The good news: you have revenue from Puerto Rico. The bad news: as a remote seller, you have to figure out Puerto Rico sales tax compliance. Since January 1, 2021, Puerto Rico has required sales tax compliance of all sellers with $100,000 in sales or 200 transactions, This is the territory’s threshold for economic nexus.
In 2017, Puerto Rico declared that advertising or other marketing efforts in the territory established nexus under physical nexus. If you’ve established a relationship with Puerto Rico through marketing, warehousing, or other means, you must collect sales tax.
What’s more, if you do not have nexus and therefore do not have to collect sales tax, you are still responsible for quite a bit of paperwork for any direct sales you make to consumers in Puerto Rico. The government of the territory provides a document explaining that you must not only alert consumers to their responsibility for use tax but also send a report to the territory detailing all your online or mail order sales within Puerto Rico.
Sales tax in Puerto Rico
Nexus in Puerto Rico is stricter than in many states. Puerto Rico considers that you have nexus if you have any marketing activity in the territory, including “cyber portals, websites, social media or other advertising means of distribution in Puerto Rico, whether electronic or not.” Since U.S. websites are freely accessible in Puerto Rico, this description will apply to most brands. There is a clause saying that, in the case of a company that does very little business in Puerto Rico, “Nor does it…position its website to gain greater knowledge of its products to residents of Puerto Rico,” it will not be said to have established nexus.
Sales contracts of $10,000 or more establish nexus, too. Economic nexus is established at $100,000 in total gross sales or 200 transactions. The same thresholds apply to marketplace facilitators. On establishing nexus in any of these ways and making the associated sales in Puerto Rico, your company must register to collect sales tax.
Puerto Rico’s sales tax is higher than that of any state, and there are also municipal taxes. Use our rate tables to determine the sales tax rate at the invoice level. Taxes must be submitted monthly, on the tenth of the month after the taxes were collected. As a territory of the United States, Puerto Rico uses the U.S. dollar for currency.
Taxable items
- Tangible items and some digital items are taxable.
- There is an annual school supply tax holiday in July and an emergency supplies tax holiday in May.
- Groceries are taxed at a lesser level and prescription drugs are usually not taxed.
- Sweets and sodas are not considered groceries.
- Digital products in general are taxed in Puerto Rico. This includes movies, music, video games, software, and NFTs.
Sales Tax DataLINK can help
If you have sales in Puerto Rico, chances are good that you are responsible for sales tax compliance, or at least for use tax notifications. Sales Tax DataLINK can help with sales taxes in every state and the territories as well. Our software is the most accurate and affordable, and we also offer complete sales tax outsourcing services. Call now! 479-715-4275
