Police were called to an accident on the Manx Electric Railway line at Port Jack on Thursday afternoon.
A spokesman for the MER said the incident happened at 4.15pm, when a taxi, heading downhill towards the promenade, drove into the yellow box where the tram lines cross the road.
It's understood the taxi suffered some damage in the accident but the tram was unscathed.
Only two people were on board the tram at the time and there were no injuries.
The service was halted for a short time while offices dealt with the accident.
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