DRAFT CSC, Title 29.  Tax & Revenue
 
CHAPTER 1
Sales, Occupancy, and Rental Taxes

1001.  Title.
1002.  Purpose.
1003.  Definitions.
1004.  Sales and Luxury Taxes.
1005.  Notice of Sales and Luxury Tax to customer.
1006.  Sales and Luxury Tax; Payment.
1007.  Sales and Luxury Tax agreement; Prepayment.
1008.  Sales and Luxury Tax; Presumption.
1009.  Alcoholic Beverage Possession Tax; Imposition.
1010.  Alcoholic Beverage Possession Tax; Payment.
1011.  Room Occupancy Tax.
1012.  Motor Vehicle Rental Tax.
1013.  Boat Rental Tax.
1014.  Room Occupancy, Motor Vehicle Rental and Boat Rental Taxes; Due.
1015.  Records.
1016.  Waybills and bills of lading.
1017.  Penalties; Civil and criminal.
1018.  Liens.
1019.  Regulations.
1020.  Disposition of revenue; General Fund.
1021.  Civil action of enforcement.
1022.  Challenge to tax payment.
1023.  Inspection for enforcement.
1024.  Transition.
1025.  Severability.

      1001.  Title.
     This Act Chapter shall be known and may be cited as the "State Tax Act of 1985."

Source:  TSL 5-119, 1, modified.

      1002.  Purpose.
     The purpose of this act Chapter is to levy and collect State taxes in order to generate revenue necessary to the provision of essential public services.

Source:  TSL 5-119, 2, modified.

      1003.  Definitions.
     For the purposes of this Act Chapter:

     (4) (1)  "Boat" means any inboard and outboard motor boat and sailing boats.

     (7) (2)  "First sale" means the sale first made after the date of receipt in Truk Chuuk State of tangible items taxable pursuant to this act Chapter.

     (5) (3)  "Heavy equipment" means any heavy self-propelled vehicles, including, but not limited to:  dozers, cranes, road graders, rollers, backhoe, loaders, and such other related heavy machineries.

     (6) (4)  "Imported" means having been brought or carried into Truk Chuuk from outside by any means.

     (8) (5)  "Luxury items" consist of the following, except locally produced items:

     (a)  perfumery, cosmetics and toiletries, including cologne and other toilet waters, articles of perfumery, whether in sachets or otherwise, and all preparations used as applications to the hair or skin, lipsticks, pomades, powders, and other toilet preparations not having medicinal properties;

     (b)  jewelry, ornamental pieces, including but not limited to: rings, necklaces, and bracelets, made of materials, stones or metals that may or may not be precious, designed for personal adornment; and

     (c)  electronic equipment devices consisting of including but not limited to: radios, stereos, tape players, compact disc (CD) players, or any combination thereof, whether for home, commercial, or automotive usage, televisions, video cassette recorders, or any combination thereof, and cameras, video cameras and camcorders.

     (3) (6)  "Motor vehicle" means any self-propelled vehicles, including but not limited to: automobiles, trucks, jeeps, motorcycles, buses, scooters, dump-trucks, and flatbeds, other than heavy equipment.

     (2) (7)  "Unpackaged" means that for sale to the customer the items to be sold is are offered in bulk and not packaged in discrete sale units.

     (1) (8)  "Unprocessed" means substantially in a natural state without having been added to or altered.

Source:  TSL 5-119, 3, as amended by CSL 3-96-01, 1(4)(4)(b), modified.

      1004.  Sales Tax Imposition.
     There is hereby levied a tax on first sale in the State of Chuuk of all tangible items, except gasoline and unprocessed and unpackaged items, as follows:

     (1)  tobacco at the rate of 30 thirty percent (30%) of the sales price;

     (2)  cigarettes at the rate of 50 fifty cents ($.50) per pack of 20 twenty cigarettes;

     (3)  diesel, kerosene and Jet A-One at the rate of five cents ($.05) per gallon;

          (a)  luxury items at the rate of ten percent (10%) of the sales price;
     
      (b)  for the purposes of this Section 4, "Luxury items" consist of the following items, except locally produced items:

     (i)  perfumery, cosmetics, and toiletries, including cologne and other toilet waters, articles of perfumery, whether sachets or otherwise, and all preparations used as applications to the hair or skin, lipsticks, pomades, powders and other toilet preparations not having medicinal properties;

     (ii)  jewelry, ornamental pieces, including but not limited to rings, necklaces and bracelets made of materials, stones or metals that may or may not be precious, designed for personal adornment;

     (iii)  electronic entertainment devices consisting of radios, stereos, tape players, compact disc (CD) players or any combinations thereof, whether for home, commercial or automotive usage, televisions, video cassette recorders or any combinations thereof, cameras, video cameras and camcorders; and

     (5)  all other items at a rate of five percent of the sales price.

