In light of the state of emergency declared due to Hurricane Irma, Puerto Rico has exempted (Administrative Determination (AD) 17-09) prepared food from the payment of sales tax from September 8, 2017 to September 10, 2017. Section 6080.12 of the 2011 Puerto Rico Internal Revenue Code (2011 Code) authorizes the Secretary of the Puerto Rico Treasury Department to take certain actions when a disaster declaration order is made by the Governor of Puerto Rico.

Merchants should report those sales on Form SC 2915, Monthly Sales and Use Tax Return, under the section for sales of exempt tangible personal property.

Implications

Prepared food is generally defined as food that is warmed or sold warm by merchants. The definition also includes two or more food ingredients that are combined to be sold as one article or product, as well those sold with eating utensils, such as knives, forks, spoons, glasses, cups, napkins or straws. In the aftermath of Hurricane Irma, close to 70% of Puerto Rico's residents were left without electric power. To mitigate the financial impact on consumers, prepared food such as that usually served in restaurants will not be subject to the 11.5% sales and use tax. It is important for merchants selling prepared food to make the necessary changes to their point of sale systems to avoid collecting sales and use tax from 12:01 am on Friday, September 8, 2017 until 11:59 pm on September 10, 2017.

The exemption period does not extend to the sale of alcoholic beverages as specifically indicated in AD 17-09. The AD is silent about the implications with respect to the 1% municipal sales tax. The 2011 Code provides, however, that the municipal tax should be imposed under the same basis, exemptions and limitations provided at the state level.

———————————————