Cigarette Stamp

Signed 3/17/03





PETITIONER, : Formal Hearing Decision and Order


Petitioner, :

: Appeal No. 02-1125

v. :

: Acct. No. #####

Auditing Division of the Utah State :

Tax Commission, : Tax Type Cigarette Stamp


Respondent. :





Irene Rees, Administrative Law Judge



For Petitioner: PETITIONER

For Respondent: Gale Francis, Assistant Attorney General, with Andrew Coffman and John Manning, Auditing Division





Petitioner brings this appeal from a penalty assessment issued by Respondent on May 9, 2002. Petitioner waived the Initial Hearing and this matter was argued in Formal Hearing on March 6, 2003. At issue is the 500% penalty assessment against Petitioner for the display for resale of contraband goods in the form of cigarettes that did not bear the appropriate stamp and markings as provided by law.


1.                   It is unlawful for a person to offer cigarettes for sale without first obtaining a license from the Tax Commission. Utah Code Ann. §59-14-101.

2.                   Cigarettes held for sale, use or storage in this state are subject to a cigarette tax. The tax is paid affixing stamps to each package or container. Utah Code §§59-14-204 and 59-14-205.

3.                   The presence on any unstamped package or container in a place of business conducting retail sales is prima facie evidence that the cigarettes are held for sale and subject to the cigarette tax. Utah Code Ann. §59-14-205 (7).

4.                   Any person who sells or distributes cigarettes in violation of the Cigarette and Tobacco Tax and Licensing Act is subject to a penalty of up to 500% of the retail value of the cigarettes. Utah Code Ann. §59-14-211 (2).



On March 1, 2002, Petitioner opened a small retail business in CITY, Utah. Petitioner testified that within days of opening the store, he was approached by a cigarette distributor who offered to sell Petitioner cigarettes for resale in his store. Petitioner purchased a supply of cigarettes and stocked them on his shelves for resale in violation of the Cigarette and Tobacco Tax and Licensing Act.

On March 19, 2002, Tax Commission personnel visited Petitioner’s store and, noting that the cigarettes did not bear the required markings and stamps, confiscated the entire stock. The Division later issued a penalty assessment in the amount of $$$$$. The assessment represents a 500% penalty, as allowed by section 59-14-211 of the Utah Code.

Petitioner testified that the distributor, COMPANY, approached him in Utah, and claimed to operate out of Southern STATE. Upon the Tax Commission’s action, Petitioner attempted to contact the distributor at its toll free telephone number, but no one answers that phone. To date, neither Petitioner nor the Division have tracked down the distributor.

Petitioner stated that he closed his store last year, and he is no longer in business. He requests some consideration for a waiver of all or part of the penalty assessment. Respondent stated that Petitioner has been completely cooperative throughout this process.

Although the Commission has discretion to impose a penalty up to 500%, it takes seriously the legislative intent to impose a significant penalty to deter trafficking in contraband cigarettes. Therefore, a complete waiver of the penalty is not justified. However, Petitioner’s store was open for only a short time before the contraband cigarettes were confiscated. Petitioner closed his doors soon thereafter, so there was little risk of ongoing harm to the community. A 100% penalty seems sufficient in this case.


Based on the foregoing, the Commission abates a portion of the penalty assessment and reduces the amount due to $$$$$.



DATED this 17th day of March , 2003.



Administrative Law Judge


The undersigned Commissioners have reviewed this matter and concur in this decision.



Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner






Palmer DePaulis Marc B. Johnson

Commissioner Commissioner