BIR Ruling

November 22, 1967 Mr. William A. Paradies President, Aboitiz Manufacturing Corp. P. O. Box 219, Manila S i r : This is with reference to your letter dated September 25, 1967 stating the following: "We would highly appreciate being adviced on the correct manner of billing the sales tax as a separate item in the invoice issued to the customer as decreed in the CTA decision on the case entitled "Connel Bros. Co. (Phil.) vs. Collector of Internal Revenue," CTA Case No. 35, 4-29-59. LLjur "We note that a large number of companies indicated the quantity of the article sold times its unit price equals the total sales value; plus the 7% sales tax, equals the total amount of sales. An equally large number of companies limits themselves to stating the gross selling price of the articles sold; and further annotating on a space provided for in the invoice, the merchandise value, plus the 7% sales tax, equals the total sales amount. Your advice on which manner of billing the sales tax is correct is earnestly solicited. "We note further that most companies compute the sales tax to be billed the customer as a predetermined factor, and not necessarily the correct amount of 7% sales tax on the articles sold, but merely an estimate of the same. We would appreciate also being adviced on whether this practice is approved in the light of the requirement under BIR General Circular No. 431 that the tax billed the customer be the correct amount of tax." In reply thereto, I have the honor to inform you that in the case of Connel Bros., Co. (Phil.) v. Collector of Internal Revenue, G.R. No. L-13470, promulgated on December 26, 1963, the Supreme Court held that the sales tax should be billed to the purchaser as separate item in the invoice, the amounts intended to cover the sales tax should be considered as part of the gross selling price of the articles sold. prcd The billing of the sales tax by the different companies as outlined in the second paragraph of the foregoing representation is in substantial compliance with the requirements of General Circular No. 431. A company may be authorized to bill as a separate item in its sales invoices issued to its customers only the estimate of the sales tax due on its sales; provided that, the amount of the tax payable by it at the end of the month shall be the total of the taxes due on its sales and not the total of the taxes as billed in the invoices, and provided further that where the sales tax as billed is greater than what is actually due, the former shall be considered the tax due, and the taxpayer shall not be entitled to the refund of the difference between the former and the latter. cdtech Very truly yours, (SGD.) AMBROSIO M. LINA Acting Commissioner of Internal Revenue