26 U.S.C. § 7652 — Shipments to the United States

(a) Puerto Rico: (1) Rate of tax: Except as section 5314 provides otherwise, merchandise made in Puerto Rico that comes into the U.S. for use or sale must pay the same federal tax as the same kind of goods made in the U.S. (2) Payment of tax: The Secretary of the Treasury^* must set rules for how and when to pay and collect this tax, including flexible payment methods under section 6302(b) and (c). These rules must let the tax be paid before the goods even leave Puerto Rico, using the same procedure as section 7651(2)(B). (3) Deposit of internal revenue collections: All the federal tax collected on goods made in Puerto Rico and brought to the U.S. (minus an estimate for refunds and drawbacks), or consumed on the island, goes into Puerto Rico's own treasury.

(b) Virgin Islands: (1) Taxes imposed in the United States: Except as section 5314 provides otherwise, goods coming into the U.S. from the Virgin Islands must pay the same federal tax as identical U.S.-made goods. (2) Exemption from tax imposed in the Virgin Islands: Those same goods, once shipped to the U.S., are exempt from any Virgin Islands tax. (3) Disposition of internal revenue collections: The Secretary^* figures out the total federal tax collected on goods made in the Virgin Islands and brought to the U.S. After subtracting 1 percent and an estimate for refunds or credits, the money is split: (A) an estimated payment goes to the Virgin Islands government before each fiscal year^* starts, under a formula set in a 1978 law, and that money becomes a separate Virgin Islands fund^* the legislature can spend as it decides; (B) any amount left over goes to the U.S. Treasury as ordinary revenue. If money paid to the Virgin Islands under (A) for the four calendar quarters immediately preceding the beginning of that fiscal year has not been obligated or spent, it remains available in any succeeding fiscal year, but only for emergency relief and essential public projects, and the total available for that purpose can never exceed $5,000,000; any leftover beyond that cap goes back to the U.S. Treasury.

(c) Articles containing distilled spirits: For purposes of (a)(3) and (b)(3), a product containing distilled spirits only counts as "produced in Puerto Rico or the Virgin Islands" if at least 92 percent of its alcohol content comes from rum.

(d) Articles other than articles containing distilled spirits: For purposes of (a)(3) and (b)(3): (1) Value added requirement for Puerto Rico: A product without distilled spirits only counts as "produced in Puerto Rico" if the cost of Puerto Rico-made materials plus the direct cost of Puerto Rico processing adds up to at least 50 percent of the product's value when it enters the U.S. (2) Prohibition of Federal excise tax subsidies: The Secretary won't transfer any tax money under (a)(3) or (b)(3) for a non-distilled-spirits product if Puerto Rico or the Virgin Islands gave that product a "federal excise tax subsidy" — meaning a subsidy that's either a different kind, or a bigger amount per unit of production, than what the territory generally gives industries whose products aren't subject to federal excise tax. (3) Direct costs of processing operations: This phrase has the same meaning it has in section 213 of the Caribbean Basin Economic Recovery Act.

(e) Shipments of rum to the United States: (1) Excise taxes on rum covered into treasuries of Puerto Rico and Virgin Islands: All tax collected under section 5001(a)(1) on rum imported into the U.S. (minus an estimate for refunds and drawbacks) goes into the treasuries of Puerto Rico and the Virgin Islands together. (2) Secretary prescribes formula: The Secretary sets, by regulation, a formula for splitting that tax money between Puerto Rico and the Virgin Islands, and the schedule and method for transferring it. (3) Rum defined: "Rum" means anything classified under tariff subheading 2208.40.00. (4) Coordination with subsections (a) and (b): This paragraph (1) doesn't apply to rum already taxed under (a) or (b).

(f) Limitation on cover over of tax on distilled spirits: For distilled-spirits tax under section 5001 or this section, the amount sent to Puerto Rico's and the Virgin Islands' treasuries per proof gallon can't exceed the lower of $13.25, or the tax rate under section 5001(a)(1) (calculated as if section 5001(c)(1) didn't apply).

(g) Drawback for medicinal alcohol, etc.: For medicines, medicinal preparations, food products, flavors, flavoring extracts, or perfumes that contain distilled spirits, aren't fit to drink, and come to the U.S. from Puerto Rico or the Virgin Islands: (1) the relevant subpart of the tax code applies as if the alcohol's use and tax had been determined in the U.S. by a U.S. person when the item entered the U.S., using the rate from subsection (f); and (2) none of that tax money goes to Puerto Rico's or the Virgin Islands' treasuries.

(h) Manner of cover over of tax must be derived from this title: No tax money can be sent to Puerto Rico's or the Virgin Islands' treasury under this section except exactly as this section describes — ignoring (1) any other law not part of this title or a revenue act, and (2) whether that other law was passed later or tries, directly or indirectly, to get around this rule.

(i) Determination of taxes collected: For purposes of (a)(3), (b)(3), and (e)(1), refunds under section 5001(c)(4) don't count as refunds, and the tax collected under section 5001(a)(1) is calculated without regard to section 5001(c).