Finance ministry restates tax rule on purchases by Internet

The Ministerio de Hacienda has completed a study of its right to collect sales tax on oversea Internet purchases. Predictably, the ministry and the Dirección General de Aduanas concluded that Costa Rican law allows the collection of sales tax from recipients of overseas goods.

This issue has been disputed and even went to court. The ministry started the fight last year when in October it began requiring the payment of sales tax on packages sent into the country. The bulk of the packages were Internet purchases by Costa Ricans for Christmas.

There still are mountains of packages on which recipients declined to pay sales tax.

The ministry is joining a trend that is even evident in the United States where tax-free Internet shopping is being challenged. The rule there is that if the distributor does not have a physical presence in the particular state, the local government cannot require the firm to collect sales taxes. So when New Balance opens up a distribution center in a state, the firm begins to collect taxes from residents of that state for Internet purchases of athletic shoes.

The issue is also a political question as well as a financial one. The Ministerio de Hacienda defined the issue clearly in its statement that taxes will continue to be collected:

You cannot understand or explain that the same product purchased in a local store pays import tax but when it is acquired on the Internet it does not pay taxes. This created an inequality in the customs tax treatment between a foreign business and a national one that undoubtedly would be affected. Therefore, to exempt Internet purchases would cause irreparable harm to the local business and also fiscal.

The sales tax is in addition to any tariffs that might be levied on the item. The Central American Free Trade Treaty reduced considerably tariffs on many items. For example, wine in bottles is free of duty when it is imported from the United States to Costa Rica under terms of the treaty. But the Dirección General de Aduanas would apply a sales tax.

Part of the legal consideration hinged on a term that is found in a law that predates the Internet. The law exempted from sales tax small shipments not of a commercial character. The ministry determined that Internet purchases are of a commercial character and therefor should not be exempt.

At least this Christmas, Internet shoppers who use one of the 90 or so courier companies or even Correos de Costa Rica will not be surprised when sales tax is added.

The ministry explanation did not say what would happen if a purchaser had paid sales tax at a foreign location. That would be the case if a purchase were shipped to Florida where most of the courier companies are located and the seller was required to collect Florida sales tax as part of the purchase price. That amount should be reflected on the invoice.

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