Puerto Rico Sales Tax Rate: 11.5%, 7%, and 4% Tiers Explained

The sales tax rate in Puerto Rico is 11.5% on most purchases, made up of a 10.5% Commonwealth tax and a 1% municipal tax collected together at the register.¹² The tax is called the IVU, short for Impuesto sobre Ventas y Uso. Several categories of goods and services pay less than 11.5%, or nothing at all, so what you actually owe depends on what you’re buying.

Rates at a Glance

11.5% — standard rate on most tangible goods and services
7% — prepared food from authorized restaurants and food establishments
4% — business-to-business services and designated professional services
1% — basic groceries and unprocessed food ingredients (municipal portion only)
0% — prescription medicine, exports, solar equipment, farming supplies, and other listed exemptions

The 1% municipal piece is uniform across all 78 municipalities, so no matter which town you shop in, the local component doesn’t change. What varies is the Commonwealth-level rate, which drops to zero for some categories and to 4% for qualifying services.

What the 11.5% Rate Covers

The standard 11.5% applies to most tangible personal property and many services. Electronics, furniture, non-exempt clothing, and contractor work you hire as a consumer typically fall here. Merchants collect both the state and municipal portions together and remit them through a single filing, though the two shares are accounted for separately.

The 4% Rate on Professional and Business-to-Business Services

Since October 2015, business-to-business services and designated professional services have been taxed at 4%, with no municipal add-on.² The 1% doesn’t apply to these transactions, so 4% is the whole tax.

Designated professional services include work performed by licensed attorneys, certified public accountants, engineers, surveyors, architects, geologists, real estate agents and appraisers, agronomists, and professional draftsmen. Tax return preparation specialists also qualify when the work relates to Puerto Rico or U.S. federal filings. Business-to-business services cover any service rendered to a person engaged in a trade, business, or income-producing activity, provided both the provider and recipient are registered merchants.

Some services are specifically pulled back out of the 4% category and stay at 11.5%. These include bank charges for account management, debt collection, security and cleaning services, laundry, telecommunications, waste pickup, and ordinary motor vehicle leasing. A business buying one of these services pays the standard rate even though its vendor is another registered merchant.

The 7% Rate on Prepared Food

Restaurants and food establishments can charge 7% on prepared food instead of 11.5%, under an administrative determination effective October 2019. Prepared food means items sold heated, combined by the seller for consumption, or sold with eating utensils provided by the establishment.

The reduced rate isn’t automatic. To charge 7%, the merchant needs a valid Merchant Registration Certificate, must be current on all IVU return filings, cannot have outstanding tax debts, and must have a tax terminal installed at each point of sale. Restaurants that haven’t completed authorization must charge the full 11.5%.

Groceries and Food Ingredients

Basic groceries and unprocessed food ingredients are exempt from the 10.5% state-level IVU, but they still carry the 1% municipal tax. Since July 2014, municipalities have been required to impose that 1% on food products and food ingredients.² Raw produce, meat, bread, and other supermarket staples are taxed at 1% rather than 11.5%.

The distinction between food ingredients (1%) and prepared food (7% or 11.5%) matters at places that sell both. A ready-to-eat sandwich at the deli counter gets the prepared-food treatment; packaged ingredients on the shelf get the grocery treatment.

Exempt Goods and Services

The Puerto Rico Internal Revenue Code lists several categories that carry no IVU at all. Per the IVU monthly return instructions, these include:³

Prescription medicine, along with articles, equipment, and technology used to provide health services, and devices designed to compensate for physical disabilities
Goods acquired for official use by Puerto Rico or U.S. federal government agencies
Taxable items sold for use and consumption outside Puerto Rico, if exported within 60 days of the sale
Solar electric systems used to produce power, including accessories and necessary components
Articles acquired exclusively for use in bona fide farming operations
Goods temporarily brought into Puerto Rico for productions, construction, trade shows, or conventions that will be re-exported

The Treasury Secretary has broad authority to impose conditions on exemption certificates, including bonds, periodic inspections of business premises, and detailed documentation of exempt transactions.⁴ Claiming an exemption and then using the goods for a non-exempt purpose means owing the full tax plus penalties.

Small Service Providers Under $50,000

Service providers whose annual gross receipts don’t exceed $50,000 are exempt from collecting and remitting IVU on services entirely.¹ A freelance consultant earning $45,000 a year doesn’t charge IVU on invoices, whether the client is another business or an individual. The threshold looks at the preceding taxable year’s gross receipts, and the merchant’s Registration Certificate will indicate no withholding is required. Clients can request a copy of the certificate to confirm eligibility. The exemption covers services only; it does not apply to merchants selling tangible goods.

Use Tax on Goods Shipped In

Goods brought into Puerto Rico from outside the island are subject to a use tax at the same rates as the sales tax. Anyone importing tangible personal property must file an Import Declaration (Form SC 2970) through the SURI portal.¹ For goods arriving by sea, the declaration must be filed before you take possession of the merchandise from the carrier.

Bonded merchants and importers bringing goods in by air or mail have until the 10th day of the month following the import to pay.¹ The same deadline applies to digital goods acquired through electronic transmission. Because the use tax is collected once, at the point of import, the item isn’t taxed again when sold or used inside Puerto Rico.

Sales Tax Holidays

Puerto Rico periodically declares sales tax holidays during which certain goods are temporarily exempt. The island has offered a back-to-school holiday covering school uniforms, footwear, and supplies, and a hurricane preparedness holiday exempting portable generators (up to $3,000) and specified preparedness items. Both have been recurring since 2011, though the exact dates are set each year by administrative order. Announcements from the Treasury Department typically come in the spring for hurricane preparedness and summer for back-to-school shopping.

1
Treasury Department. Regulation of the Puerto Rico Internal Revenue Code of 2011
2
Justia. Puerto Rico Code 13 L of PR 33344 – Imposition of Sales and Use Tax by Municipalities
3
Department of the Treasury (Commonwealth of Puerto Rico). Form AS 2915.1 D – Informative
4
Justia. Puerto Rico Code 13 L of PR 32051 – Exemptions