A Sales and Use Tax (SUT) regimen operates in Puerto Rico and has replaced, with few exceptions, the excise tax system that existed for many decades. SUT applies to taxable items: tangible personal property, taxable services, admissions rights and combined transactions, business to business services and business to customer services, subject to certain exclusions and exemptions. The SUT rate applicable to the sale of tangible personal property is 11.50% out of which 10.5% goes to the Commonwealth of Puerto Rico and 1% goes to municipalities. The SUT rate applicable to business to business services is 4%.
Filling a Sales and Use Tax Return in Puerto Rico
Every merchant engaged in any business in Puerto Rico must register with the Puerto Rico Treasury Department by filing Form AS 2914.14, Request for Merchants’ Registration. Said registration must be made thirty (30) days before the commencement of business. Failure of timely registration may result in the assessment of a $10,000 fine.
The responsibility for the payment of SUT falls on the person that buys, consumes, uses, or warehouses for use or consumption a taxable item. However, if the transaction is subject to SUT and the merchant is required to collect said tax from the buyer as a withholding agent, the merchant is responsible for the payment of the sales and use tax. If the merchant is so required but fails to collect the SUT from the buyer, the Puerto Rico Treasury Department may collect it from either the merchant or the buyer.
Every merchant and every person who has purchased taxable items subject to SUT, must file a Monthly Sales and Use Tax Return, Form SC 2915, and remit to the Puerto Rico Treasury Department Secretary SUT collected, no later than the 20th day of the following the month in which the taxes are collected or in which the transaction subject to the tax takes place. Also, goods imported are subject to the SUT at the port. Every merchant and every person who has imported taxable items must file a Monthly Imports Return and remit to the Puerto Rico Treasury Department secretary SUT collected, no later than the 10th day of the following the month in which the goods are imported. The returns should be filed electronically at the Puerto Rico Department of Treasury website, PICO.
Among the tax salient exemptions from SUT are: raw material and machinery and equipment for use in the manufacturing process (manufacturing exemption), as well as equipment and other items temporarily introduced into Puerto Rico that are directly related to the production of films, constructions, trade shows and seminars conducted in Puerto Rico provided such equipment and items are exported. Certain documentation requirements apply to qualify for these exemptions. In addition, the reseller and manufacturing exemptions require that the merchant requests a Certificate of Exemption from the Puerto Rico Treasury Department Secretary.