Temporary exemption from the sales and use tax in prepared foods

On January 7, 2020, the Governor of Puerto Rico issued Executive Order No. OE-2020-01, in which she declared Puerto Rico in a state of emergency as a result of the seismic activity experienced in the past few days.

The Puerto Rico Department of the Treasury “PRTD” issued Administrative Determination 20-01 “AD 20-01” to provide a temporary exemption from the Puerto Rico Sales and Use Tax “SUT” to individuals in those taxable items acquired in Puerto Rico that are considered “prepared foods”, “carbonated drinks”, “confectionery products” and “candies” hereinafter and collectively, “prepared foods”, as defined in Section 4010.01 of the Puerto Rico Internal Revenue Code of 2011, as amended “Code”.

Section 6080.12(b) of the Code empowers the Secretary of the Treasury “Secretary” the authority to exempt from the payment of the SUT on taxable items acquired by individuals affected by a disaster, which are essential items required for the restoration, repair, and supply of their basic needs and damages caused by a disaster declared by the Governor of Puerto Rico.

Through AD 20-01, the PRTD exempts from the state and municipal SUT established in Sections 4020.01, 4210.01 and 6080.14 of the Code, the prepared food purchased by any natural person in Puerto Rico. The selling merchant will report said sales in their Monthly SUT Return (Form SC 2915) specifically in the line “Sale of Exempt Tangible Personal Property” of the form. This exemption will not apply to the sale of alcoholic beverages.

If a merchant, by action or omission, charges a consumer the SUT on a sale of prepared foods exempted from the payment of said tax under AD 20-01, the merchant will be obliged to reimburse the amount of the SUT charged to the consumer and will be subject to Section 4020.08 (c) of the Code which establishes the following:

(c)“The tax to be collected in accordance with this subtitle, and any other amount, part or not of this tax, that is not returned to a buyer, but that was collected from the buyer under the representation that it was a tax, shall constitute funds of the Government of Puerto Rico from the time of its collection." 

AD 20-01 will be effective immediately until 11:59 pm of Friday, January 31, 2020.

We will continue with our commitment to keep you up to date with these tax-related developments. Please contact our Tax Department should you require additional information regarding this or any other tax issue. We will be glad to assist you.