Chapter 71

11 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 1 CHAPTER 71 THE CASH ECONOMY ENFORCEMENT ACT SOURCE: Chapter added by P.L. 31-135:2 (Nov 17, 2011). § 71101. Statement and Legislative Purpose. § 71102. Regulatory Division; Additional Special F unctions, Powers and Duties. § 71103. Identification of Cash-Economy Cases; Rete ntion of Funds. § 71104. Citations for Violations; Deposits. § 71105. Cash-Based Businesses; Injunction. § 71106. Cash-Based Businesses; Defined. § 71107. Failure to Produce License Upon Demand. § 71108. Failure to Keep Adequate Books and Records . § 71109. Failure to Record Transaction by Receipt. § 71110. Failure to Record Transaction by Register. § 71111. Tax Avoidance Price Fixing. § 71112. Interference With a Tax Official. § 71113. Reporting Requirement for Contractors on F ederal Construction Projects. § 71114. Withholding Assessment Fee Requirement for Government Contracts; Off-Island Businesses without Guam Busin ess License. § 71101. Statement and Legislative Purpose. I Liheslaturan Guåhan finds that in all tax systems, government administrators are continually working to reduce ta x noncompliance known as the 'tax gap.' In the United

ment and Legislative Purpose. I Liheslaturan Guåhan finds that in all tax systems, government administrators are continually working to reduce ta x noncompliance known as the 'tax gap.' In the United States, the t ax gap, which is the difference between the amount of tax that is requir ed to be reported and timely paid and the amount of tax that is actually reported and paid, is estimated to be almost Four Hundred Billion Dollars ($400,000,000,000) per year. Of this tax gap, it is further estimated that about Two Hundred Billion Dollars ($200,000,000,000), or half of the tax gap, is composed of what is known as the 'cash economy'. Cash-based transactions are a fundamental part of a ny economy. As the oldest form of payment, cash continues to domin ate many facets of the local economy. Cash is inherently private, eff icient, and predictable for both purchaser and seller. However, cash trans actions are also the simplest means of underreporting or non-reporting f or tax purposes, because no bank, no means of electronic oversight, and no intermediary COL29201711 GCA FINANCE & TAXATION CH.

actions are also the simplest means of underreporting or non-reporting f or tax purposes, because no bank, no means of electronic oversight, and no intermediary COL29201711 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 2 maintains records of the movement of funds from one pocket to another. The purpose of this Act is to provide the Departmen t of Revenue and Taxation (DRT) with the necessary resources and tools to target high-risk, cash-based transactions to shore up conf idence in Guam’s tax system for those that do comply. More importantly, I Liheslaturan Guåhan intends that the enforcement resources provide foc us on the civil collection and enforcement nature of Guam’s busines s license laws. In an effort to demonstrate the targets of this undert aking, this Act defines 'cash-based business' for enforcement purposes, and DRT is directed to focus on such businesses. At the same time, educat ion is equally important as enforcement. Therefore, this Act requi res the DRT to reach out to industry groups, specific demographics in th e economy, and practitioners to educate taxpayers on their tax res ponsibilities. § 71102.

orcement. Therefore, this Act requi res the DRT to reach out to industry groups, specific demographics in th e economy, and practitioners to educate taxpayers on their tax res ponsibilities. § 71102. Regulatory Division; Additional Special Fu nctions, Powers and Duties. Notwithstanding any other provision of law, there is provided within the Department of Revenue and Taxation, Regu latory Division, additional special functions, powers and duties to carry out civil enforcement efforts of this Act as directed by DRT. The Director of DRT (Director) may staff the Division as the exigen cies of the public service may require. In addition to the existing powers and duties alrea dy provided by law, the Regulatory Division shall also have the following additional powers pursuant to this Chapter: (a) investigate reported or suspected violations of business license laws for civil enforcement purposes, includ ing through covert means allowable pursuant to the Internal Rev enue Manual of the Internal Revenue Service, with a stated priorit y of investigating cash-based businesses as defined in this Chapter.

