Court lifts injunction on Virgin Islands excise tax collection effective Jan. 1, 2021

U.S. District Court Judge Robert Molloy ruled on Dec. 9, 2020, that the Virgin Islands government could resume collecting excise taxes beginning Jan. 1, 2021, after the Bureau of Internal Revenue showed it had adopted an electronic system that assigns the tax to importers and local manufacturers.

The injunction had barred collection of the tax since a 2018 ruling by U.S. District Court Judge Curtis Gomez in a lawsuit filed by Reefco. The suit argued that the government taxed importers of manufactured goods but not local manufacturers, violating the Commerce Clause.

BIR Director Joel Lee estimated excise taxes generated about $40 million a year for the government. According to the Government House statement, more than $84 million in excise tax revenue had been lost through November 2020 while collections were halted.

Attorney General Denise George said Judge Molloy scheduled a follow-up hearing for Feb. 3, 2021, to assess the resumption of excise tax collections.

The statement said a 3rd Circuit Court of Appeals panel in October 2020 remanded the case to District Court to determine whether the government had taken adequate steps to resume collections and whether the injunction could be lifted.

Official source: https://www.vi.gov/governor-bryan-hails-court-decision-to-lift-injunction-against-collecting-excise-tax/