Wholesaler Sues Tax Agency for NOT Issuing Stamps

It’s not often that we hear members of the tobacco industry complaining that a tax authority is not issuing tax stamps – in fact, the complaints are usually because the opposite is true.

However, a wholesale company in Guam has sued Department of Revenue and Taxation Director Dafne Shimizu for not following the law and implementing tax stamps on cigarettes.

Western Sales Trading Company told the Superior Court of Guam that the failure to issue stamps to monitor and enforce tax collections was putting the company at a price disadvantage if the island’s other tobacco wholesalers weren’t collecting and paying the taxes.

A 2017 law requires wholesalers to purchase tax stamps from the tax authority and attach them to the bottom of every cigarette package. The law states that, whereas the government has been relying on voluntary compliance to collect tobacco taxes, a good accountability mechanism ‘will level the playing field’.

But, unfortunately, the cigarette stamp programme was never implemented. In a written petition, Western Sales cited a 2018 audit by the Office of Public Accountability, which found that the government was not keeping accurate data on tobacco products, and that there were ‘hard examples’ of tobacco trafficking and incorrect tax filing.

In a recent development to this story, the Office of the Attorney General (AG) has asked the court to dismiss the wholesaler’s case, stating that the procurement of the tax stamps actually started before the case was filed, thereby rendering it moot.

In fact, according to court documents, there are two ongoing procurements for tax stamps and tax stamp services, and the AG’s office will be paying for the stamps, using some of the $200,000 it received as part of the cigarette stamp law to enforce the programme.

In the meantime, Director Shimizu has recused herself from the tobacco tax stamp matter, citing ‘an inherent conflict of interest,’ given that her husband’s family distributes tobacco products on Guam. Shimizu advised that the agency’s Deputy Director Frank Leon Guerrero would replace her as official representative on this matter.