86 0319 thru 86 0327

Cigarette Stamps

Signed 12/9/86






XXXXX;                            )

XXXXX;                            :

XXXXX                             )

XXXXX;                            :

XXXXX;                            )

XXXXX;                            :

XXXXX,                            )    INFORMAL DECISION


          Petitioner,             )


v.                                )



COLLECTION DIVISION OF THE        :    Appeal No. 86 0319

STATE TAX COMMISSION OF UTAH,     )    thru 86 0327


          Respondent.             )



                             STATEMENT OF CASE

          This is an appeal to the Utah State Tax Commission from a decision of the Collection Division of the Utah State Tax Commission (Respondent) to assess a $$$$$ per pack cigarette tax penalty on cigarettes confiscated from XXXXX; XXXXX; XXXXX; XXXXX; XXXXX; XXXXX; and XXXXX (Petitioners).  An Informal Hearing was held on XXXXX, in the offices of the Utah State Tax Commission.  James E. Harward, Hearing Officer, heard the matter for the Commission.  XXXXX, Esq., represented the Petitioners.  XXXXX represented the Respondent.

          In the process of checking for proper cigarette tax stamps on packages of cigarettes, Respondent confiscated packs from the following retail establishments: (See addendum).

          Affidavits presented by each Petitioner stated that they only purchased cigarettes from licensed wholesale outlets (a common distributor is XXXXX); that to the best of their knowledge they have never had or attempted to sell any cigarettes upon which the Utah State cigarette tax had not been paid; that to the best of their knowledge the confiscated cigarettes had been taxed but the stamps were defective because of the stamping procedures of the wholesaler; and that there was no intent to sell improperly stamped cigarettes.  A letter from BXXXXX was presented, the contents of which instructed the retail establishments to watch for packages of cigarettes that have not been properly stamped.

          XXXXX had been using an inking machine to affix the stamps.  A new machine has since been installed which affixes a more legible stamp.

          Petitioner stated this is the first offense for all retail establishments involved and that the only error was the malfunctioning machine. There were no non‑taxed cigarettes or contraband.  Petitioners took corrective action immediately when they were notified of the problem.


          Cigarettes which have not been stamped are contraband goods pursuant to Utah Code Ann. ' 59‑18‑6 (1953).  Contraband cigarettes may be seized and sold at public auction by the State Tax Commission. Id.

          A penalty of $$$$$ per offense is properly assessed pursuant to Section 59‑18‑5(1).  Each unstamped package of cigarettes is a separate offense.

          It is the duty of all "manufacturers, jobbers, distributors, wholesalers and retail dealers to securely affix" the cigarette stamps to each package, Id. (emphasis added).  The retail dealer is responsible to insure that every package of cigarettes is properly stamped before it is sold.  Regardless of the problems which a wholesaler may have in the stamping procedure, it is the retailer who must make the final determination whether the packages have been stamped.

          Verifying that packages of cigarettes have been properly stamped is a simple and quick procedure on the part of the retailer.

                            DECISION AND ORDER

          It is the Decision and Order of the Utah State Tax Commission that penalty be reduced to $$$$$ per retail store with the exception of appeal No. 86 0321.  Penalty for the latter shall remain at $$$$$.

          The Collection Division of the Utah State Tax Commission is hereby ordered to adjust its records in accordance with this decision.

          DATED this 9 day of December 1986.



R.H. Hansen                       Roger O. Tew

Chairman                          Commissioner


Joe B. Pacheco                    G. Blaine Davis

Commissioner                      Commissioner


NOTICE: You have 30 days after the date on the Mailing Certificate to request a Formal Hearing.