BIR Ruling [DA-364-05]

August 25, 2005 BIR RULING [DA-364-05] Section 116 VAT Ruling No. 037-01 F & J De Jesus, Inc. 7636 Guijo cor. Sacred Heart St. San Antonio Village Makati City Attention: Ms. Joanne Christine J. Jimenez Administrative Manager Gentlemen : This refers to your letter dated June 1, 2005 requesting for a clarificatory ruling that since F & J De Jesus, Inc. is exempt from value-added tax pursuant to Section 109(y) of the Tax Code of 1997 and as ruled under DA-667-2004 dated December 28, 2004, it is likewise exempt from the percentage tax under Section 116 of the same Code. In reply, please be informed that both the 10% VAT and 3% percentage tax are taxes on the business transaction or activity. Both are indirect taxes which may be passed on or shifted to the customer who ultimately bears or assumes the burden of the tax. In VAT Ruling No. 037-2001 dated June 13, 2001, this Office had an occasion to rule that the 3% percentage tax prescribed under Section 116 of the Tax Code of 1997 does not apply to transactions exempt from the 10% VAT listed in Section 109(a) to (y) of the same Code as it applies only to transaction/s falling under item (z) of said section, to wit: "SEC. 109. Exempt Transactions . The following shall be exempt from the value-added tax: (a) . . . xxx xxx xxx (z) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of Five hundred fifty thousand pesos (P550,000): . . . ." "SEC. 116. Tax on Persons Exempt from Value-added Tax (VAT) . Any Person whose sales or receipts are exempt under Section 109(z) of this Code from the payment of value-added tax and who is not a VAT registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales or receipts: Provided , That cooperatives shall be exempt from the three percent (3%) gross receipts tax herein imposed." ADcSHC Thus, the BIR in BIR Ruling No. DA-667-2004 dated December 28, 2004 rule that F & J De Jesus, Inc. is exempt from the 10% value-added tax on its sale, importation, printing or publication of educational books. Likewise, it is exempt from the 3% percentage tax on the said transaction. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) JOSE MARION C. BUAG OIC, Commissioner of Internal Revenue