The procurement for cigarette tax stamps for Guam has essentially been brought back to the drawing board, and by extension, the procurement for a third party to enforce tobacco taxes on the island is also on hold.
Marie Lizama, deputy director at the Department of Revenue and Taxation, said only one bid was received by the General Services Agency for the stamps but the bid failed because the bidder did not meet all the requirements, was subsequently rejected, and did not protest the rejection.
“Because that failed, then obviously we could not move forward with (procurement for a third party), because you can’t move forward without the stamps,” Lizama said. “What transpired was we were going to go ahead and regroup and try to figure out alternatives.”
For now, DRT is in this process of determining what will be its next steps.
“We wanted to see whether or not there would be an easier, or rather, something that would entail a successful bidder. Because obviously, if there was only one bid for the (invitation for bids), it begs the question, ‘Is there a reason (for) that?’ … And if the bidder did not meet the requirements and did not protest the rejection, then it’s kind of something that we need to take another look at,” Lizama said.
The purpose of the Cigarette Tax Stamp law is to ensure compliance with tobacco taxes by demonstrating proof of payment through stamps affixed on cigarette products.
The tax stamp bill lapsed into law in late 2017 but after having gone on for years without implementation, another measure was introduced that directed DRT to seek a third party for enforcement of tobacco taxes, including the administration of the Cigarette Tax Stamp Law.
This bill, which became Public Law 35-129 in 2020, also established the cigarette tax stamp rules and regulations.
Companies pay the business privilege tax on all tobacco products that are moved for local sales from bonded warehouses, according to Lizama. The tracking and physical inspection of these inventories are conducted on a monthly basis by BPT specialists at Rev and Tax.
However, back in 2018, the Office of Public Accountability did relay concerns about potential under-reporting, because they could not obtain data from some of the wholesalers and off-island manufacturers to independently verify that taxes reported to DRT accurately represented the number of tobacco products sold.
DRT generally disagreed with the OPA’s findings and recommendations and maintained that it has been effective in administering Guam tobacco tax laws.
Public Auditor Benjamin Cruz has also been critical of the bonded warehouse law, which allows tobacco wholesalers to delay tax payment by storing their products in a Rev and Tax certified bonded warehouse. Payments can be delayed until the 20th day of the following month after the products are withdrawn from the warehouse. Otherwise, the taxes are paid before the Guam Customs and Quarantine Agency releases the tobacco cargo at the port or airport.
He has called for the repeal of the law.
DRT is also facing a lawsuit in the Superior Court of Guam, where a petition was filed to force the agency into implementing the cigarette tax stamp law.
