Efforts by the V.I. government to compel payments of taxes on exported goods got a boost over the weekend when the head of the Internal Revenue Bureau offered guidelines to local businesses.
In a statement on Thursday, IRB Director Joel Lee reminded those who make products for export to file monthly excise tax returns along with corresponding documents.
The request comes four weeks ahead of a scheduled federal court hearing at government officials are expected to give evidence that local manufacturers are being taxed for the goods they make and ship from here. Since Dec. 20, when a judge lifted part of an injunction barring the government from collecting excise taxes, efforts have been made to uphold the one condition that would allow revenue to flow again.
Since the injunction was imposed by former District Court Judge Curtis Gomez, the government estimates more than $74 million in revenue has slipped out of its grasp.
The ruling is part of the case Reefco Services, Inc. vs. Government of the U.S. Virgin Islands. Reefco executives accused the government of imposing its tax policies in a discriminatory manner. In December, District Court Judge Robert Molloy said the government could resume excise tax collection as long as it could prove that both importers and exporters of manufactured goods were being taxed according to the law.
Molloy gave the government’s legal counsel until Feb. 3 to prove it was making sure local manufacturers were paying their share. With the hearing date approaching, Deputy Attorney General Carol Thomas-Jacobs asked for a delay, saying the government wants to make sure it met the court’s requirements for proving there was a local tax system in place.
“Under the Rules and Regulations for the Payment of excise taxes for manufacturers in the Virgin Islands, local manufacturers are required to file their manufacturing cost worksheets until after Jan. 31, 2012, and the excise tax returns are due within 30 days of Jan. 31, 2012, or by March 2, 2012,” Thomas-Jacobs said.
Reefco attorney Taylor Strickling said his client would rather see the government come to court prepared to show it had met its burden “of demonstrating they have implemented a legally adequate excise tax on goods produced locally.”
According to a 2018 publication released by the U.S. Small Business Administration, there are 49 established manufacturers in the Virgin Islands. Most are small but included in the group are advanced manufacturers, including Diageo, Gold Coast Yachts and United Electronic Industries Services, LLC.
In the notice issued in a news release on Feb. 11, Lee asked all local manufacturers to follow the directions to calculate their tax bills, found in the Virgin Islands Code, Title 33, section 42(b).
Lee also said tax returns and worksheets detailing the manufacturing process are to be filed with Internal Revenue monthly.
“Manufacturers who import raw materials to be used in their manufacturing businesses will be required to report those items at the time of importation and use,” the tax director said.
Legal teams are scheduled to update the court at a rescheduled hearing set for March 9.