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Puerto Rico strikes again with bad sales tax moves

Posted by salestax on April 2, 2009

***UPDATE***

This bill was passed:  No more resale certificates allowed in PR as of 6/1/09 and tax returns for June collections will start being due on the 10th of the month beginning July 10, 2009.

********************************

Back in early March, Puerto Rico House Bill 1404 was introduced to the legislation that would changed the way their sales tax is collected and remitted.  For full details on this move see the Grant Thornton alert here.

Not only is the whole PR sales tax legislation illegally implemented from the very start (my opinion based on their definition of  nexus vs. the 25+ year old  Quill v. North Dakota case amongst several others).  But, to require foreign companies to collect the PR sales tax and then to make these changes is really asinine.  It’s as if they know nothing about the US Sales Tax system, how it works, how to implement it, or it’s history and how it’s changed over the years.  Anyway, these changes include removing an up-front exemption for resale and implementing an Advanced sales tax. Advanced Sales Tax is when a distributor pays tax on everything it buys and then charges customers tax when it is sold.  After the sale the distributor can then take a credit on those items on which tax was paid against the tax that was charged to customers.  A practice, long upheld by the state of Louisiana, who actaully came to their senses and removed that rule for 2009. 

The other major change is requiring that all Puerto Rico sales/use tax returns be filed by the 10th of the month instead of the 20th.  Here again… do they not learn anything by studying the U.S.A. sales tax system?  There used to be states who required early pre-payments or early return due dates – they’re all but gone.  The long hold out is Maine who requires a return be filed by the 15th of each month.

And, to boot it all into a nice little bundle, they wanted it all effective by April 1st!  hahaha!!!  There’s an April Fool for you!  On March 31st, since the legislature had not acted on this bill yet, taxpayers were wondering what to do.

Finally, someone in PR realized at the 11th hour that this was maybe a little too ambiguous.  So, in the late hours of the typical business day on March 31st, the PR Secretary of Treasury released a statement that the effective dates would not be until June 1st if the bill was passed.  If you can read Spanish, feel free to look at the statement here

So, breathe easy for now, until we find out if this legislation will pass muster.

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One Response to “Puerto Rico strikes again with bad sales tax moves”

  1. bicicleta eléctrica…

    […]Puerto Rico strikes again with bad sales tax moves « The Sales Tax Connection[…]…

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