The USVI gross receipts tax: rate, exemption and deadlines

The rate and what it is charged on

It is not a tax on profit, and a bad year does not reduce it.

The territory charges 5% on the gross receipts of a business doing business in the Virgin Islands. The code reads gross receipts broadly: all receipts, cash or accrued, for services or derived from trade, business, commerce or sales, including the value of tangible personal property or services sold, rentals and fees.

It then rules out deductions. Nothing comes off for the cost of property sold, materials, labor, royalties, taxes, interest, or, in the statute’s own words, “any other expenses whatsoever.” A restaurant on thin margins and a consultancy on wide ones pay the same 5% on the same receipts.

The rate has been 5% since March 2012, raised in two steps from 4%. Older copies of the code, some codification sites and spreadsheets inherited from previous preparers still show 4%, which is the wrong number.

Gross receipts tax is separate from income tax, which in the territory is the federal code run as local law. It is written in Title 33 of the Virgin Islands Code, levied on the territory’s own account, and has no federal counterpart.

Rate

5% of gross receipts, with no deduction for cost or expense of any kind.

Administered by

The Virgin Islands Bureau of Internal Revenue, VIBIR.

Returns

Form 720 V.I. monthly, or Form 720-B annually for a smaller business.

Cash or accrual

The statute reaches receipts on either basis. A box in the return’s header elects one and sets what “receipts for the month” means: use the basis the business runs on, match the income tax return, and stay on it year to year.

Who owes the tax, and who files anyway

The tax reaches further than most owners assume, and owing nothing is not the same as having nothing to file.

In the base

Every person, firm, corporation and association doing business in the Virgin Islands, on receipts within the territory: retail, restaurants, professional services, contractors, charter and marine, rentals.

Outside the tax

Banks, which the statute excludes, Virgin Islands agricultural producers, and certain not-for-profit charitable, religious and educational organizations and government agencies. They sit outside the tax, not inside it with an exemption.

A quiet month still files

A month with no receipts, or a business whose receipts are fully exempt, still files by the due date with zero or none entered.

Groups and several businesses

In a controlled group at any point in the period, the group’s combined receipts decide each member’s exemption: one monthly exemption and one annual threshold for the whole group. A sole proprietor with several businesses files one consolidated return.

The $9,000 exemption and the $225,000 line

If annual gross receipts are under $225,000, the first $9,000 of receipts in each month is exempt, and the business may file once a year on Form 720-B instead of twelve times on Form 720 V.I. At $225,000 or more, there is no monthly exemption: the 5% applies to all the receipts, and the return is monthly.

So the $9,000 is not an allowance every business takes; it belongs to the smaller filer. The $5,000 and $350,000 still printed on an old form or in an unrevised regulation are pre-2008 figures the statute has replaced.

The exemption does not carry forward

Each month’s exemption is lost if unused, not banked, so an uneven year pays more tax than a level one with the same annual total.

The monthly exemption in practice

Take a business under the $225,000 line over two months.

$7,000 in month one

Under the $9,000 exemption, so no tax. The $2,000 left unused is not banked.

$10,000 in month two

$9,000 exempt and $1,000 taxable, so $50 of tax. Month one’s leftover does not come across.

Or $8,000 in each

The same $17,000 over the same two months, and no tax in either.

Crossing the line part way through a year

If receipts reach $225,000 or more during the year, the entire year’s receipts become taxable, not only those after the crossing point, and the months already filed are recomputed and amended on Form 720C. It costs far less to see that coming in the books than to find out afterwards.

It works the other way too. A business that paid on all of its receipts and finished the year under the threshold may claim back the exemption portion it overpaid.

Deadlines, and filing with VIBIR

Any one return is straightforward. Twelve a year, on top of everything else a business files, is where things slip.

A monthly return covers one calendar month and is timely if postmarked or submitted to the Bureau by the 30th of the following month. The annual Form 720-B is due within 30 days of the year’s end, which is January 30 for a business on the calendar year.

The Bureau runs an online filing service, GRT Online, and paper filing is still accepted. Registering, and authorizing a firm to file for the business, are one-time steps at the start.

Gross receipts tax the Virgin Islands Government withheld from a payment to the business is credited on the return. It is withheld at 4% against a 5% tax, so it rarely clears the liability, and it is only creditable if the documentation shows it.

Penalty and interest both accrue by the month, so the cost of lateness grows with the delay. The calendar, not the arithmetic, is what our monthly filing service takes over.

Three returns: Form 720 V.I., Form 720-B and Form 720C

Most businesses only ever see the first. Annual receipts decide which applies, and in a controlled group, the group’s combined receipts do.

Form 720 V.I.

Monthly. One calendar month of receipts, taxed at 5%. Filed twelve times a year at or above the $225,000 line, and by any other monthly filer, including one whose receipts are fully exempt.

Form 720-B

Annual. The whole year month by month, applying the $9,000 exemption to each month in turn. For receipts under $225,000, filed within 30 days of the year’s end: January 30 for a calendar-year filer.

Form 720C

Amended. A filed period, showing the original figure, the net change and the corrected figure. Filed as soon as a change is known, for the period it belongs to, against either form. A refund claim must come within three years of filing the original return or two years of paying the tax.

Incentive beneficiaries still file, marked exempt

A grant under one of the territory’s incentive programs removes the tax, not the return.

The Economic Development Commission (EDC) and the Research and Technology Park (RTPark) each carry a full exemption from gross receipts tax. An EDC beneficiary still files Form 720 every month, marked EDC Beneficiary – Exempt: the exemption is claimed on the return, not by leaving it unfiled. It covers the beneficiary’s own activity only, so a concession operating on the beneficiary’s premises is not covered.

The return carries nine exemption codes, and the one claimed must match the authority the business actually holds. Despite a common assumption, duty-free and tourist retail has no gross receipts exemption of its own: a duty-free retailer without a grant pays the full 5%. More on the programs: EDC and RTPark compliance.

Where gross receipts filings go wrong

These are the eight problems we see most when a new client hands over a year of filings.

• Computing the tax at 4%. The rate has been 5% since March 2012; 4% survives in stale copies of the code and inherited spreadsheets.
• Treating it as a tax on profit. Cost of goods, payroll and interest do not reduce the base, and a month that lost money still owes.
• Assuming the $9,000 exemption is universal. It belongs to a business under $225,000 a year and to nobody else.
• Splitting into entities to multiply the exemption. A controlled group shares one exemption pool and one threshold test.
• Skipping a month with no receipts. The return is still due, with zero or none entered.
• Filing nothing because a grant makes the business exempt. An EDC beneficiary files every month, marked exempt.
• Absorbing a correction into a later month. A wrong figure belongs on Form 720C for the period it came from.
• Letting returns pile up. Penalty and interest accrue monthly, so the gap widens on its own.

Where to read more

• Form 720 V.I., and why it is not the federal Form 720→
• Hand the filings over: our monthly Form 720 service→
• How taxes work in the U.S. Virgin Islands→
• Contact the St. Thomas office→