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  HOME | Caribbean

Judge Sides with Walmart in Tax Battle with Puerto Rico

SAN JUAN – Walmart won a legal victory on Monday over the government of Puerto Rico in the matter of a modified tangible-property tax expected to net $100 million a year for the treasury of the cash-strapped island.

Puerto Rico’s Act 72 violates the U.S. Constitution, Federal Judge Jose Fuste said in a decision of more than 100 pages.

The effect of Act 72 was to raise the tax rate on Wal-Mart Puerto Rico’s purchases of goods from Wal-Mart distribution centers located in the mainland United States from 2 percent to 6.5 percent.

Because of the wording of the law, the 6.5 percent rate applied only to Walmart, as it has gross revenues of more than $2.75 billion from a trade or business on the island.

Fuste found that Act 72 contravened the constitutional principle of equal protection under the law as well as the Commerce Clause.

Walmart Puerto Rico, which operates in the commonwealth under the brands Walmart Supercenter, Walmart, Sam’s Club, Super Ahorros and Supermercados Amigo, has 55 retail outlets on the island and employs nearly 15,000 people.

Walmart, the world’s largest company by revenue, reserved comment on Monday’s court ruling pending a thorough review of the decision.

But the island’s governor, Alejandro Garcia Padilla, announced that his administration would appeal the decision.

“The judge just took away $100 million from the people of Puerto Rico and gave it to Walmart,” he said. “Now I have to look for that money somewhere else. Of course I’m going to appeal the decision, and immediately.”

Puerto Rico is struggling with an acute financial crisis as it seeks to renegotiate its $72 billion debt amid plunging government revenues due to a decade-long recession.

 

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