Mexico has a value added tax on many products and services, similar to many other places in the world. The tax is commonly referred to as IVA (ee-va), which stands for the Spanish words Impuesto al Valor Agregado. In Mexico, this tax is applied federally, but it has one particularity that many people are commonly confused by is that it is applied differently depending on your location in the country: In the border area, the value added tax is applied at 11%; everywhere else in the country it is applied at 16%.
According to the law that regulates this tax, the border area is:
The twenty kilometer margins that run parallel to the international border lines on the north and south of the country, all of the territory of the States of Baja California, Baja California South, Quintana Roo and the municipalities of Caborca and Cananea, Sonora, as well the part of the State of Sonora between the following geographical limits: To the north, the dividing line from the bed of the Colorado River until the point situated on that line 10 kilometers to the west of the Municipality of Plutarco Elias Calles, from that point a straight line to the coast at a point situated 10 kilometers east of Puerto Peñasco, from there following the bed of the river until north until the international dividing line.
There is a large list of goods and services that are exempt from the tax, including: Non-processed animal and vegetable products, medicines, most products destined for food production, water and ice, agricultural products and farm equipment, some regional foods, hydroponic greenhouse supplies, bulk jewelery, self-edited books and magazines, farm work, and a few others.