• March 2003: Republican Senators Robert Klitzkie and Jesse Lujan introduce separate bills (Bill 54 & Bill 44) to roll back the proposed GRT increase, but their bills never makes it to session floor.

• April 1, 2003: The Gross Receipts Tax is increased by 50 percent, from 4 to 6 percent.

• November 2003: Bill 63, authored by Speaker Ben Pangelinan, is enacted into law, providing a slight tax cut for businesses who separate the GRT from the cost of the item on the receipt.

• Feb. 1, 2004: Macy's implements its GRT policy under the visible GRT law, which adds 6 percent on top of the shelf price.

• Feb. 20: Five Democratic senators introduce Bill 267, which would roll back the GRT by April 1. The bill also proposes to change GRT reporting from a quarterly to a monthly basis.

• Feb. 25: The attorney general's office releases a legal opinion on the visible GRT law, saying that separating the GRT from the maintained shelf price is proper and that it is a violation of Guam law to treat the GRT as a sales tax by adding it onto the price of the merchandise or service at the final point of sale.

• Feb. 26: A class-action lawsuit is filed against Macy's West, requesting an injunction of their practice of adding 6 percent on top of the shelf price.

• March 4: Lawmakers unanimously pass Bill 267. The governor has yet to act on the legislation.

Tax confusion persists
Consumers make complaints about visible GRT

By Steve Limtiaco
Pacific Sunday News
March 7, 2004

Lawmakers last week voted to roll back the Gross Receipts Tax to 4 percent, beginning April 1, but confusion over the "visible" GRT remains and consumers continue to pay for that confusion at the cash register.

After lawmakers approved two changes to the Gross Receipts Tax last year -- an increase and a "visible" tax -- some Guam businesses started to add 6 percent at the register, on top of the sticker price. Before the tax changes, sticker prices on Guam included the Gross Receipts Tax, so there was no additional charge at the register.

"We've been reading and hearing about how (the visible GRT) has been reported three different ways. It doesn't seem to be doing any good, but it's sure causing a lot of concern," said Sen. Larry Kasperbauer, R-Dededo, who tried unsuccessfully to get the visible GRT law repealed during Thursday's legislative session.

Kasperbauer last October voted in favor of the visible GRT, which gives a small tax break to businesses that tell consumers how much Gross Receipts Tax they have paid.

But the visible Gross Receipts Tax has been applied inconsistently, Kasperbauer said, so it is time to restore the old tax regulations.

"There's simply so much confusion about the whole Gross Receipts Tax issue right now, not only from the business community and the tour agents in Japan, but just the common everyday person," he said. "We're rolling back the GRT -- just get rid of (visible GRT) also."

Bill 267, which rolls back the Gross Receipts Tax to the old level of 4 percent, was sent to the governor's office Friday afternoon, where it is under review, according to the governor's communications office. Lawmakers increased the tax last year in order to provide additional revenue for the government. It is being rolled back, lawmakers said, because the government's revenue collections should be better than expected.

Spencer Cuison, 17, of Dededo, who works part time at a medical office, said she doubts the rollback in the Gross Receipts Tax will cause prices to return to their old levels.

"It will still be a little bit high. It's higher now, but it will be a little less high," she said.

Cuison said Guam teens are used to saving money for things they want, based on the price tag, and said the additional charge at the register has been hard.

Keep the law
Speaker Ben Pangelinan, D-Barrigada, who wrote the law that created the visible Gross Receipts Tax, said it is worth keeping, despite the fact it has been incorrectly applied by some businesses. The confusion will be sorted out, he said.

"I believe you will see businesses migrate very quickly either to embedding (the GRT) in the price and not getting the tax break or you will see them following the example of (businesses) like Pay-Less, who have unveiled the tax that has always been there."

He said the visible tax law helps consumers understand what they are paying for and also solves a long-standing problem of businesses being taxed on the Gross Receipts Tax they collect.

The visible Gross Receipts Tax law allows businesses to pay Gross Receipts Taxes only on the value of the merchandise or service they provide. The tax they collect on behalf of the government is cut out of the equation.

"The benefit of the visible GRT is it gets rid of the regressiveness of taxing the tax," Pangelinan said.

Before the visible Gross Receipts Tax was put in place, some businesses had raised prices sharply and were blaming the increases on the 6 percent Gross Receipts Tax, Pangelinan said.

"There were businesses marking up products way beyond the additional 2 cents on the dollar, and they were blaming the increase on the tax, not on increasing their prices," Pangelinan said.

The Legislature's solution of making the price tag consumer-friendly has not been perfect.

"Some businesses unscrupulously decided that they were going to add the 6 percent on top of the 6 percent already built into their price," Pangelinan said. "That's what aggravated the situation -- that's what caused the consumer complaints."

And there have been dozens of complaints, according to the attorney general's office, which last month issued a legal opinion on the "correct" way to implement the visible Gross Receipts Tax.

It is improper to tack 6 percent onto the purchase price, according to the attorney general's office.

About 70 people have called the attorney general's office to complain about the way some businesses are applying the gross receipt tax, said Bernie Alvarez, consumer advocate at the office.

"Basically, when they go to make a purchase or pay for the service, they're being charged a GRT on their receipts," she said.

The complaints are about different types of businesses islandwide, Alvarez said, including several complaints about medical clinics.

She said patients who normally are required to make a small co-payment for their medical visit are now being asked by the clinic to also pay the Gross Receipts Tax for the visit.

The attorney general's office will begin approaching businesses regarding the complaints, she said.

Antonio Pineda, owner of Gemrus Construction, said he has been hit twice because of the increase in the Gross Receipts Tax and because of the way it is being applied by the companies that supply his construction materials.

He said construction supplies that once cost $100 now cost $106 because his suppliers recently started to add 6 percent on top of the normal purchase price.

As a businessman, he also pays the higher GRT, he said, although he said he has not increased prices for his customers.

Maria Fejeran, sales manager of Resort Wear Outlet at Guam Premier Outlets, said the store initially started charging an additional 6 percent at the register, but quickly stopped the practice after customers complained and after learning that other stores at the outlet mall were not doing the same.

"It's a lot of confusion," she said. "Some of our customers feel like we're supposed to be tax-free, so why are we showing that (tax) on our shelves?"

It has the potential of ruining Guam's reputation with tourists, she said.

The Gross Receipts Tax now is part of the store's sticker prices, she said. "We valued our customers more," she said.

Kasperbauer and Pangelinan could not say for sure whether rolling back the Gross Receipts Tax will bring prices back to old levels.

"I think some businesses will roll it back 2 percent; whereas, they should be really rolling it back 10," Pangelinan said. "I just hope that the businesses will use this opportunity to give some relief to the consumer.

Kasperbauer said, "Some will (return to the old way of pricing), some probably won't, and that's because there's so much confusion with all that, and that's why (the tax increase) never should have happened in the first place."


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