Plain-clothes police and Customs officers swooped on the Tattoo Studio, in Hope Street, at lunchtime yesterday.
They were today trying to discover whether the shop was a holding house before the offensive material was distributed elsewhere.
A 37-year-old local man was arrested as a specialist team moved in to search the shop.
His name has not been released by the police, but he was today helping them with their inquiries.
Through the day several other addresses were searched and CDs and other material were seized.
A force spokesman said the material was believed to be offensive, but not pornographic.
The operation was launched following the importation of offensive material into the Island.