2023 Laws of Puerto Rico › TITLE TWENTY-ONE - Municipalities (§§ 1-4 — 6756) › Subtitle 3 - General Provisions (§§ 621-639 — 1100a) › Chapter 71 - Municipal License Taxes (§§ 621-639 — 652y) › § 651a - Definitions

(a) As used in §§ 651-651y of this title unless manifestly incompatible with the purposes thereof:
(1) Finance Director.— Means the municipal official appointed by the mayor and confirmed by the legislature, who shall have the responsibility for the collection, deposit, control, custody and disbursement of municipal funds, including municipal license taxes, among others.
(2) Official collector.— Means the municipal employee appointed by the mayor to be under the direction of the Finance Director and to whom the functions of collecting and depositing municipal public funds may be delegated, including the receiving or collecting of municipal license taxes which the municipal legislature shall impose by virtue of §§ 651-652y of this title. The official collector shall perform his/her functions and responsibilities under the direct supervision of the Finance Director and shall execute his/her functions pursuant to applicable regulations.
(3) Person.— Means and includes an individual, a trust or estate, a partnership or a corporation, association, any form of organization of services, of sale, financial, industry or business, as well as any assignee, trustee or representative, whether designated by a court or otherwise, and which is engaged, for profit, in the rendering of any service, in the sale of any goods, in any financial business or any industry or business in any municipality of the Commonwealth of Puerto Rico.
(4) Services.— Means such operations as are carried out by any industry or business of rendering services to the client or consumer, including, but not limited to, professional services, provided they are not covered by other terms of §§ 651-652y of this title.
(5) Sales.— Means such operations as are carried out by an industry or business consisting in the sale of goods at retail or wholesale.
(6) Financial business.— Means any industry or business consisting of services and transactions of commercial banks, savings and loan associations, mutual or savings banks, financing companies, insurance companies, investment companies, brokerage houses, collection agencies and any other activity of a like nature carried out by any industry or business. The term “financial business” shall not include activities in connection with the investment of a person’s own personal funds, when said investment does not constitute the main activity of the business.
(7) Volume of business.—
(A) General rule.—
(i) Volume of business.— Means the gross income received or earned from the rendering of any service, the sale of any goods or by any other industry or business in the municipality in which the main enterprise carries out its operations, or the gross income received or earned by the main enterprise in the municipality in which its offices, warehouses, or branches are located; its manufacturing, packaging, bottling, processing, making, preparing, assembling or extracting plants, construction sites, or any other type of organization, industry or business which does business in its name, without taking their earnings or profits into account.
(ii) Gross income.— Means total income from sources within and outside of Puerto Rico which can be attributed to the operations carried out in each municipality, excluding all income such as interest and dividends from investments by an individual of his/her own funds, the holding of corporate stock or other investment instruments.
(B) Financial business.— Where a financial business is involved, the volume of business shall be the gross income received or earned, excluding:
(i) The cost of property sold, that is, excluding the cost of the real property and the goods and chattels sold by the financial business, which may consist, among other assets, stocks and bonds.
(ii) Reimbursements of advances, loans and credits granted, but the sum deducted on this account shall not exceed the principal of said advances, loans or credits.
(iii) The deposits.
(iv) Losses incurred in any operation in securities, but the deduction made on that account shall not exceed the total amount of the profits obtained for said securities.
In the specific case of commercial banks, savings and loan associations and mutual or savings banks, the gross income shall mean the interest received or earned on loans, the fees for services rendered, the rents, the gross benefit in the sale of property or securities and the profits, benefits and income derived from any other source within and outside of Puerto Rico which can be attributed to Puerto Rican operations.
The gross income earned by these organizations which is subject to the payment of municipal license taxes shall be distributed among the branches, in the proportion that all types of branch deposits bear to the total deposits of the organization in Puerto Rico.
(C) Commission agents, sales agents and contractors.— In the case of commission agents, brokers and sales agents, volume of business shall be understood to be the gross receipts from commissions without deducting any cost item whatsoever. In the case of contractors, even though the contract be on a cost-plus basis, the volume of business shall be the gross amount of the contract without deducting any cost item whatsoever, except for the cost of the machinery and the equipment the contractor is compelled to acquire for permanent installation in the project, and which does not properly constitute a factor in the volume of business of the contractor, without including in this exception, materials, household appliances, or equipment which is usually part of the construction project.
(D) Sales of stores, commercial firms, and other industries or businesses.— The volume of business shall be, in the case of sales of stores, commercial firms, and other industries or businesses, the amount of gross sales after the returns are deducted; the total value of freight and passenger fares in each office established in each municipality, in the case of vehicles for land transportation; and in general, the amount of the moneys received or earned by any industry or business according to the nature of the industry or business.
(E) Branches in different municipalities.— The volume of business of persons who keep offices, warehouses, branches or any other kind of commercial or industrial organization in different municipalities of the Commonwealth shall be determined in each municipality separately in order that the main organization pay the corresponding tax to the municipality where each office, warehouse, branch or any other kind of industrial or commercial organization is located.
(F) Gasoline stations.— The volume of business in the case of gasoline stations shall be the number of gallons of gasoline sold, multiplied by the gross maximum profit allowed by law, plus the sales volume of other goods and services.
(G) Communications services.— The volume of business of any person who operates or provides any communications service shall be the following:
(i) Cable or satellite television services.— In the case of cable or satellite television services, the volume of business shall be the amount collected in each municipality where cable or satellite television services, installation of related equipment, and lease or sale of related equipment are billed and collected.
(ii) Telecommunications services.— In the case of telecommunications services, the volume of business shall be the amount collected from the following services and activities:
(I) Telephone services including intrastate and interstate long distance services;
(II) sale and lease of telecommunications equipment;
(III) personal telecommunications services, including commercial mobile radio services such as radio pagers or beepers and cellular telephones;
(IV) telecommunications system access charges;
(V) telephone directory services;
(VI) any other activity related to telecommunications activities included in items (I)-(V) of this subparagraph;
(VII) any other telecommunications service or activity that does not include broadcasting services by radio, television and the services included in subparagraph (i) of this paragraph, and
(VIII) income proceeding from the investment of the own funds of the person who operates or provides telecommunications services.
The volume of business collected from the telecommunications services included in this subparagraph shall be distributed among the municipalities as provided in paragraph (H) of this clause and § 651b of this title.
In the case of persons exclusively engaged in intrastate and interstate long distance telephone services, the volume of business shall be the amount collected for intrastate and interstate long distance telephone services in every municipality in which the subscribers are billed and collected for such services.
(iii) Other communications services.— In the case of communications services other than those included in subparagraphs (i) and (ii) of this paragraph, the volume of business shall be the amount collected for said communications services in each municipality where they keep an office.
(H) Operations carried out in several municipalities.— In case the operation of a business is carried out in two (2) or more municipalities, the license tax shall be computed by prorating the volume of business, taking as base the average of the number of square feet of the areas of the buildings used in each municipality during the taxable period of the calendar year preceding the date of filing of the license tax. In the case of businesses engaged in telecommunications services, the areas of the buildings used in each municipality include the parking areas of the buildings owned by the person who operates the telecommunications services business. This formula shall not apply to the businesses whose volume of business may be determined as established in paragraphs (A)–(G) of this clause.
In the case of solid waste and telecommunications companies, whether wired or wireless, that render services in more than one municipality, the computation of the license tax shall be determined separately for each municipality in order for the main office of the corresponding company to pay the license tax that corresponds to the municipality where the service was rendered. The license tax shall be computed by prorating the volume of business taking as a basis the number of customers such companies have in each municipality during the taxable period of the calendar year on the filing date of the municipal license tax.
(8) Corporation.— Means and includes limited companies, joint stock companies, incorporated companies, private corporations and any other associations receiving or earning income subject to a license tax as provided herein. The terms “association” and “corporation” include, in addition to other analogous entities, any organization other than a partnership, created for the purpose of making transactions or of achieving specific purposes and which, in a manner similar to the corporations, continue to exist irrespective of the changes in its membership, of its participants and whose business is directed by a person, a committee, a board or by any other entity acting in a representative capacity.
(9) Partnership.— Means and includes civil, agricultural, commercial, industrial, professional or any other kind of partnership, regular, collective or commandite, whether or not its bylaws appear in public deed or private document and shall further include two (2) or more persons who are engaged, under a common name or not, in an enterprise for profit.
(10) Accounting year.— Means the calendar year or fiscal year terminating within said calendar year on the basis of which the volume of business is determined under §§ 651-652y of this title. In the case of a return filed for a fraction of one year under the provisions of §§ 651-652y of this title or under the regulations, this term means the period for which the return is filed.
(11) Fiscal year.— Means an accounting period of twelve (12) months terminating the last day of any month other than December.
(12) Court of First Instance and Supreme Court.— Mean the Court of First Instance of Puerto Rico and Supreme Court of Puerto Rico, [respectively].
(13) Includes.— When used in any definition of term[s in] §§ 651-652y of this title shall not be construed in the sense of excluding what is not specifically mentioned, but which because of its nature would be within the term defined.
(14) Main organization.— Means the parent entity which controls the branches, warehouses or offices.
(15) Attributable to the operation.— Shall mean the total income derived within and outside of Puerto Rico, received or earned by a person connected with the operation of an industry or a business in Puerto Rico, such as, but not limited to, the interest on investments, notes or other obligations, excluding exempted interest as defined in § 651h of this title, as well as dividends or profits received by said person.
(16) Municipal license.— Means the tax levied and collected by the municipality under the terms of §§ 651-652y of this title, from any person engaged in rendering any service, or the sale of any goods to any financial business or business in the municipalities of the Commonwealth of Puerto Rico.
(17) Provisional license.— Means an authorization granted by the municipality to any person who commences any industry or business subject to the payment of a license tax, which shall be exempted from the payment of said license for the semester corresponding to that in which said activity commences.
History —July 10, 1974, No. 113, Part 1, p. 371, § 2; Nov. 14, 1974, No. 4, Part 2, p. 718, § 1; Aug. 30, 1991, No. 82, § 1; Nov. 17, 1992, No. 93, § 1; Apr. 14, 1996, No. 23, § 1; June 24, 1998, No. 96, § 1; Feb. 15, 2008, No. 10, § 1; Aug. 25, 2012, No. 208, § 1, eff 90 days after Aug. 25, 2012.