What Exactly Are Tax Stamps and How Do You Make Sure They Are Legit?

Brand Protection
April 12, 2021
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What are tax stamps and how to make sure they are authentic

The trouble with tax stamps is that most of us know vaguely what they look like, and few of us could say for certain if one is legitimate or not. This is a problem, because governments across the world take a very dim view on tax evasion and tend to implement strict penalties of fraudulent tax documents. What's more, if the revenue stamps are not in order, this could suggest that the product itself is a fake.

Take a look at our guide to learn more about these stamps, and to discover how you can check that the product you are holding in your hands is the real thing.

What are tax stamps?

A tax stamp is a mark of authenticity that is placed on products after excise tax has been paid in full and the item is ready for legal sale. In the United States, these taxes were first applied in 1791, and were attached to bottled whiskeys. Ever since then, governments have been seeking ways to prove beyond doubt whether or not excise tax is due. This led to the development of tax stamps.

The primary idea behind these tax stamps is that they are fraud-proof. The stamp itself bears a sophisticated design that is difficult to fake to a high degree of quality, as well as numerous features that are designed to make identification easy. While tax markers like these are fairly effective in achieving their aims, to say that they are fraud-proof is a serious overstatement. Both businesses and consumers need to remain vigilant if they are to keep themselves protected against fraud, and if they are to spot these fraudulent tax stamps when they encounter them.

Excise tax vs sales tax

What is excise tax, exactly? Excise tax is an integral part of what tax stamps are all about, so it's important to understand this term. Well, this is a flat tax that is attached to certain items. For example, governments may apply taxes on specific products -- in particular, luxury items or products that are linked to health issues -- at a uniform rate. This is known as the excise tax.

How is an excise tax different from sales tax/ VAT? You may be thinking that these two terms are interchangeable, and to be fair, they both work in a similar way. However, they are crucially different.

Sales tax, for instance, is applied to basically everything you buy, while excise tax is usually restricted to the item types listed above. Another difference is the way in which the tax is implemented -- sales tax is based on a percentage of the item's value, while excise tax is implemented at a flat rate.

Counterfeiting tax stamps

Unfortunately, while excise tax stamps are designed to be a security measure, they do get counterfeited from time to time. Fraudsters who want to avoid paying the required tax on the items they sell, or who want to give their fake products an air of authenticity, may try to fake these stamps.

What's more, it's not always easy to spot these fakes. Fraudsters have very sophisticated methods of faking tax stamps, and the finished product may look almost exactly like the real thing. If we put a luxury product such as wine under the microscope, we can see the scale of this problem. Figures from the European Union show that counterfeit wine and spirits trading costs the Union's markets $1.43 billion each year, while 70% of wines sold in the Far Eastern nation of China are believed to be fraudulent. Many of these beverages are luxury goods, bearing fraudulent tax stamps.

How to spot legit tax stamps

Immediate signs that a tax stamp is legit

  • The tax stamp is clean and undamaged. Many tax stamps -- for example those placed on cigarette cartons or liquor bottles -- also serve the purpose of an anti-tampering measure as well as that of an anti-counterfeit solution. If the stamp is damaged or has been resealed, this is a sign that the product may not be legitimate. It may also be a sign that a tax stamp has been lifted from another product and applied to this one.
  • There are no obvious errors or signs of low quality. Governments take excise stamps very seriously. As a result, all stamps are manufactured with a very high level of quality. If you are looking at a stamp with obvious printing errors or a stamp that has been manufactured from a sub-standard material, it is likely to be fake.
  • The stamp is from a different jurisdiction. Different nations -- and even different states, provinces and territories within an individual nation -- may have different excise stamps. If the product you are holding has a stamp from a different jurisdiction, this means it is not legal for sale within your local market, and may even be the result of counterfeiting.

More sophisticated signs

To discover more about the more sophisticated signs used to counter fraud and to achieve effective product authentication, you will need to consult the excise tax authority in your local jurisdiction. Different authorities deploy different security measures and features, and will implement different rules and standards relating to tax stamps.

For example, in Canada, excise tax stamps measure 20 x 40 mm and include an alphanumeric identifier number. It cannot be assumed that this will apply in all international jurisdictions. In Ghana, different designs are used to denote different product categories and to differentiate between imported and domestic products.

Most jurisdictions use highly sophisticated anti-fraud techniques in the manufacture of tax stamps, in the same way that banknotes contain numerous different security features in their design. It's important to make yourself familiar with the specific features in your area and check your products for these features as best you can.

A digital approach

We live in a digital age, and so it follows that modern tax stamps should have a digital aspect. Most jurisdictions now deploy digital methods -- alongside the more traditional physical methods -- to safeguard the security of their tax stamps. But how do business owners and consumers verify these security features through digital authentication?

The engage™ app and platform is a major leap forwards when it comes to keeping consumers and businesses safe from fraud. Businesses can register the tax information of their products via the platform. Consumers can then use the app to assess the validity of products before purchase, scanning the code with their smartphones to provide instant assurance.

One thing is for certain, digital solutions like this one are going to be at the forefront of the fight against counterfeiting in the coming years.

Verifying tax stamps with engage™

To discover more about how engage™ can help your business remain protected against fraudsters, or to learn about the power the app offers to consumers, get in touch with our team. Request your free demo of the app and platform, and take major steps towards preventing the damaging effects of fraud and counterfeiting.

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