BIR Ruling [DA-366-06]

June 9, 2006 BIR RULING [DA-366-06] DA-464-2003; Sec. 109 (R), NIRC; Sec. 9. 236-1 (b), RR 16-2005 St. Margaret Book Supply Incorporated Unit 304, Building II A. Rodriguez Avenue Pasig City Attention: Leonora Delos Reyes President This refers to your letter dated April 18, 2006 requesting for VAT exemption on your sales of school textbooks pursuant to the provisions of Section 109(R) of the Tax Code of 1997, as amended by Republic Act (RA) No. 9337. It is represented that St. Margaret Book Supply Inc . (" St. Margaret ", for brevity) is engaged in the distribution and sale of school textbooks to local government units (LGUs) and to Pasig City Science High School; and that in the course of its recent transactions, St. Margaret was requested to provide the latter with a ruling from the BIR granting it exemption from the payment of 12% VAT, hence, this request for exemption. In reply, please be informed that Section 109(R) of the same Tax Code provides that: "Sec. 109. Exempt Transactions Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT. xxx xxx xxx (R) Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements." From the above provision, it is evident that St. Margaret's sale of school textbooks to LGUs and to Pasig City Science High School is exempt from the payment of 12% VAT, if such is its sole business activity. However, if it engages in other activities other than those that are VAT-exempt under Section 109 (1)(A) to (U) of the same Tax Code and there are reasonable grounds to believe that such activities will generate or actually do generate gross sales or receipts in excess of One Million Five Hundred Thousand Pesos (P1,500,000.00), St. Margaret will be required to register as a VAT business entity and issue separate VAT invoices/receipts to record such transactions in accordance with Section 9.236-1 (b) of Revenue Regulations (RR) No. 16-2005. cEaCAH 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 null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service