BIR Ruling

July 9, 1969 Yupangco-Yamaha Music Corporation 1195 Pasong Tamo Street Makati, Rizal Attention: Mr . Graciano A . Yupangco President Gentlemen : This refers to your letter of February 26, 1969 requesting information as to how you can register your school, the Yamaha School of Music with this Office and as to what internal revenue and municipal taxes your corporation shall be liable to if it engages in business in accordance with the following purposes: Primarily : (1) To engage in the manufacture and/or assembly of any and all kinds of musical instruments such as pianos, organs, accordions, harmonicas, wind musical instruments, percussion instruments and all other musical instruments; (2) To buy any and all raw materials or semi-finished raw materials either locally or by importation from foreign countries for use in the manufacture of the above-mentioned musical instruments; (3) To sell, barter, or in any way dispose of the finished musical instruments so manufactured or assembled as mentioned above. Secondarily : (1) To engage in the manufacture and/or assembly of all kinds of commodities other than the musical instruments mentioned in the primary purpose above; to buy locally or import the necessary raw materials needed therefore; and to sell, barter, or otherwise dispose of the finished product so manufactured or assembled under this paragraph; (2) To engage in the buying and selling, importing and exporting and the bartering of all kinds of commodities as well as the buying and selling, importing and exporting and bartering of spare parts needed in the repair or upkeep of the commodities so purchased, imported or bartered under this paragraph; and (3) To engage in the buying, selling, bartering, renting, leasing from or to other persons, associations and corporations of real estate such as land and/or buildings and houses; Finally (4) For the purpose of promoting and popularizing resulting in more sales of the musical instruments and other commodities so manufacture or imported and for the creation of goodwill and good public relations, to engage in any and all promotional activities such as the establishment of music schools and music halls, sponsoring or conducting musical contests and concerts, patronizing music and arts, encouraging music composers and inventors, etc. In reply, I have the honor to inform you that if your company pursues the business described under the primary purposes and the first paragraph of the secondary purposes, it is a manufacturer, subject to the annual fixed tax of P20.00 under Section 182(A)(1) of the Tax Code. The manufactured instruments such as accordions, harmonicas, sound musical instruments, percussion instruments and all other musical instruments, are subject to the 7% tax prescribed by Section 186 of the Tax Code; while the pianos and organs are subject to the 30% tax prescribed in Section 185(g) of the same Code. The other commodities to be manufactured under the first paragraph of the secondary purposes shall be subject to the corresponding sales tax prescribed in Sections 184, 185 and 186 of the same Code. LibLex If it pursues the activity described in the second paragraph of your corporation's secondary purposes, it is a dealer subject to the graduated annual fixed tax imposed in Section 182(A)(2) of the Tax Code. If it engages in the business activities described in the third paragraph of the secondary purposes, it is a real estate dealer subject to the graduated annual fixed tax prescribed in Section 182(A)(3)(s) of the Tax Code. For engaging in the activities described in the fourth paragraph of the secondary purposes, the corporation is not subject to any internal revenue tax on business. Hence, the Yamaha School of Music is exempt from the payment of internal revenue taxes on business. However, the income derived from the operation of the school shall be consolidated with other income of the corporation for purposes of determining the income tax of your corporation. The school's Books of Accounts, registers, records, invoices or receipts shall be registered with the Office of the Revenue District Officer, Makati, Rizal in accordance with Section 19 of Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations. cdll Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue