CUC seeks exemption from beautification tax

The cash-strapped Commonwealth Utilities Corp. pays some $3.8 million a year in taxes when it procures fuel for its power plants—an amount that could be lowered if the agency is exempted from paying the “beautification tax.”

CUC executive director Alan W. Fletcher told Saipan Tribune Thursday that the agency will ask the Legislature to exempt the corporation from the beautification tax.

“The beautification tax is a fairly new wrinkle that CUC is now being assessed by Mobil Oil Marianas, Inc. Past and current contracts with Mobil pass through to CUC all taxes charged on fuel. Previously these taxes included wharfage fee, oil spill tax, and gross receipts tax and now the beautification tax is included,” said Fletcher.

He revealed that in total, all these taxes amount to over 21 cents per gallon of diesel—about $3.8 million per year.

Saipan Tribune learned that 4 CMC 1411 as amended by Public Law 13-42 levies a tax of 0.42 percent ad valorem on all consumer goods as defined in 1401(g). This tax shall be collected by the Division of Customs at the point of entry. However, the Legislature is permitted to amend the law and exempt an organization from this tax.

“Previously CNMI Division of Customs allowed this tax to be offset. However, [Customs] has now disallowed this longstanding practice and informed Mobil that fuel sold to CUC is exempt only from LFT and not from the beautification tax. As a result, Customs invoiced Mobil the total beautification tax from 2003 to present,” disclosed Fletcher.

If Customs’ position is correct, and if Mobil is required to pay back beautification taxes on volumes previously sold to CUC, the agreements between CUC and Mobil allow for this tax to be recovered from CUC by Mobil, Fletcher said.

“As Customs pursues this claim, and should it prevail, Mobil intends to recover these beautification taxes from CUC,” he added.

Saipan Tribune learned that Mobil now includes this beautification tax on the price of diesel fuel oil invoices it bills CUC. By way of estimate, this additional tax amounts to about $230,000 per year.

Fletcher said CUC is currently looking at the legality of the tax as it applies to fuel delivered to CUC. CUC feels that the tax should only apply to “packaged” goods that arrive in the CNMI in containers. The law, he said, was passed to support the CNMI’s solid waste management program.

“If it is determined that this tax applies to the diesel fuel delivered to the power plants, CUC will approach the Legislature and request an exemption from this tax to prevent it from being passed on to consumers,” added the executive director.