22 May 2017
Indirect Tax Alert
News from Americas Tax Center
Puerto Rico amends
sales and use tax to
target collection on
internet sales and
payment of municipal
use tax on imports
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Executive summary
On 29 April 2017, the Governor of Puerto Rico signed legislation (Act 25-2017)
aimed at increasing collections of sales and use tax (SUT) on internet sales
made by companies without a physical presence in Puerto Rico. The Puerto
Rico Treasury Department (PRTD) followed with the issuance of Circular Letter
(CL) 17-08 on 1 May 2017, addressing payment of SUT on internet purchases
made by individuals who are not merchants. The following summarizes the key
aspects of these recent developments.
Detailed discussion
Copy into your web browser:
Act 25-2017
http://www.ey.com/US/en/Services/
Tax/Americas-Tax-Center---borderlessclient-service
New disclosures of SUT information for “non-withholding agent”
Act 25-2017 introduces the “non-withholding agent” status as a new SUT
concept. This new term refers to merchants that conduct sales by mail,
including internet sales, and whose only contact with Puerto Rico is through
the purchaser who is a person resident in Puerto Rico or a person dedicated
to industry or business in Puerto Rico.
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Indirect Tax Alert Americas Tax Center
Beginning on 1 July 2017, merchants that are “non-withholding agents” will be required to file the following notices:
Notice
Due date
Information required
Written notification to
Puerto Rico purchasers
about SUT reporting and
payment obligations,
including such notice in
receipts and invoices
Each time a purchase is
completed
Purchasers must be notified in writing that the $100 for each
purchase may be subject to SUT in Puerto Rico violation
and that they should file an Import Declaration
and Tax on Imports Monthly Return, and to
report and pay any SUT due.
Quarterly notice to the
PRTD
1. 30 April
(31 March quarter)
1. Name and address of the seller
2. 31 July
(30 June quarter)
2. Name and delivery address of each buyer in
Puerto Rico
Penalty to
non-withholding
agent for failure
to file notice
$5,000 for each
violation
3. The dates of the purchases, the quantities of
3. 31 October
each purchase and the description of each
(30 September quarter)
purchase
4. 31 January
(31 December quarter)
4. The category of the purchase, including
whether it is exempt or taxable, and any other
information required by the Secretary
5. A statement to the effect that purchasers
have been notified of the requirement to file
an Import Declaration and Tax on Imports
Monthly Return in which they would report
and pay any SUT
Annual notice to Puerto
Rico purchasers
31 January
Information similar to that of the Quarterly
Notice to the PRTD for the preceding calendar
year.
$500 for each
violation
Import Declaration and Tax on Imports Monthly Return and the payment of the 1% municipal SUT
Merchants that import tangible property into Puerto Rico must submit an Import Declaration that provides detailed information
on the 10.5% use tax related to the tangible property introduced in Puerto Rico. Act 25-2017 now requires that the Import
Declaration include the 1% municipal SUT that will now be collected by the PRTD on imported tangible property. It is established
that no additional import declaration will be required for purposes of the municipal SUT.
The PRTD is now authorized to waive the requirement of filing the Tax on Imports Monthly Return for merchants that paid the
total SUT due when the Import Declaration was filed.
CL 17-08
CL 17-08 includes guidance for individuals who make internet purchases, but are not merchants. Under CL 17-08, all individuals
who are not merchants and who import taxable goods for personal use or consumption must file Form SC 2970A, Declaration
of Use of Imported Goods and Services, and pay the corresponding SUT. Individuals must file the declaration with the payment
through the electronic system known as Unified Internal Revenue System (SURI by its Spanish acronym).
Indirect Tax Alert Americas Tax Center
The obligation to file the declaration and make the SUT
payment applies when an individual:
•Acquires and imports taxable or exempt items for personal
use or consumption through maritime transport
•Imports a taxable item acquired for personal use or
consumption by any transport means (except maritime
transport) and the sale of such taxable item was not subject
to the collection of the SUT
If the good is imported or introduced into Puerto Rico
through maritime transport, the declaration must be filed
with the SUT payment before the individual takes possession
of the good. If the individual shows that SUT has been paid
for the good, the individual must include a copy of the bill
or purchase order along with the import declaration.
If the good is brought into Puerto Rico by air, mail or
other means of transportation, the individual must file the
declaration and remit the SUT payment on or before the
10th day of the month following the date on which the good
is introduced.
CL 17-08 contains examples to illustrate these provisions.
It also provides step-by-step instructions for filing the
declaration through SURI.
Implications
Businesses and persons making internet sales to customers
that are residents of Puerto Rico or persons dedicated to
industry or business in Puerto Rico that have determined that
they would not register in Puerto Rico for SUT purposes due
to lack of physical presence (i.e., lack of nexus with Puerto
Rico) should reassess that determination in light of the soonto-be implemented requirements for a “non-withholding
agent.” Failure to comply could result in penalties imposed
on a per-violation basis, which could become material. Given
the fiscal crisis currently facing the Commonwealth, PRTD
officials have noted that they will step up enforcement efforts,
with particular emphasis on internet sales. Act 25-2017 and
CL 17-08 are testament to this new enforcement focus.
In additiosn, persons importing taxable items into Puerto
Rico need to take notice of the new requirement to pay the
1% municipal SUT on the Import Declaration and Tax on
Imports Monthly Return in order to ensure compliance with
these changes. The effective date of this new rule seems
to be the date of approval of Act 25-2017 (29 April 2017),
while the new reporting obligations for non-withholding
agents apply starting 1 July 2017.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Puerto Rico LLC, State and Local Taxation Group, San Juan
• Pedro Mercado-Reyes
• Pablo Hymovitz Cardona
• Rosa Rodriguez
+1 787 772 7177
+1 787 772 7119
+1 787 772 7062
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[email protected]
[email protected]
[email protected]
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Indirect Tax
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