ing through covert means allowable pursuant to the Internal Rev enue Manual of the Internal Revenue Service, with a stated priorit y of investigating cash-based businesses as defined in this Chapter. A ny criminal investigations originating as a result of informati on reported by a member of the general public shall require that the Department obtain the identity of the person providing the inf ormation; (b) enforce the business license laws by issuing, e nforcing, or executing citations, fines, infractions and assessm ents; (c) serve as fraud referral specialists to assist i n the development and review of fraud cases for appropria te disposition of potentially fraudulent activities, including ref erral to criminal investigators and assessment of civil fraud penalti es; provided , that COL29201711 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 3 personnel assigned to the Regulatory Division may not participate in any criminal investigation; (d) organize and hold public informational meetings on issues of business license laws, including compliance defi ciencies in segments of the economy, and undertake any other ac tivities to encourage taxpayers, practitioners,

ic informational meetings on issues of business license laws, including compliance defi ciencies in segments of the economy, and undertake any other ac tivities to encourage taxpayers, practitioners, and others to m aintain responsibility and compliance with their tax obliga tions; (e) coordinate with other sections or divisions wit hin DRT, other departments or branches of the government of Guam, or the federal government on matters relating to civil enf orcement of the tax laws, including joint investigations, informati on-sharing arrangements, or concurrent collection efforts; provided , that personnel assigned to the Regulatory Division may not participate in any criminal investigation; (f) compile information received by third parties, including taxpayers, competitors, government agencies, confid ential sources, or public sources, and delegate this information wi thin the Department for proper handling. Proper handling ma y include referral internally to other civil or criminal enfo rcement divisions; (g) conduct investigations, research, and studies o f matters relevant to the complex or sensitive civil enforcem ent of the business license laws; and (h) perform such other

enfo rcement divisions; (g) conduct investigations, research, and studies o f matters relevant to the complex or sensitive civil enforcem ent of the business license laws; and (h) perform such other acts as may be incidental to the exercise of the functions, powers, and duties set f orth in this Section and existing law, or as otherwise directed by the Director of the DRT. § 71103. Identification of Cash-Economy Cases; Rete ntion of Funds. Notwithstanding any law to the contrary, each fisca l year the Regulatory Division may identify any taxpayer, asse ssment, investigation, or collection matter as a matter of the Regulatory Division. All revenues collected from Regulatory Division mat ters shall be deposited into the Better Public Service Fund. § 71104. Citations for Violations; Deposits. (a) The Regulatory Division may issue cease and des ist citations to any person if the Regulatory Division has cause to believe the person has violated, is violating, or evidences present intent to violate any provision of this Chapter or administrative rule adopted ther eunder. Any person COL29201711 GCA FINANCE & TAXATION CH.

e person has violated, is violating, or evidences present intent to violate any provision of this Chapter or administrative rule adopted ther eunder. Any person COL29201711 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 4 who violates this Chapter shall be subject to a fine not to exceed One Thousand Dollars ($1,000) unless otherwise specifie d; provided , that if the person is a cash-based business, the fine shall not exceed Two Thousand Dollars ($2,000). (b) The Department may recommend legislation defini ng the circumstances and the civil monetary fines citable for unlawful actions under this Chapter. (c) Any fines assessed under this Section shall be a matter of the Regulatory Division under this Chapter, and shall be retained and deposited into the Better Public Service Fund. (d) Any fines assessed shall be due and payable thirty (30) days after issuance, subject to appeal rights provided u nder Subsection (e); provided , that if payment of the fine is determined to be i n jeopardy, such fine shall be payable immediately, and shall be immediately collected. A finding of jeopardy shall be made in writing, setting forth the specific reasons for the finding.

