Public Auditor Benjamin Cruz is calling for the repeal of the tobacco tax provision requiring bonded warehouses, which he believes will improve collections and promote fairness among the island's five tobacco wholesalers.

The current law allows tobacco wholesalers to delay tax payments until after their tobacco products are released from their bonded warehouses for retail distribution.

When tobacco products are released from the warehouse, it must be done in the presence of a Department of Revenue and Taxation employee, at which time the tax is supposed to be collected.

In a letter to Sen. Sabina Perez, whose legislative committee oversees Rev and Tax, Cruz wrote that eliminating the bonded warehouse system would allow all tobacco products to be taxed immediately upon arrival on Guam.

Given the "recent headlines" about the department's staffing and technology needs, the public auditor wrote that getting rid of the requirement for storing tobacco products in a warehouse would eliminate the need for DRT employees to be on site when the products are released and "free them up to pursue other priorities of the agency."

May 2018 audit

Cruz, who is the former speaker of the Legislature and former chairman of the legislative budget-writing committee, also pointed out that the law on tobacco tax enforcement is not being followed fully.

He cites a May 2018 audit released by the Office of Public Accountability. Auditors found that Rev and Tax was "not assessing the tobacco tax" every time tobacco products were released from the bonded warehouse into the retail market. The auditors also found that Rev and Tax was not always comparing the wholesalers' tax filings with documentation on tobacco products that were being released from bonded warehouses for retail distribution.

"I think it is an opportune time to review and repeal the provisions of the law requiring bonded warehouses," Cruz wrote to Perez.

Recommended for you