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May 15, 2020
Puerto Rico’s Treasury Department further extends sales tax exemption for necessities and prepared food as a result of COVID-19
Because of the COVID-19 pandemic and the recently announced extension of the lockdown period by the Governor of Puerto Rico through 25 May 2020, the Puerto Rico Treasury Department (PRTD) has further extended (Administrative Determination (AD) 20-12) the exemption from state and municipal sales tax for necessities. The PRTD is also providing additional time (AD 20-13) to acquire prepared food without paying the state and municipal sales tax.
First necessities – AD 20-12
AD 20-12 extends the sales tax exemption previously granted through AD 20-07,
The following items will be exempt from state and municipal sales tax under AD 20-07:
Prepared food – AD 20-13
AD 20-13 extends further previous sales tax-free periods (AD 20-08 and AD 20-11) from the most recent one that ended on 3 May 2020 to 25 May 2020. Merchants will report the sales on the “Sale of Exempt Tangible Property” line of the Monthly Sales and Use Tax Return. If a merchant collects sales tax from a consumer, the merchant must immediately reimburse the consumer for the amount of sales tax collected. Pursuant to the original determination in AD 20-08, items covered by the sales tax exemption period are prepared food, carbonated beverages, confectionary products, and candies.
AD 20-13 on the prepared food sales tax exemption is not applicable to alcoholic beverages.
Also, these COVID-19 exemptions both for prepared food and necessities are, in essence, applicable to the sales of those items. However, those items may be fully exempt from tax in the distribution chain during the tax-free periods because the PRTD previously issued AD 20-10, which allows merchant resellers to import or acquire taxable items without paying the sales and use tax, as applicable. The exemption period under AD 20-10 began on 6 April 2020 and ends on 30 June 2020.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Puerto Rico LLC, State and Local Taxation Group, San Juan