This blog was last updated on June 26, 2021
Here is another answer in our Ask a Tax Expert Series, where our team of 40+ Tax Experts respond to your questions. Question: Charging Puerto Rico Sales Tax When Using 3rd Party Carrier? “We are an internet retailer that uses a third-party carrier to deliver products to Puerto Rico residents. Due to the recent Tax Law changes in Puerto Rico, are we liable for any sales taxes or do we need to charge any sales tax to Puerto Rico residents? I have read all the conditions to have Nexus in Puerto Rico and we don’t fall in any of them, but I just want to make sure.” Answer from our Taxware Tax Team The Commonwealth of Puerto Rico has established a wide number of situations where a business is considered to have nexus with the island. As you may know, most of those conditions are specified in Section 4010.01 of the Tax Code of Puerto Rico, the regulations, as well as various publications issued by Commonwealth. There are additional broadly defined provisions relating to Drop Ship scenarios, some of which are defined in Section 4020.03 of the Tax Code and in the Regulations. If your business model does not fall under any of those conditions, you may not have nexus with the island and therefore would not be required to collect and submit tax. However, you should be aware that the Commonwealth of Puerto historically has given a very wide interpretation to the provisions of the code that define the establishment of nexus for businesses located out of Puerto Rico. Taxware cannot provide direct guidance as to whether or not your organization has nexus with the Commonwealth of Puerto Rico. That decision should be made by someone within your organization or a trusted tax advisor. A tax advisor will typically perform a nexus study, which is a comprehensive analysis of the manner in which you do business and a comparison against the nexus standards as articulated by Puerto Rico. We hope this information is helpful.