ned to be i n jeopardy, such fine shall be payable immediately, and shall be immediately collected. A finding of jeopardy shall be made in writing, setting forth the specific reasons for the finding. The finding o f jeopardy shall be subject to immediate appeal under Subsection (e), a nd at the taxpayer’s request the appeal shall be expedited and heard as soon as reasonably practicable. Any amount of fine collected under jeo pardy shall only be returned upon a finding by the Director of DRT or t he Superior Court of Guam that there was no violation under this Chapter . (e) Cease and desist citations may be appealed to t he Director or the Director’s designee, and the determination of t he Director may be appealed to the Superior Court of Guam under this C hapter. § 71105. Cash-Based Businesses; Injunction. The Regulatory Division, with the Director’s approv al, may bring civil actions in the Superior Court of Guam to enjo in any unlawful act under this Chapter, including any administrative ru le adopted thereunder, by a cash-based business. To the extent provided by statute, the Regulatory Division may include in any action an as sessment of a monetary fine. § 71106.

any administrative ru le adopted thereunder, by a cash-based business. To the extent provided by statute, the Regulatory Division may include in any action an as sessment of a monetary fine. § 71106. Cash-Based Businesses; Defined. For the purposes of this Chapter, cash-based business means any person who operates a business, including for-profi t or not-for-profit, where transactions in goods or services are exchang ed substantially for cash and where the business is found, based upon re asonable cause including observation or evidence, to have met one (1) of the following COL29201711 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 5 factors: (a) is found to have substantially underreported or misrepresented the proper amount of tax liability on any return or other submission to the Department. For purposes of this Section, an a mount has been substantially underreported if the amount properly includible on the return or submission is in excess of twenty-five pe rcent (25%) of the amount stated on the return or submission; (b) is required to be licensed, registered, or perm itted under Title 11, Guam Code Annotated, and is in fact not so licensed, registered, or

t (25%) of the amount stated on the return or submission; (b) is required to be licensed, registered, or perm itted under Title 11, Guam Code Annotated, and is in fact not so licensed, registered, or permitted; (c) has a past pattern of noncompliance of obligati ons under Title 11, Guam Code Annotated; (d) does not have a fixed and permanent principal place of business; (e) has not obtained any required tax clearance; (f) has failed to maintain adequate books and recor ds, or those records required to be maintained by law or adminis trative rule; (g) does not accept checks or electronic payment devices for business transactions; provided , that a business may establish reasonable criteria for accepting personal checks; (h) offers price differentials or otherwise deviate s from usual business practices when the business transaction su bstantially involves payment of cash, except where there is a bona-fide business reason for a price differential, such as the avoidance of mercha nt fees imposed by credit card companies; or (i) any other factor relevant to describing a cash- based business capable of noncompliance, as determined by the Dire ctor of Revenue and Taxation, and issued

es imposed by credit card companies; or (i) any other factor relevant to describing a cash- based business capable of noncompliance, as determined by the Dire ctor of Revenue and Taxation, and issued pursuant to a tax information release; provided , that a business shall not be deemed to have met any of these factors while a genuine dispute as to that factor is pending in a c ontested case before any administrative agency or in any court. § 71107. Failure to Produce License Upon Demand. Every person required to be licensed or permitted u nder Title 11, Guam Code Annotated, whether or not so licensed or permitted, shall be required to publically display, and shall produce the license or permit upon demand by the Regulatory Division. Failure to produce the license COL29201711 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 6 or permit upon demand shall be unlawful. Any person who violates this Section shall be subject to a fine not to exceed Five Hundred Dollars ($500); provided , that if the person is a cash-based business, the fine shall not exceed One Thousand Dollars ($1,000).

tes this Section shall be subject to a fine not to exceed Five Hundred Dollars ($500); provided , that if the person is a cash-based business, the fine shall not exceed One Thousand Dollars ($1,000). It shall be an absolute defense to this Section if the person produces a li cense or permit number on file with the Department, and the Department con firms that the person associated with the number is true and accurate. § 71108. Failure to Keep Adequate Books and Records . It shall be unlawful for any person required under Title 11 , Guam Code Annotated, to keep books or records to fail to produce the books or records upon demand by the Regulatory Division, or as soon thereafter as is reasonable under the circumstances. Any person w ho violates this Section shall be subject to a fine not to exceed One Thousand Dollars ($1,000); provided , that if the person is a cash-based business, the fine shall not exceed Two Thousand Dollars ($2,000). § 71109. Failure to Record Transaction by Receipt. It shall be unlawful to conduct more than ten (10) taxable business transactions per day in cash, and fail to provide a receipt or other record of the transaction when the means for issuing a rec

