Vehicle dealer and parts licence: the $100,000 bond

It is Chapter 4.7 of Joint Regulation No. 9473, which groups three licences: the Motor Vehicle and Trailer Dealer Licence; the Motor Vehicle Parts and Accessories Trafficker Licence, wholesale and retail, including Classes A, B and C; and the limited-time Motor Vehicle, Parts and Accessories Dealer Licence. The first two come from mergers: the regulation itself records that the Motor Vehicle Trafficker Licence, formerly Treasury’s, and the Motor Vehicle and Trailer Dealer Licence, formerly DTOP’s, were consolidated into a single licence issued by OGPe.

The dealer licence is needed by anyone wishing to devote themselves wholly or partly to the retail sale of motor vehicles or trailers and who sells, as part of an enterprise, business, "dealer" or trade, motor vehicles or trailers for profit. The parts and accessories trafficker licence is needed by anyone in the business of selling motor vehicle parts and accessories; and it is also required of motor vehicle repair shop owners if they keep an inventory of such parts and accessories in their shop, regardless of the inventory’s volume. The limited-time licence is for temporary establishments, and the premises must hold the corresponding Permiso Único for a Temporary Activity.

• Completing the corresponding application and meeting the requirements set in Rule 4.1.4, both to obtain and to renew the licence.Verified against the official source
• Specifying in the application whether new, imported used or locally acquired used vehicles will be marketed or distributed.Verified against the official source
• Obtaining a minimum bond of one hundred thousand dollars ($100,000.00) for the main business, under which the first branch applied for may be included.Verified against the official source
• Obtaining an additional fifty thousand dollar ($50,000.00) bond for each additional lot or branch.Verified against the official source
• Obtaining a Motor Vehicle and Trailer Dealer Licence for each branch, when expanding activities to other areas.Verified against the official source
• For the limited-time licence: holding the premises’ Permiso Único for a Temporary Activity, and not exceeding fifteen (15) consecutive days.Verified against the official source

• For the limited-time licence: the Permiso Único for a Temporary Activity.
• Certification of income tax returns filed for the five (5) years before the accreditation request, issued by the Treasury Department.
• Treasury certification of IVU returns filed, and a Treasury debt certification.
• Temporary merchants registry.
• Corporations or partnerships: certification of the president, managing partner or equivalent; where that person does not reside in Puerto Rico, the information is satisfied by the authorised representative in Puerto Rico.

1. 1

   Step 1: Who needs the dealer licence

   Anyone wishing to devote themselves wholly or partly to the retail sale of motor vehicles or trailers, and who sells as part of an enterprise, business, "dealer" or trade, motor vehicles or trailers for profit, must obtain the Motor Vehicle and Trailer Dealer Licence. Note "wholly or partly": it need not be the business’s only line. The application must specify whether new, imported used or locally acquired used vehicles will be marketed or distributed. And any dealer wishing to expand to other areas, to set up one or several branches, must obtain a licence for each branch.

2. 2

   Step 2: The hundred thousand dollar bond and what it covers

   This is the fact most useful to someone buying a car. Every motor vehicle and trailer dealer must obtain a minimum bond of one hundred thousand dollars for the main business, and the first branch applied for may be included under that bond. And the regulation says what it is for: the bond covers any claim, among others cheques not honoured by the bank, plate payments, fines, hidden defects and warranties. Each additional lot or branch requires an additional fifty thousand dollar bond. Note the word bond: it is a guarantee backing claims, not a licence fee paid to the government.

3. 3

   Step 3: If you buy or sell the business

   The chapter regulates the transfer with two duties people forget. On assignment or sale of a business devoted to buying or selling motor vehicles, the assignor or seller must return to DTOP, for the dealer and distributor licence, the unused provisional motor vehicle permits, plates and marbetes assigned to operate the business. And the new acquirer must obtain a new Motor Vehicle and Trailer Dealer Licence and request the provisional permits, new plates and marbetes needed to operate. The licence is not inherited with the business.

4. 4

   Step 4: The parts licence reaches repair shops

   Anyone in the business of selling motor vehicle parts and accessories must obtain a Motor Vehicle Parts and Accessories Trafficker Licence. And here is the surprising part: that licence is required of motor vehicle repair shop owners if they keep an inventory of such parts and accessories in their shop, regardless of the inventory’s volume. There is no minimum threshold: if the shop keeps a parts inventory, it needs the licence.

