The IVU (impuesto sobre ventas y uso, sales and use tax) is Puerto Rico's consumption tax. It has two parts: the sales tax, which the merchant charges the customer when selling an item or a service, and the use tax, which is paid by whoever brings something in from outside to use or consume on the island. The merchant collects the IVU and sends it to the Departamento de Hacienda (Puerto Rico's Treasury Department, "Hacienda") every month. That money is never income for the business.
This guide is for business owners and professionals who need to know how much to charge and when. If you do not have your registration yet, start with the Registro de Comerciantes (merchant registration).
The rates in effect in 2026
The text of the 2011 Código de Rentas Internas (Internal Revenue Code of Puerto Rico) published by Hacienda (revised as of May 28, 2026) keeps these rates:
| Transaction | State | Municipal | Total |
|---|---|---|---|
| Sale of taxable items and services (general rate) | 10.5% (6% under Section 4020.01 plus 4.5% under Section 4210.01) | 1% (Section 6080.14) | 11.5% |
| Services provided to other merchants (B2B) | 4% (Section 4210.01(c)) | Does not apply | 4% |
| Designated professional services | 4% (Section 4210.01(c)) | Does not apply | 4% |
| Food and food ingredients | Exempt (Section 4030.11) | 1% | 1% |
| Prepared food sold by restaurants certified by Hacienda | 6% (exempt from the 4.5%, Section 4210.01(a)(1)) | 1% | 7% |
Were there changes in 2025 or 2026? Not in the rates, according to the official text of the Code revised as of May 28, 2026. The tax reform discussed in 2025 and 2026 focused on individual income tax, and the official text of the Code shows no changes to the IVU. The important change was administrative: Act 72-2025 (Ley 72-2025) and Circular Letter (Carta Circular) of Internal Revenue No. 26-13 brought the municipal IVU into SURI (Hacienda's online system). Starting with the July 2026 period, in 73 municipalities the 1% municipal tax is reported on the same monthly Hacienda return and paid through SURI. The municipalities of Bayamón, Carolina, Guaynabo, Mayagüez and San Juan do not participate, and in those the municipal IVU is still filed directly with the municipality. We explain the details in our guide to the monthly IVU return.
What is subject to IVU
The IVU applies to every "taxable item," which the Code defines as:
- Tangible personal property: clothing, appliances, parts, furniture, materials and almost any physical item.
- Taxable services: any service provided to any person, including storage of goods, leasing of personal property (such as daily car rentals), computer programming, equipment installation and repair of personal property.
- Admission fees to shows and events.
Services provided to you by a person outside Puerto Rico are also taxable if they relate to your activities here. In those cases, as Circular Letter 20-33 explains, the person receiving the service in Puerto Rico is responsible for paying the IVU.
Main exemptions
Chapter 3 of Subtitle D of the Code contains dozens of exemptions. The ones you see most often day to day are:
- Food and food ingredients (exempt from the state IVU, not from the 1% municipal tax).
- Prescription drugs, insulin, prosthetics, oxygen and certain medical equipment.
- Items and equipment for people with disabilities, with the corresponding certification.
- Rent on housing that is your principal residence, and commercial rent paid by a merchant that complies with the fiscal terminal requirement, if it applies.
- Services the law excludes from "taxable service": health and medical-hospital services, educational services and tuition, insurance, interest and charges of financial institutions (with exceptions for certain bank charges) and services provided by the government.
There are also IVU-free periods that Hacienda announces by circular letter. For fiscal year 2026-2027, school uniforms and supplies are exempt from July 17 to 18, 2026, and from January 8 to 9, 2027 (Circular Letter 26-11). Hurricane preparedness items were exempt from May 22 to 25, 2026 (Circular Letter 26-08).
The 4% IVU on B2B services
Since October 1, 2015, services provided to other merchants, meaning services provided to a person engaged in a trade or business, pay 4% instead of 11.5%, and do not carry the 1% municipal tax (Sections 4210.01(c) and 6080.14).
There are two exceptions that confuse many people:
Services that pay the full rate even if the customer is a business. The definition in Section 4010.01(bbb) excludes these services from the 4%, so they remain regular taxable services: bank charges, collection of accounts, security and private investigation, cleaning, laundry, repair and non-capitalizable maintenance of personal property, telecommunications, waste collection and daily vehicle rentals.
Services that do not pay the 4% IVU. Among others:
- services provided by people whose annual business volume does not exceed $300,000 (threshold in effect since July 1, 2020, measured using the prior tax year's volume and adding the volume of the entire controlled group);
- educational, health and financial services;
- services between members of the same controlled group or related entities;
- subcontracted services on construction projects;
- the wages of an employment agency's employees, identified on the invoice;
- advertising and rights to use intangibles.
Designated professional services
Designated professional services also pay 4% (Section 4010.01(ll)). They are legal services and the services of agronomists, architects, certified public accountants, real estate brokers and salespeople, draftspersons, real estate appraisers, geologists, engineers and surveyors, return preparers, and certain continuing education.
