Guam's Business Privilege Tax

The Government of Guam's (GovGuam) Department of Revenue and Taxation (DRT) collects tax revenues, which account for more than half of GovGuam's revenue sources. The Business Privilege Tax (BPT), which applies to all persons or contractors on Guam as well contractors not located on the island but who conduct business on the island, made up 35 percent of Guam's tax revenue in fiscal year 2012. Any business that has contracts with the Federal Government, including the U.S. Department of Defense, for U.S. military projects on Guam is subject to the tax. With more than 6,000 U.S. Marines and their dependents relocating to the island, the number of contracts for projects may increase to build the infrastructure necessary to accommodate this increased U.S. military presence.

We evaluated DRT's ability to collect the BPT from Federal contractors. We determined that DRT has an incomplete procedure for identifying contractors subject to the BPT and for collecting those taxes. DRT also uses an incomplete list of Federal contractors when identifying those subject to BPT.

We offered three recommendations to help improve DRT's processes. We recommended that GovGuam resolve whether Guam is owed $414,414 in taxes that OIG found it did not collect from 6 contracts in a sample of 40 reviewed; develop and implement a BPT collection procedure for all contractors conducting projects for the U.S. Government on Guam; and expand data sources to include, but not limited to USASpending, to identify all contractors that may be subject to the BPT. Based on the response from the Governor of Guam, we consider all three recommendations unresolved.