5. 5

   Step 5: What is a part or accessory, and what is not

   The regulation defines the term and then trims it. It includes any article that, even if it can have independent utility, was made according to the "predominant normal use" to form part of the constitution, functioning or ornamentation of taxed articles; and any article that, even if driven or otherwise aided by the principal taxed apparatus, is also reciprocally subordinate to it to achieve its functioning. And it excludes four things: those giving mere support to the principal article or providing a seat for the operator or performer, unless attachable to the principal article; those that, without being attachable, are used exclusively for cleaning, conservation, lubrication, adjustment or repair of the principal article, not including the toolboxes that come with the vehicle or machine; those that, by simple coupling, receive traction from self-propelled vehicles toward a place where they will perform a mainly agricultural, sanitary or similar function; and those that, without being attachable, are used exclusively to eliminate or dampen noise or vibration in the principal article, not including silencers for internal combustion engines.

6. 6

   Step 6: The fifteen-day licence

   Limited-time Motor Vehicle, Parts and Accessories Dealer Licences may be issued for temporary establishments, for a term not exceeding fifteen consecutive days. And there is a premises requirement: the site the licence is sought for must hold the corresponding Permiso Único for a Temporary Activity. It is the licence for fairs and vehicle shows.

7. 7

   Step 7: The temporary licence’s paperwork

   Unlike the others, this one carries its own list. You must file the Permiso Único for a Temporary Activity; certification of income tax returns filed for the five years before the accreditation request issued by Treasury — and, for corporations or partnerships, the president’s or managing partner’s certification as well; Treasury certification of IVU returns filed, with the same corporate certification; a Treasury debt certification; a temporary merchants registry; the certification of the president, managing partner or equivalent for corporations or partnerships; and, where that person does not reside in Puerto Rico, the information is satisfied by the authorised representative in Puerto Rico.

8. 8

   Step 8: Who polices it: Treasury and DTOP

   Holding one of these licences within a Permiso Único does not exempt anyone from the Joint Regulation itself, the Internal Revenue Code and its regulations, or any other applicable Treasury law or regulation; nor from Ley 22-2000, its regulations and any other applicable DTOP rule. Treasury has the power to audit, carry out periodic inspections, fine and order the stoppage or closure of the operation, and its Secretary may examine at any time the books, files, reports and other documents relating to the commercial activity or article subject to these licences. And DTOP officials supervise, evaluate and intervene with motor vehicle and trailer dealers periodically, for faithful compliance with the law, standards and regulations in force.

9. 9

   Step 9: Where these licences come from

   It is worth knowing if you are told you need two separate permits. The regulation records that the Motor Vehicle Trafficker Licence, formerly issued by Treasury, and the Motor Vehicle and Trailer Dealer Licence, formerly issued by DTOP, were consolidated into the Motor Vehicle and Trailer Dealer Licence issued by OGPe. And the limited-time retail "Motor Vehicle Shows" trafficker licence, formerly Treasury’s, and the limited-time dealer licence, formerly DTOP’s, were consolidated into the limited-time licence OGPe issues today. One licence, even though the Treasury and DTOP duties remain alive.

Before OGPe, a hierarchy I-III autonomous municipality or an Authorised Professional, through the SUI and together with the Permiso Único, because the regulation lists these licences among those filed and evaluated exclusively that way. Unused provisional permits, plates and marbetes are returned to DTOP on assignment or sale of the business. Oversight belongs to Treasury and DTOP by subject matter.

• Confusing the hundred thousand dollar bond with a licence fee paid to the government.
• Opening a branch without its own licence and without the additional fifty thousand dollar bond.
• Running a shop with a parts inventory without the parts and accessories trafficker licence.
• Buying a vehicle sales business and continuing to operate on the seller’s licence.
• Failing to return to DTOP the unused provisional permits, plates and marbetes when selling the business.
• Running a vehicle show for more than fifteen consecutive days on the temporary licence.
• Applying for the temporary licence without the premises’ Permiso Único for a Temporary Activity.
• Failing to state in the application whether new, imported used or locally acquired used vehicles will be sold.

These are the government pages this guide is based on.

• Oficina de Gerencia de Permisos (OGPe)

  OGPe

  docs.pr.gov

• Permit Management Office

  ogpe

  ogpe.pr.gov