Source:  TSL 5-119 4, as amended by CSL 191-04, 1, CSL 2-93-06, 1, CSL 3-96-01 1 (4), and CSL 5-00-27, 1 (4), modified.

      1005.  Notice of Sales and Luxury Tax to Customer.
     The sellers of items listed in Section 1004 of this Chapter shall show the base price of the item and the amount of sales tax on the item as follows:

     (1)  The base price and the amount of sales tax shall be marked on each item; or

     (2)  The base price and the amount of sales tax shall be shown and prominently displayed at the place of sale; or

     (3)  A receipt provided to the customer shall show separately the base price and the amount of the sales tax.

Source:  TSL 5-119, 5.

      1006.  Sales and Luxury Tax; Payment.
     The sales and luxury taxes levied under Section 1004 of this Chapter shall attach at the time of first sale in Truk Chuuk State.  All taxes shall that have been attached during a calendar month shall be paid by the first seller to the State Department of Finance on or before the fifteenth day of the succeeding month, provided that the Director of Finance may make special provisions for the payment of taxes due from islands outside of the Truk Chuuk Lagoon.  Tax revenues not paid within the time specified in this Section will be considered delinquent.
 
Source:  TSL 5-119, 6, modified.

      1007.  Sales and Luxury Tax Agreement; Prepayment.
     The first seller of the items listed in Section 1004 of this Chapter shall have the option of prepaying all the sales taxes due under that Section in accordance with regulations to be issued by the Department of Finance.

Source:  TSL 5-119, 7.

      1008.  Sales and Luxury Tax; Presumption.
     It shall be presumed that:

     (1)  All items listed in Section 1004 of this Act Chapter imported into the State of Truk Chuuk for resale purposes by any person who is a licensed importer of such items, have been sold within a period of four calendar months after their date of receipt, unless the licensed importer can prove to the contrary to the satisfaction of the Director of the Department of Finance; and

     (2)  Any sales of items taxable under this Chapter are subject to such tax until the contrary is proven, and the burden of proving that a sale is not taxable under this Act Chapter shall be on the seller or purchaser, as the case may be.

Source:  TSL 5-119, 8, modified.

      1009.  Alcoholic Beverage Possession Tax; Imposition.
     A tax on possession of alcoholic beverages within the State of Truk Chuuk is imposed at the following rates:

     (1)  Beer and malt beverages:

     (a)  in containers of 12 twelve fluid ounces or less, fifty cents per container; or

     (b)  in containers of more than 12 twelve fluid ounces, fifteen cents for every four fluid ounces, or fraction thereof.

     (2)  Distilled alcoholic beverages, fifteen dollars per gallon;

     (3)  Wine, six dollars per gallon, provided that possession of sacramental wines by religious institutions shall be exempted from this tax.

Source:  TSL 5-119, 9, as amended by CSL 2-93-06, 2, modified.

      1010.  Alcoholic Beverage Possession Tax; Payment.
     Within five days after bottling or importation of an alcoholic beverage the tax is due and payable by the possessor thereof within the State of Truk Chuuk. The possessor shall pay to the Department of Finance the tax and receive appropriate tax stamps to place on the containers of alcoholic beverage.  For any container without tax stamps, it shall be presumed that no tax has been paid.  This tax shall only apply to alcoholic beverages committed for sale and use in Truk Chuuk State.  Such beverages in import transit outside the state are not taxable.  A refund on taxes shall be provided to the taxpayer who later proves alcoholic beverages were exported outside the State of Truk Chuuk.  It is assumed that alcoholic beverages are sold or committed for use in the State after the expiration of twelve 12 months of importation or bottling.  The Director of the State Department of Finance shall establish procedures to implement this act Chapter.

Source:  TSL 5-119, 10, modified.

