BIR Ruling

May 29, 1969 Mr. Eulalio T. Lim Tuguegarao, Cagayan S i r : This refers to your letter dated December 19, 1969 to the Action Line c/o The Manila Times Publishing Co., P.O. Box 775, Manila requesting information on whether or not the term "gross receipts or earnings" as used in subsection (b) of Section 1 of Commonwealth Act No. 465, otherwise known as "An Act to Impose a Residence Tax", has the same meaning with the term "gross income" as defined in Section 43 of Revenue Regulations No. 2 In reply thereto, please be informed that these two legal provisions are distinct and separate from each other and deals with different subject matters. For purposes of the additional residence tax, the term "gross receipts" means the actual sales receipts, income or earnings received by the business for a particular period without any deduction, or as provided under Section 9 of Revenue Regulations No. 1 dated September 1, 1939, as amended, implementing Commonwealth Act No. 465, the meaning of gross receipts or earnings in the case of merchants, shall be understood to mean their cash sales. Hence, it has been held that "gross receipts" means the entire receipts without diminution. (State vs. Hallenberg-Wager Motor Co., 108 S.W. 2d 398; 401, 301, So 771, 38 C.J.S. p. 1083) On the other hand, Section 43 of Revenue Regulations No. 2, speaks particularly of the "gross income" of a manufacturing, merchandising, or mining business for purposes of the income tax, and means "the total sales, less the cost of goods sold, plus any income from investments and from incidental or outside operations or sources. In determining the gross income, subtractions should not be made for depreciation, depletion, selling expenses or losses, or for items not ordinarily used in computing the cost of goods sold." aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue