Except as provided in section 5314, articles of merchandise of Puerto Rican manufacture coming into the United States and withdrawn for consumption or sale shall be subject to a tax equal to the internal revenue tax imposed in the United States upon the like articles of merchandise of domestic manufacture.

(1) Rate of tax Except as provided in section 5314, articles of merchandise of Puerto Rican manufacture coming into the United States and withdrawn for consumption or sale shall be subject to a tax equal to the internal revenue tax imposed in the United States upon the like articles of merchandise of domestic manufacture.

(2) Payment of tax The Secretary shall by regulations prescribe the mode and time for payment and collection of the tax described in paragraph (1), including any discretionary method described in section 6302(b) and (c). Such regulations shall authorize the payment of such tax before shipment from Puerto Rico, and the provisions of section 7651(2)(B) shall be applicable to the payment and collection of such tax in Puerto Rico.

(3) Deposit of internal revenue collections All taxes collected under the internal revenue laws of the United States on articles produced in Puerto Rico and transported to the United States (less the estimated amount necessary for payment of refunds and drawbacks), or consumed in the island, shall be covered into the treasury of Puerto Rico.

The Secretary shall determine the amount of all taxes imposed by, and collected under the internal revenue laws of the United States on articles produced in the Virgin Islands and transported to the United States. The amount so determined less 1 percent and less the estimated amount of refunds or credits shall be subject to disposition as follows:

(1) Taxes imposed in the United States Except as provided in section 5314, there shall be imposed in the United States, upon articles coming into the United States from the Virgin Islands, a tax equal to the internal revenue tax imposed in the United States upon like articles of domestic manufacture.

(2) Exemption from tax imposed in the Virgin Islands Such articles shipped from such islands to the United States shall be exempt from the payment of any tax imposed by the internal revenue laws of such islands.

The Secretary shall determine the amount of all taxes imposed by, and collected under the internal revenue laws of the United States on articles produced in the Virgin Islands and transported to the United States. The amount so determined less 1 percent and less the estimated amount of refunds or credits shall be subject to disposition as follows:

(A) The payment of an estimated amount shall be made to the government of the Virgin Islands before the commencement of each fiscal year as set forth in section 4(c)(2) of the Act entitled “An Act to authorize appropriations for certain insular areas of the United States, and for other purposes”, approved August 18, 1978 (48 U.S.C. 1645), as in effect on the date of the enactment of the Trade and Development Act of 2000. The payment so made shall constitute a separate fund in the treasury of the Virgin Islands and may be expended as the legislature may determine.

(B) Any amounts remaining shall be deposited in the Treasury of the United States as miscellaneous receipts.

For purposes of subsections (a)(3) and (b)(3), any article containing distilled spirits shall in no event be treated as produced in Puerto Rico or the Virgin Islands unless at least 92 percent of the alcoholic content in such article is attributable to rum.

For purposes of subsections (a)(3) and (b)(3)—

Any article, other than an article containing distilled spirits, shall in no event be treated as produced in Puerto Rico unless the sum of—

(A) the cost or value of the materials produced in Puerto Rico, plus

(B) the direct costs of processing operations performed in Puerto Rico,

For purposes of this paragraph, the term “Federal excise tax subsidy” means any subsidy—

(A) In general No amount shall be transferred under subsection (a)(3) or (b)(3) in respect of taxes imposed on any article, other than an article containing distilled spirits, if the Secretary determines that a Federal excise tax subsidy was provided by Puerto Rico or the Virgin Islands (as the case may be) with respect to such article.

(B) Federal excise tax subsidyFor purposes of this paragraph, the term “Federal excise tax subsidy” means any subsidy— (i) of a kind different from, or (ii) in an amount per value or volume of production greater than, the subsidy which Puerto Rico or the Virgin Islands offers generally to industries producing articles not subject to Federal excise taxes.

(3) Direct costs of processing operations For purposes of this subsection, the term “direct cost of processing operations” has the same meaning as when used in section 213 of the Caribbean Basin Economic Recovery Act.

All taxes collected under section 5001(a)(1) on rum imported into the United States (less the estimated amount necessary for payment of refunds and drawbacks) shall be covered into the treasuries of Puerto Rico and the Virgin Islands.

(1) Excise taxes on rum covered into treasuries of Puerto Rico and Virgin Islands All taxes collected under section 5001(a)(1) on rum imported into the United States (less the estimated amount necessary for payment of refunds and drawbacks) shall be covered into the treasuries of Puerto Rico and the Virgin Islands.

(2) Secretary prescribes formula The Secretary shall, from time to time, prescribe by regulation a formula for the division of such tax collections between Puerto Rico and the Virgin Islands and the timing and methods for transferring such tax collections.

(3) Rum defined For purposes of this subsection, the term “rum” means any article classified under subheading 2208.40.00 of the Harmonized Tariff Schedule of the United States (19 U.S.C. 1202).

(4) Coordination with subsections (a) and (b) Paragraph (1) shall not apply with respect to any rum subject to tax under subsection (a) or (b).

(5) Determination of amount of taxes collected For purposes of this subsection, the amount of taxes collected under section 5001(a)(1) shall be determined without regard to section 5001(c).

For purposes of this section, with respect to taxes imposed under section 5001 or this section on distilled spirits, the amount covered into the treasuries of Puerto Rico and the Virgin Islands shall not exceed the lesser of the rate of—

(1) $10.50 ($13.25 in the case of distilled spirits brought into the United States after June 30, 1999, and before January 1, 2022), or

(2) the tax imposed under subsection (a)(1) of section 5001, determined as if subsection (c)(1) of such section did not apply, on each proof gallon.

In the case of medicines, medicinal preparations, food products, flavors, flavoring extracts, or perfume containing distilled spirits, which are unfit for beverage purposes and which are brought into the United States from Puerto Rico or the Virgin Islands—

subpart B of part II of subchapter A of chapter 51 shall be applied as if—

(A) the use and tax determination described in section 5111 had occurred in the United States by a United States person at the time the article is brought into the United States, and

(B) the rate of tax were the rate applicable under subsection (f) of this section, and

(2) no amount shall be covered into the treasuries of Puerto Rico or the Virgin Islands.

No amount shall be covered into the treasury of Puerto Rico or the Virgin Islands with respect to taxes for which cover over is provided under this section unless made in the manner specified in this section without regard to—

(1) any provision of law which is not contained in this title or in a revenue Act; and

(2) whether such provision of law is a subsequently enacted provision or directly or indirectly seeks to waive the application of this subsection.

(Aug. 16, 1954, ch. 736, 68A Stat. 907; Pub. L. 85–859, title II, § 204(17), (18), Sept. 2, 1958, 72 Stat. 1430; Pub. L. 89–44, title VIII, § 808(b)(3), June 21, 1965, 79 Stat. 164; Pub. L. 94–202, § 10(a), Jan. 2, 1976, 89 Stat. 1141; Pub. L. 94–455, title XIX, § 1906(a)(55), (b) (13)(A), Oct. 4, 1976, 90 Stat. 1832, 1834; Pub. L. 98–67, title II, § 221(a), Aug. 5, 1983, 97 Stat. 395; Pub. L. 98–213, § 5(c), Dec. 8, 1983, 97 Stat. 1460; Pub. L. 98–369, div. B, title VI, §§ 2681(a), 2682(a), July 18, 1984, 98 Stat. 1172, 1174; Pub. L. 99–514, title XVIII, § 1879(i)(1), Oct. 22, 1986, 100 Stat. 2907; Pub. L. 100–418, title I, § 1214(p)(1), Aug. 23, 1988, 102 Stat. 1159; Pub. L. 103–66, title XIII, § 13227(e), Aug. 10, 1993, 107 Stat. 494; Pub. L. 103–465, title I, § 136(b), Dec. 8, 1994, 108 Stat. 4841; Pub. L. 106–170, title V, § 512(a), Dec. 17, 1999, 113 Stat. 1924; Pub. L. 106–200, title VI, § 602(b), (c), May 18, 2000, 114 Stat. 305, 306; Pub. L. 107–147, title VI, § 609(a), Mar. 9, 2002, 116 Stat. 60; Pub. L. 108–311, title III, § 305(a), Oct. 4, 2004, 118 Stat. 1179; Pub. L. 109–59, title XI, § 11125(b)(22), Aug. 10, 2005, 119 Stat. 1957; Pub. L. 109–432, div. A, title I, § 114(a), Dec. 20, 2006, 120 Stat. 2940; Pub. L. 110–343, div. C, title III, § 308(a), Oct. 3, 2008, 122 Stat. 3869; Pub. L. 111–312, title VII, § 755(a), Dec. 17, 2010, 124 Stat. 3322; Pub. L. 112–240, title III, § 329(a), Jan. 2, 2013, 126 Stat. 2335; Pub. L. 113–295, div. A, title I, § 140(a), Dec. 19, 2014, 128 Stat. 4020; Pub. L. 114–113, div. Q, title I, § 172(a), Dec. 18, 2015, 129 Stat. 3071; Pub. L. 115–97, title I, § 13807(b), Dec. 22, 2017, 131 Stat. 2176; Pub. L. 115–123, div. D, title II, § 41102(a)(1), (b)(1), Feb. 9, 2018, 132 Stat. 155.)