      1011.  Room Occupancy Tax.
     There is hereby levied a tax of ten percent of the occupancy of a hotel, motel and apartment room, including the occupancy of lodging rooms on cruise or tour ships when operating within the State of Chuuk.

Source:  TSL 5-119, 11, as amended by CSL 191-04, 4.

Editor's note:  The leasehold tax imposed by CSL 191-04, 4(11)(2) was struck as being a tax on income and therefore in violation of FSM Const. Art. IX, 2(e), which grants the power to tax income exclusively to the FSM Congress.

      1012.  Motor Vehicle Rental Tax.
     There is hereby levied a tax of 13 thirteen percent of the rental of a motor vehicle.

Source:  TSL 5-119, 12, as amended by CSL 191-04, 3.

      1013.  Boat Rental Tax.
     There is hereby levied a tax of ten percent of the rental of a boat.

Source:  TSL 5-119, 13.

      1014.  Room Occupancy, Motor Vehicle Rental, Boat Rental Taxes; Due.
     Taxes levied in Sections 1011, 1012 and 1013 of this Chapter shall attach upon the occupancy of a hotel, motel and apartment room, or the rental of a motor vehicle or a boat.  All hotel, motel and apartment room occupancy taxes and all motor vehicle and boat rental taxes that attach during the month shall be paid to the State Department of Finance on or before the fifteenth day of the succeeding month.  The Department of Finance shall make an allowance for payment of taxes outside of Truk Chuuk Lagoon.

Source:  TSL 5-119, 14, modified.

      1015.  Records.
     The seller of items listed by Section 1004 of this act Chapter, hotel, motel, and apartment proprietors, and lessors of motor vehicles and boats, and possessors of alcoholic beverages shall keep accurate records of all sales, room charges, motor vehicle and boat rentals and stocks of alcoholic beverage, and shall provide the Department of Finance with all accurate records and supporting documents to substantiate the accuracy of the records.

Source:  TSL 5-119, 15.

      1016.  Waybills and bills of lading.
     All carriers entering the State of Truk Chuuk shall deliver to the Department of Finance a copy of the air and sea waybill or bill of lading for all items imported into the State of Truk Chuuk not less more than seven days after such items are released from the carrier.

Source:  TSL 5-119, 16, modified.

      1017.  Penalties; Civil and Criminal.

     (1)  Sellers of items listed in Section 1004 of this act Chapter, hotel, motel, and apartment proprietors, lessors of motor vehicles and boats, and possessors of alcoholic beverages who fail to collect or timely pay the taxes levied by this act Chapter shall be charged a penalty of five percent per month on the balance of the taxes due and unpaid.

     (2)  Sellers of items listed in Section 1004 of this act Chapter, hotel, motel and apartment proprietors, lessors of motor vehicles and boats, and possessors of alcoholic beverages who fail to keep and provide to the Department of Treasury accurate records and supporting documents pursuant to Section 1015 of this act Chapter shall be guilty of a misdemeanor and shall, upon conviction, be fined not less than $5,000 for each fiscal quarter such failure occurs.

     (3)  A carrier violating Section 1016 of this act Chapter shall be guilty of a misdemeanor and shall, upon conviction, be fined not less than $5,000.

     (4)  Any person convicted of possession of a container of alcoholic beverage for which no tax has been paid shall be punished by imprisonment of not more than one year, or by a fine of not less than $5,000, or by both.

     (5)  Any person, company or corporation who knowingly, willfully, and unlawfully violates or refuses to comply with any regulation duly issued by the Department of Treasury for the enforcement of this act Chapter shall, upon conviction thereof, be fined not less than $500, or imprisoned for not more than 90 ninety days, or both such fine and imprisonment.  Such penalties are in addition to those which may be due under Subsections (1) through (3) and (6) of this Section.

     (6)  Any person, company or corporation who knowingly and willfully refuses to permit the examination required by Section 1023 26 of this Act Chapter shall, upon conviction thereof, be fined not less than $5,000.00, or imprisoned for not more than one year, or both.

Source:  TSL 5-119, 17, as amended by CSL 2-94-15, 2, modified.

