The Puerto Rico Treasury Department favored Monday a bill that would give it the tools to Sales and Use Tax on sales of taxable products in Puerto Rico sold online by businesses without physical presence on the island.
In a public hearing of the Senate Finance and Budget Committee chaired by Rep. Antonio Soto-Torres, Treasury Deputy Secretary Roxana Cruz-Rivera, stressed the need to correct statutes related to online purchases from stores without presence on the island, and through that, raise additional revenues.
The intention of House Bill 849 is in line with Treasury’s efforts to increase the uptake of the sales and use tax by using technology. The House’s proposal opens doors for companies that do not charge the IVU (as the sales and use tax is referred to in Spanish) to “sit down to negotiate and become withholding agents,” Cruz-Rivera said.
Rivera Cruz asked for an additional 10 days to submit some recommendations to harmonize various sections of the Internal Revenue Code with the bill. She anticipated that the agency would ask for an increase in penalties to non-withholding retailers that fail to file the required reports.
While the list of retailers that sell online and do not apply IVU to Puerto Rico shipments is long, the most prominent player is Amazon.
The bill provides Treasury with law enforcement tools and clears up existing gaps that will allow to more effectively address the problem of online sales tax collections from companies with no physical presence in Puerto Rico.
The bill also addresses the claims by small and medium enterprises that have expressed to be at a competitive disadvantage with larger companies.
“Companies like Amazon can no longer use the excuse that because they have no stores in Puerto Rico, they do not charge the tax,” said Soto-Torres, adding the bill does not propose the payment of a new tax.
“Companies are supposed to be charging the IVU, but to be more competitive they don’t. What I seek is to give the government the power to reach agreements with the companies [to collect and remit payments],” he explained.
“By doing this, it would be less burdensome for companies, as they don’t have to file monthly and annual reports for sales and dates that the transactions were made, so that Treasury may proceed with the collection,” said Soto-Torres.
During the hearing, the lawmaker read a letter from the United Retailers Association, which supported the bill. Local business and Justice Department representatives will testify next Monday on the bill, he added.