such aircraft plus interest determined under subchapter C of chapter 67 during the period beginning on the date such tax would otherwise have been imposed. If such taxpayer fails to pay the tax imposed pursuant to the preceding sentence, no deduction shall be allowed under section 168 for any taxable year with respect to the aircraft involved. “(d) Other Exceptions.— The tax imposed by this section shall not apply to the sale of any aircraft for use by the purchaser exclusively— “(1) in the aerial application of fertilizers or other substances, “(2) in the case of a helicopter, in a use described in paragraph (1) or (2) of section 4261(e), “(3) in a trade or business of providing flight training, or “(4) in a trade or business of transporting persons or property for compensation or hire. “SEC. 4004. RULES APPLICABLE TO SUBPART A. “(a) Exemption for Law Enforcement Uses, Etc.— No tax shall be imposed under this subpart on the sale of any article— “(1) to the Federal Government, or a State or local government, for use exclusively in police, firefighting, search and rescue, or other law enforcement or public safety activities, or in public works activities, or “(2) to any person for use exclusively in providing emergency medical services. “(b) Separate Purchase of Article and Parts and Accessories Therefor.— Under regulations prescribed by the Secretary— “(1) In general.— Except as provided in paragraph (2), if— “(A) the owner, lessee, or operator of any article taxable under this subpart (determined without regard to price) installs (or causes to be installed) any part or accessory on such article, and “(B) such installation is not later than the date 6 months after the date the article was 1st placed in service, then there is hereby imposed on such installation a tax equal to 10 percent of the price of such part or accessory and its installation. “(2) Limitation.— The tax imposed by paragraph (1) on the installation of any part or accessory shall not exceed 10 percent of the excess (if any) of— “(A) the sum of— “(i) the price of such part or accessory and its installation, 104 STAT. 1388–441 “(ii) the aggregate price of the parts and accessories (and their installation) installed before such part or accessory, plus “(iii) the price for which the passenger vehicle, boat, or aircraft was sold, over “(B) $30,000 in the case of a passenger vehicle, $100,000 in the case of a boat, and $250,000 in the case of an aircraft. “(3) Exceptions.— Paragraph (1) shall not apply if— “(A) the part or accessory installed is a replacement part or accessory, or “(B) the aggregate price of the parts and accessories (and their installation) described in paragraph (1) with respect to the taxable article does not exceed $200 (or such other amount or amounts as the Secretary may by regulation prescribe). “(4) Installers secondarily liable for tax.— The owners of the trade or business installing the parts or accessories shall be secondarily liable for the tax imposed by this subsection. “(c) Imposition of Tax on Sales, Etc., Within 2 Years of Articles Purchased Tax-Free.— “(1) In general.— If— “(A) no tax was imposed under this subchapter on the 1st retail sale of any article by reason of its exempt use, and “(B) within 2 years after the date of such 1st retail sale, such article is resold by the purchaser or such purchaser makes a substantial non-exempt use of such article, then such sale or use of such article by such purchaser shall be treated as the 1st retail sale of such article for a price equal to its fair market value at the time of such sale or use. “(2) Exempt use.— For purposes of this subsection, the term ‘exempt use’ means any use of an article if the 1st retail sale of such article is not taxable under this subchapter by reason of such use. “Subpart B— Jewelry and Furs “Sec. 4006. Jewelry. “Sec. 4007. Furs. “SEC. 4006. JEWELRY. “(a) Imposition of Tax.— There is hereby imposed on the 1st retail sale of any jewelry a tax equal to 10 percent of the price for which so sold to the extent such price exceeds $10,000. “(b) Jewelry.— For purposes of subsection (a), the term ‘jewelry’ means all articles commonly or commercially known as jewelry, whether real or imitation, including watches. “(c) Manufacture From Customer’s Material.— If— “(1) a person, in the course of a trade or business, produces jewelry from material furnished directly or indirectly by a customer, and “(2) the jewelry is for the use of, and not for resale by, such customer, the delivery of such jewelry to such customer shall be treated as the 1st retail sale of such jewelry for a price equal to its fair market value at the time of such delivery. 104 STAT. 1388–442 “SEC. 4007. FURS. “(a) Imposition of Tax.— There is hereby imposed on the 1st retail sale of the following articles a tax equal to 10 percent of the price for which so sold to the extent such price exceeds $10,000: “(1) Articles made of fur on the hide or pelt. “(2) Articles of which such fur is a major component. “(b) Manufacture From Customer’s Material.— If— “(1) a person, in the course of a trade or business, produces an article of the kind described in subsection (a) from fur on the hide or pelt furnished, directly or indirectly, by a customer, and “(2) the article is for the use of, and not for resale by, such customer, the delivery of such article to such customer shall be treated as the 1st retail sale of such article for a price equal to its fair market value at the time of such delivery. “PART II— RULES OF GENERAL APPLICABILITY “Sec. 4011. Definitions and special rules. “Sec. 4012. Termination. “SEC. 4011. DEFINITIONS AND SPECIAL RULES. “(a) 1st Retail Sale.— For purposes of this subchapter, the term ‘1st retail sale’ means the 1st sale, for a purpose other than resale, after manufacture, production, or importation. “(b) Use Treated As Sale.— “(1) In general.— If any person uses an article taxable under this subchapter (including any use after importation) before the 1st retail sale of such article, then such person shall be liable for tax under this subchapter in the same manner as if such article were sold at retail by him. “(2) Exemption for further manufacture.