Editor's note:  CSL 2-94-15 that amended this section was signed into law by the Governor on October 29, 1994.  Section 1 of CSL 2-94-15 is a purpose clause that states as follows:

     Section 1.  Purpose.  The purpose of this amendatory Act is to authorize the inspection of business premises, and the inventories, books, papers and records of businesses to facilitate the proper assessment of the taxes imposed by Sections 4 and 9 of the State Tax Act of 1985, TSL. No. 5-119.

      1018.  Liens.
     Taxes levied by this act Chapter, which are due and unpaid, including penalties charged, are debts to the State and shall constitute liens in favor of the State upon all property and rights to property, whether real or personal, belonging to any person, business, association or corporation liable for the tax, and such taxes and penalties may be collected by levy upon such property and rights to property in the same manner as the levy of an execution.

Source:  TSL 5-119, 18, modified.

      1019.  Regulations.
     The Department of the Treasury, with the approval of the Governor, shall prescribe such regulations as may be necessary for the conduct of all inspections and the collection of all taxes levied under this act Chapter.

Source:  TSL 5-119, 19, as amended by CSL 2-94-15, 3, modified.

Editor's note:  CSL 2-94-15 that amended this section was signed into law by the Governor on October 29, 1994.  Section 1 of CSL 2-94-15 is a purpose clause that states as follows:

     Section 1.  Purpose.  The purpose of this amendatory Act is to authorize the inspection of business premises, and the inventories, books, papers and records of businesses to facilitate the proper assessment of the taxes imposed by Sections 4 and 9 of the State Tax Act of 1985, TSL. No. 5-119.

      1020.  Disposition of revenue; General Fund.
     All taxes, penalties and fines collected pursuant to this act Chapter shall be deposited into the General Fund of the State of Chuuk.

Source:  TSL 5-119, 20, modified.

      1021.  Civil action of enforcement.
     Any taxes imposed or authorized under this act Chapter may also be collected by civil suit brought by the Attorney General of the State, either in the name of the State or in the name of the Director of the Department of Finance, or the Chief of the Division of Revenue.  In such civil suit a written statement by the Director or Chief as to the amount of tax due, the fact that it is unpaid, and who is authorized to collect it, shall be sufficient evidence to create a rebuttable presumption that the taxes are owing.

Source:  TSL 5-119, 21, modified.

      1022.  Challenge to tax payment.

     (1)  No person shall have a right of action to challenge the validity of any tax levied by this act Chapter unless that person shall first pay the tax in question, under protest, to the State.

     (2)  No person shall have a right of action to challenge the validity of any tax levied by this act Chapter unless that person is the actual taxpayer having liability for payment of the tax.

     (3)  Any action to challenge the validity of any state tax must be brought within one year after the cause of action arose.

Source:  TSL 5-119, 22, modified.

      1023.  Inspection for enforcement.
     Duly authorized employees of the Department of Public Safety and the Department of  Treasury, may at all reasonable hours enter any business premises, and examine the premises and the inventory, books, papers and records of any importer, wholesaler or retailer, for the purpose of inspecting the same and determining whether the taxes imposed by Sections 1004 and 1009 of this Act Chapter have been fully paid.

Source:  CSL 2-94-15, 4, which added a new section 26 to TSL 5-119 and renumbered section 26 to 27, modified.

Editor's note:  CSL 2-94-15 that created this section was signed into law by the Governor on October 29, 1994.  Section 1 of CSL 2-94-15 is a purpose clause that states as follows:

     Section 1.  Purpose.  The purpose of this amendatory Act is to authorize the inspection of business premises, and the inventories, books, papers and records of businesses to facilitate the proper assessment of the taxes imposed by Sections 4 and 9 of the State Tax Act of 1985, TSL. No. 5-119.

      1024.  Transition.
     The Department of Finance shall take all necessary steps for the collection of taxes, after the effective date of this act Chapter, on items taxable under Truk Chuuk State Law 5-103, which items were imported into the State after November 20, 1984, and prior to the effective date of this act Chapter.  Failure of taxpayers to pay the taxes due to under this act Chapter shall make such taxpayers subject to the penalties, fines and liens provided in Sections 11 and 12 of Truk Chuuk State Law No. 5-103.

Source:  TSL 5-119, 24(2), modified.

      1025.  Severability.
     If any provision of this act Chapter, or its application to any person or circumstance is held invalid, the remainder of this act Chapter, or the application of the provision to other person or circumstance is not affected.

Source:  TSL 5-119, 25, modified.