pt. It shall be unlawful to conduct more than ten (10) taxable business transactions per day in cash, and fail to provide a receipt or other record of the transaction when the means for issuing a rec eipt or recording the transaction are available. Each day a person is in violation of this Section shall be treated as a separate violation. Any person wh o violates this Section shall be subject to a fine not to exceed One Thousand Dollars ($1,000); provided , that if the person is a cash-based business, the fine shall not exceed Two Thousand Dollars ($2,000). § 71110. Failure to Record Transaction by Register. It shall be unlawful to conduct more than ten (10) taxable business transactions per day in cash, and fail to record th e transaction in a cash register when the means for recording the transacti on in a cash register are available. Each day a person is in violation of this Section shall be treated as a separate violation. Any person who vio lates this Section shall be subject to a fine not to exceed One Thousand Dollars ($1,000); provided , that if the person is a cash-based business, the fine shall not exceed Two Thousand Dollars ($2,000). § 71111.

ction shall be subject to a fine not to exceed One Thousand Dollars ($1,000); provided , that if the person is a cash-based business, the fine shall not exceed Two Thousand Dollars ($2,000). § 71111. Tax Avoidance Price Fixing. It shall be unlawful for any person to sell, offer to sell, or otherwise convey more than one (1) price for any business to be transacted wh en the lower price is offered if the transaction is pa id for in cash. It shall COL29201711 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 7 not be an offense under this Section if a business cha rges a higher price for legitimate business purposes, such as for the p urpose of recovering any charges assessed the business, including for fa cilitating electronic payment. Any person who violates this Section s hall be subject to a fine not to exceed Two Thousand Dollars ($2,000); provided , that if the person is a cash-based business, the fine shall not exceed Three Thousand Dollars ($3,000). § 71112. Interference with a Tax Official. It shall be unlawful for any person to intentionally interf ere with, hinder, obstruct, prevent, or impede any investigat or, auditor, collector, or other employee of the

ference with a Tax Official. It shall be unlawful for any person to intentionally interf ere with, hinder, obstruct, prevent, or impede any investigat or, auditor, collector, or other employee of the Department from obtaining license information, books, records, articles, or items of business tran sacted, or other information or property rightfully entitled the Dep artment. Any person who violates this Section shall be subject to a fine of not more than Two Thousand Dollars ($2,000). It shall be an absolute defense to the fine under this Section that the person acted with good cause. § 71113. Reporting Requirement for Contractors on F ederal Construction Projects. All persons who do not possess a valid Guam business license under Title 11, Guam Code Annotated, at the time of a con tract award, and who contract with the federal government for any constr uction project located in Guam, shall report to DRT, on forms prescribed by the Departme nt, its estimated gross receipts from the construction project, or any other information requested by DRT on the prescribed form , within thirty (30) days of the contract being awarded.

the Departme nt, its estimated gross receipts from the construction project, or any other information requested by DRT on the prescribed form , within thirty (30) days of the contract being awarded. Failure to repo rt as provided in this Section shall result in a penalty of One Thousand Dollars ($1,00 0) per month, or fraction thereof, for each month that a f ailure to report exists; provided , that the maximum penalty allowed under this Secti on in the aggregate shall not be more than Six Thousand Dollars ($6,000). § 71114. Withholding Assessment Fee Requirement for Government Contracts; Off-Island Businesses Without Guam Busin ess License. (a) For the purposes of this Section, the following shall mean: (1) Non-resident person means a person or body who is not a permanent resident of Guam, or a business that does not possess a valid Guam business license under Title 11, Guam Co de Annotated, and does not pay Business Privilege Taxes under Cha pter 26 of Title 11, Guam Code Annotated, and includes any individua l, firm, co- partnership, joint venture, association, corporatio n, estate, trust, COL29201711 GCA FINANCE & TAXATION CH.

