BIR Ruling

March 24, 1975 Messrs. Garcia, Tolentino, Aguilar & Co. Certified Public Accountants P. O. Box 1663, MCC Makati, Rizal Gentlemen : This refers to your letter dated October 22, 1974 requesting a ruling as to the tax status of your client whose business is to deal in glasses, mirrors and like products. It is represented that your client is an importer of glasses and mirrors; that when these items are available locally, your client buys them locally; that most of his customers are building contractors who give their orders with specifications and dimensions; that the sales in most cases are with installations; that your client prepares the glasses, cuts them to sizes and installs them for customers; and that there are cases where the customers buy glasses without installations. Based on the foregoing facts, you now want to be clarified on the following questions: "1. What is the tax status of the abovementioned client? "2. What are the internal revenue taxes that he is supposed to pay? In reply, I have the honor to inform you as follows: For undertaking the importation of glasses and mirrors, your client is an importer subject to the P50.00 annual fixed tax prescribed in Section 182(A)(1) of the Tax Code and his importations of glasses and mirrors are subject to the 7% advance sales tax the tax to be based on the landed cost thereof plus 25% mark-up pursuant to Section 183(b) in relation to Section 186, both of the Tax Code. And for selling locally purchased glasses and mirrors, your client is a dealer thereof, subject to the graduated annual fixed tax prescribed in Section 182(A)(2) of the same Code. It may be stated that as a general rule the cutting of glasses with specific sizes by the dealer to meet the sizes desired by his customers does not constitute manufacturing, because the cutting of the glasses into desired sizes, and/or the installation thereof in building are merely incidental to the main contract of purchase and sale. However, considering that most of your client's customers are building contractors who give their orders with specifications and dimensions and require your client to install the glasses he sells, he is considered a contractor, if he receives a separate fee for the installation of the glasses he sells. In such case, your client is subject to the contractor's fixed and percentage taxes prescribed in Sections 182(A)(1) and 191 of the Tax Code. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5