The following do not pay the 4%, among others:
- professionals whose annual business volume does not exceed $200,000 (since March 1, 2019, based on the prior year's volume);
- attorneys' fees for legal representation before courts and agencies, legal consulting and notary services;
- services between members of a controlled group.
Designated professionals can use the cash method for IVU even if they use the accrual method for income tax (Section 4041.01(b), according to Circular Letter 20-33).
How to collect IVU
- Calculate the IVU on the sales price of each taxable item and collect it along with the price. Section 4020.06 requires that it be collected together with the sales price.
- Separate the state and municipal amounts in your records. Since July 2026, the monthly return asks for the information by location in order to calculate the municipal IVU.
- Do not overcharge. Collecting too much IVU carries a penalty of $100 for each receipt or invoice (Section 6043.06(a)).
- Request and keep exemption certificates when you sell free of IVU, for example to a reseller. If you do not keep them, you pay the tax plus a 50% penalty (Section 6043.02(d)).
- Send in the IVU with the monthly return, no later than the 20th of the following month.
Use the calculator to see the breakdown of a sale:
A hardware store in Juncos sells a $250 ladder. The state IVU is $26.25 (10.5%) and the municipal IVU is $2.50 (1%), for a total of $28.75 and a charge of $278.75.
That same month, an engineer with a business volume of $350,000 bills a company $2,000 for a design. Because he provides designated professional services and his volume exceeds $200,000, he charges 4%: $80. There is no municipal portion.
IVU on imports
Everything brought into Puerto Rico for use, consumption or resale is subject to use tax at the same rates, and Hacienda also collects the 1% municipal tax. The general rules in Section 4042.03 are:
- Imports by sea or by electronic means pay the tax before release, that is, before you take possession of the merchandise.
- Bonded merchants with a sufficient bond, and goods arriving by mail or air cargo, pay no later than the 10th of the following month.
- What you take out of your imported inventory for your own use, samples or donations pays no later than the 20th of the following month.
Merchants with a Reseller Certificate (Certificado de Revendedor) can claim a credit on the monthly return for the state IVU paid on merchandise for resale, and buy inventory free of the 1% municipal tax. That credit does not apply against the municipal IVU.
Frequently asked questions
Is the IVU 11.5% in every town?
Yes. The 1% municipal tax is a fixed, uniform rate that every municipality has had to impose since February 1, 2014 (Section 6080.14). What changes from town to town is who you file the 1% with: since July 2026, with Hacienda through SURI in 73 municipalities, and directly with the municipality in Bayamón, Carolina, Guaynabo, Mayagüez and San Juan.
Do I charge 4% or 11.5% if my customer is a business?
It depends on the service. If it is a regular taxable service provided to a business, it is usually 4%, unless it is one of the excluded services, such as cleaning, security, repair or telecommunications, which pay 11.5%. If your business volume for the prior year was not more than $300,000, your B2B services do not pay the 4%. Items you sell to a business pay 11.5%, unless the buyer has a valid exemption certificate.
Do restaurants charge 11.5%?
Restaurants certified by Hacienda have not charged the 4.5% portion on prepared food, carbonated drinks, baked goods and candy since October 1, 2019, so their rate on those items is 7%. A restaurant without the certification charges 11.5%.
Do online merchandise purchases pay IVU?
Yes. If the seller did not charge you IVU, the purchase is subject to use tax. Hacienda has a process in SURI for people who are not merchants to report and pay on those imports.
What happens if I did not collect IVU that I should have?
You are still responsible as the merchant. You would have to pay the tax out of your own pocket, plus interest, surcharges and penalties. Read our guides on the monthly IVU return and on interest, surcharges and penalties.
Sources
- Código de Rentas Internas de Puerto Rico de 2011, según enmendado (Secciones 4010.01, 4020.01, 4020.02, 4030.11 a 4030.14, 4210.01, 4210.02 y 6080.14), Departamento de Hacienda. hacienda.pr.gov
- Departamento de Hacienda, "Impuesto sobre Ventas y Uso (IVU)". hacienda.pr.gov
- Departamento de Hacienda, "Carta Circular de Rentas Internas Núm. 26-13 (integración del IVU municipal en SURI)", 30 de junio de 2026. hacienda.pr.gov
- Departamento de Hacienda, "Carta Circular de Rentas Internas Núm. 20-33 (exención temporera del IVU de 4%)", 16 de julio de 2020. hacienda.pr.gov
- Departamento de Hacienda, "Carta Circular de Rentas Internas Núm. 26-11 (periodo libre de IVU por regreso a la escuela 2026-2027)". hacienda.pr.gov
- Departamento de Hacienda, "Carta Circular de Rentas Internas Núm. 26-08 (periodo libre de IVU para la temporada de huracanes 2026)". hacienda.pr.gov
787TAX is an independent guide. It is not Puerto Rico's Departamento de Hacienda, the CRIM or the IRS. This page is general information, not tax or legal advice. Example figures are hypothetical. Found an error? Tell us.