— Paragraph (1) shall not apply to use of an article as material in the manufacture or production of, or as a component part of, another article taxable under this subchapter to be manufactured or produced by him. “(3) Exemption for demonstration use of passenger vehicles.— Paragraph (1) shall not apply to any use of a passenger vehicle as a demonstrator for a potential customer while the potential customer is in the vehicle. “(4) Exception for use after importation of certain articles.— Paragraph (1) shall not apply to the use of an article after importation if the user or importer establishes to the satisfaction of the Secretary that the 1st use of the article occurred before January 1, 1991, outside the United States. “(5) Computation of tax.— In the case of any person made liable for tax by paragraph (1), the tax shall be computed on the price at which similar articles are sold at retail in the ordinary course of trade, as determined by the Secretary. “(c) Leases Considered as Sales.— For purposes of this subchapter— “(1) In general.— Except as otherwise provided in this subsection, the lease of an article (including any renewal or any extension of a lease or any subsequent lease of such article) by any person shall be considered a sale of such article at retail. “(2) Special rules for certain leases of passenger vehicles, boats, and aircraft.— 104 STAT. 1388–443 “(A) Tax not imposed on sale for leasing in a qualified lease.— The sale of a passenger vehicle, boat, or air-craft to a person engaged in a leasing or rental trade or business of the article involved for leasing by such person in a qualified lease shall not be treated as the 1st retail sale of such article. “(B) Qualified lease.— For purposes of subparagraph (A), the term ‘qualified lease’ means— “(i) any lease in the case of a boat or an aircraft, and “(ii) any long-term lease (as defined in section 4052) in the case of any passenger vehicle. “(C) Special rules.— In the case of a qualified lease of an article which is treated as the 1st retail sale of such article— “(i) Determination of price.— The tax under this subchapter shall be computed on the lowest price for which the article is sold by retailers in the ordinary course of trade. “(ii) Payment of tax.— Rules similar to the rules of section 4217(e)(2) shall apply. “(iii) No tax where exempt use by lessee.— No tax shall be imposed on any lease payment under a qualified lease if the lessee’s use of the article under such lease is an exempt use (as defined in section 4004(c)) of such article. “(d) Determination of Price.— “(1) In general.— In determining price for purposes of this subchapter— “(A) there shall be included any charge incident to placing the article in condition ready for use, “(B) there shall be excluded— “(i) the amount of the tax imposed by this subchapter, “(ii) if stated as a separate charge, the amount of any retail sales tax imposed by any State or political sub-division thereof or the District of Columbia, whether the liability for such tax is imposed on the vendor or vendee, and “(iii) the value of any component of such article if— “(I) such component is furnished by the 1st user of such article, and “(II) such component has been used before such furnishing, and “(C) the price shall be determined without regard to any trade-in. Subparagraph (B)(iii) shall not apply for purposes of the taxes imposed by sections 4006 and 4007. “(2) Other rules.— Rules similar to the rules of paragraphs (2) and (4) of section 4052(b) shall apply for purposes of this subchapter. “(e) Parts and Accessories Sold With Taxable Article.— Parts and accessories sold on, in connection with, or with the sale of any article taxable under this subchapter shall be treated as part of the article. “(f) Partial Payments, Etc.— In the case of a contract, sale, or arrangement described in paragraph (2), (3), or (4) of section 4216(c), 104 STAT. 1388–444rules similar to the rules of section 4217(e)(2) shall apply for purposes of this subchapter. “SEC. 4012. TERMINATION. “The taxes imposed by this subchapter shall not apply to any sale or use after December 31, 1999.” (b) Exemption for Exports.— (1) The material preceding paragraph (1) of section 4221(a) is amended by striking “section 4051” and inserting “subchapter A or C of chapter 31”. (2) Subsection (a) of section 4221 is amended by adding at the end thereof the following new sentence: “In the case of taxes imposed by subchapter A of chapter 31, paragraphs (1), (3), (4), and (5) shall not apply.” (c) Exemption for Sales to the United States.— Section 4293 is amended by inserting “subchapter A of chapter 31,” before “section 4041”. (d) Technical Amendments.— (1) Subsection (c) of section 4221 is amended by striking “section 4053(a)(6)” and inserting “section 4001(c), 4002(b), 4003(c), 4004(a), or 4O53(a)(1)”. (2) Paragraph (1) of section 4221(d) is amended by striking “the tax imposed by section 4051” and inserting “taxes imposed by subchapter A or C of chapter 31”. (3) Subsection (d) of section 4222 is amended by striking “sections 4053(a)(6)” and inserting “sections 4001(c), 4002(b), 4003(c), 4004(a), 4053(a)(6)”. (e) Clerical Amendment.— The table of subchapters for chapter 31 is amended to read as follows: “Subchapter A. Certain luxury items. “Subchapter B. Special fuels. “Subchapter C. Heavy trucks and trailers.” (f) Effective Date.— (1) In general.— The amendments made by this section shall take effect on January 1, 1991. (2) Exception for binding contracts.— In determining whether any tax imposed by subchapter A of chapter 31 of the Internal Revenue Code of 1986, as added by this section, applies to any sale after December 31, 1990, there shall not be taken into account the amount paid for any article (or any part or accessory therefor) if the purchaser held on September 30, 1990, a contract (which was binding on such date and at all times thereafter before the purchase) for the purchase of such article (or such part or accessory).