nder Cha pter 26 of Title 11, Guam Code Annotated, and includes any individua l, firm, co- partnership, joint venture, association, corporatio n, estate, trust, COL29201711 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 8 limited liability company, limited partnership, lim ited liability partnership, or any other group or combination, as a foreign entity outside of Guam, acting as a unit. (2) Professional services or services means any kin d of services rendered by a non-resident person and incl udes, but is not limited to, legal, promotional, advertising, public awareness, architectural and engineering services, or other se rvices deemed applicable in the opinion of the Director of the De partment of Revenue and Taxation. (b) (1) There is established a withholding assess ment fee for a non-resident person without a valid Guam business l icense, which shall be equal to four percent (4%) of the total do llar value of a contract awarded for all government of Guam contrac ts for professional services provided by a non-resident pe rson residing outside of Guam, as a cost of doing business with t he government of Guam.

contract awarded for all government of Guam contrac ts for professional services provided by a non-resident pe rson residing outside of Guam, as a cost of doing business with t he government of Guam. (2) This Section shall apply as a mandatory requir ement of a government of Guam contract being awarded to provid e professional services required by any government of Guam agency, to include all autonomous agencies. (3) All agencies, to include autonomous agencies, of the government of Guam shall ensure that all Requests f or Proposals (RFP), Invitation for Bid (IFB), or any other form of solicitation for professional services, include the notification to potential offerors that the award and issuance of a contract to provid e the professional services is subject to the withholding assessment f ee for contracts awarded to persons without a valid Guam business li cense. (4) The agency awarding the contract or the agency ’s representative awarding the contract shall, at the time of a contract award, in the instance of a contract for profession al services to a person who does not possess a valid Guam business l icense under Title 11, Guam Code Annotated, and who is not a res ident of

ract award, in the instance of a contract for profession al services to a person who does not possess a valid Guam business l icense under Title 11, Guam Code Annotated, and who is not a res ident of Guam, deduct from funds allocated for the contract an amo unt equal to four percent (4%) of the total dollar value of a contrac t awarded, and shall transmit the funds to the Treasurer of Guam f or deposit in the General Fund. The amount of the withholding assessm ent fee withheld pursuant to this Section shall be duly not ed in the payment statements to the contractor. The agency shall repo rt to the Department of Revenue and Taxation (DRT), on forms prescribed COL29201711 GCA FINANCE & TAXATION CH. 71 THE CASH ECONOMY ENFORCEMENT ACT 9 by the Department, the amount of the withholding as sessment fee withheld, or any other information requested by DRT on the prescribed form, from the awarded professional serv ices contract within thirty (30) days of the contract being award ed. (c) Prospective Applicability. The withholding asse ssment fee pursuant to this Section for a non-resident person without a valid Guam business license shall not be applicable to any con tract for professional

ctive Applicability. The withholding asse ssment fee pursuant to this Section for a non-resident person without a valid Guam business license shall not be applicable to any con tract for professional services entered into with the government of Guam p rior to the effective date of this Act; provided, however, that it shall be applicable for the award of a new contract or contract renewal for the contractual provision of the same or similar services. (d) Withholding Assessment Fee Collected Declared G overnment of Guam Funds. The withholding assessment fee levie d, assessed and collected under this Chapter shall become funds of the government of Guam from the moment of collection and shall be sub ject to all laws, rules and regulations pertaining thereto, and unles s specifically provided by law, all such withholding assessment fees collec ted shall be deposited into the Treasury of Guam as part of the General Fu nd. SOURCE: Added by P.L. 33-166:2 (June 30, 2016). 2016 NOTE: Subitem designations were added to Subsection (b) to adhere to the Compiler’s general codification and alpha-numeric s chemes pursuant to 1 GCA § 1606. ---------- COL292017