Puerto Rico ramps up efforts to collect online travel taxes
Follows tax haven charges, debt issues, sales tax hike & asteroid rumor

August 22, 2015

Puerto Rico has been in the news a lot this year, and not for its attributes as a Caribbean vacation spot.

Coast Guard Barque Eagle en route to San Juan Puerto Rico_DVIDS_Wikimedia Commons
Coast Guard Barque Eagle sailing past the 16th-century Fort San Felipe del Morro in San Juan, Puerto Rico, on May 21, 2014, as it head for a four-day port call. Image courtesy the Defense Video & Imagery Distribution System and Wikimedia Commons.

The U.S. island territory has been criticized for being a tax haven for wealthy Americans.

Its overall finances have come under scrutiny after Puerto Rican leaders wanted to declare bankruptcy to write off its $72 billion debt.

In lieu of going bust, which isn't possible without a law change by the U.S. Congress, Puerto Rico opted instead to try to raise more money by hiking its sales tax rate from 7 percent to 11.5 percent. That's the highest sales tax in any U.S. jurisdiction.

There's even been a warning that an asteroid will hit near the island sometime month. Don't cancel your vacation reservations. NASA says that Internet rumor is not true.

Online travel tax battle: While Puerto Rico won't have to worry about a disaster from outer space, it is fighting a tax battle over terrestrial space, specifically hotel rooms.

The government-run Puerto Rico Tourism Company filed a federal lawsuit in 2014 against Expedia, Priceline, Orbitz and other online travel companies (OTC), complaining that they have underpaid the island's 9 percent room tax since 1999.

That 9 percent rate is this week's By the Numbers figure.

OTCs purchase room nights from hotels at reduced rates, then rent the rooms via the Internet at a markup, but still at a cheaper rate than the hotel's going rate. In many cases, the hotels don't know the amount charged to the consumer.

There's no mention of the amount that Puerto Rico estimates it has last over the years from the tax nonpayment. It no doubt, though, that it's in the high millions for a nation that relies heavily on tourism. One estimate of the total amount of unpaid room tax nationwide is growing at a rate of around $500 million a year.

The latest legal battle in the Puerto Rico case is over the tourism office's request to have the case decided by a jury. The OTCs objected, saying that the issue is a question of law and not of fact.

"It would be unusual to have a jury trial," Jerry Donnini of Moffa, Gainor, & Sutton PA in Fort Lauderdale, Florida, told Tax Notes. "It's a question of law, and jurors aren't going to be excited to hear a tax case. They might fall asleep, or you'll have an uninformed jury."

You also might find these items of interest:

Share:

The More Tax Posts tab at the top of this page will take you to, well, more tax posts. You also can search below for a tax topic. 

Latest Posts
6 tax moves to consider this June

June 3, 2026

Definitely take a break this June. But taxes don’t take vacations. So, you also should…

Read More
Tax Season 2026 Continues!

We made it. Tax Day 2025 is finally over. For most of us. When the filing season started on Jan. 26, millions who were expecting refunds filed immediately. Most of us got our returns to the Internal Revenue Service by April 15. But plenty of taxpayers also got extensions. They are looking at an Oct. 15 filing deadline.

Those procrastinating filers aren’t a problem. In fact, the IRS appreciates taxpayers who take time to fill out their 1040 forms correctly. It also is grateful that tax submissions are spread out a bit, especially now that the IRS is a leaner agency. Processing returns is easier when they arrive throughout the year instead of in massive bunches.

But enough about Uncle Sam’s tax collection issues. The focus now is on all y’all who filed for extensions, giving you another six months to complete your return. Since your new mid-October due date will be here before you know it, let’s get started now on meeting it.

The ol’ blog is here to help you finish up your extended Form 1040. You can start with January’s tax tips page, which has links to the rest of the year’s tips by-month collections. You also can peruse various tax categories for more tailored advice by clicking on the More Tax Posts drop-down menu at the top of this (and every) page.

And to make sure you don’t miss your new filing deadline, the count-down clock below will let you know just how much time you to file by Oct. 15. At the latest.e. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

Comments