Puerto Rican Sales Tax

In November of 2006, Puerto Rico implemented a sales tax for the first time its history as a commonwealth of the United States. Before that, the government made its money on what we call an arbitrio, or “import tax”.

The goal of the sales tax was to make contributions to the government more transparent, as well as lower the price of goods by removing the import tax that was hidden in the retail price. The problem with this idea was that many of the goods that were in store inventories at the time of the switch to sales tax had already paid the import tax, so the vendors weren’t going to lower prices immediately. As a result, Puerto Rican consumers were stuck with the 6.6% import tax hidden in the retail price of store items and a 7% tax visible at the register. What’s more, very few vendors (less than 10%) lowered the price of their wares even after they had cleared their inventories of items that had paid the import tax, leaving Puerto Rican citizens to bear the economic burden.