BIR Ruling [DA-566-99]

October 4, 1999 BIR RULING [DA-566-99] MEMORANDUM TO: The Head Revenue Executive Assistant Collective Service Re : Fujitsu Computer Products Corp. TCC in payment of DST This refers to your memorandum dated July 7, 1999, which basically quotes the oft-repeated arguments that TCC's cannot be used in the payment of DST. This Office in BIR Ruling Nos. DA-021-98 dated January 21, 1998; DA-485-98 dated November 10, 1998; and DA-227-99 dated April 13, 1999, among others, has squarely addressed this issue. In these cases, this Office acknowledged the merits of the taxpayer's request that a validly issued TCC can be utilized in the payment of its DST liability. In fact, BIR Ruling No. DA 485-98 dated November 10, 1998 was itself issued to the instant taxpayer Fujitsu Computer Products Corp. allowing the latter to utilize its TCC in payment of its DST liability. cdll Your personal view that the DST is an indirect tax is clearly misplaced. An indirect tax as you defined in your memorandum is "that demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another, is a tax, which the taxpayer can shift to another." This does not apply to DST which can be the direct liability of BOTH parties to a contract since the liability for it is demanded from the person making, signing, issuing, accepting or transferring a document. A perfect example of this is in case of a contract of loan, wherein the parties are equally directly and primarily liable since they both signed the document as borrower and lender. Consequently, since it is impractical that both of them will pay the DST, the parties will agree who will pay the DST relative to the contract. In the case of indirect taxes, such as VAT, only one party is liable to the tax but the same as provided for by law can be passed-on or shifted to another person. To quote BIR Ruling No. 227-99 dated April 13, 1999 on the matter of "direct liability": "In reply, please be informed that we find your arguments tenable. Furthermore, in the case of loan agreement, the borrower is a party directly and primarily liable for the DST because it is a party who signs the loan agreement . This finds support in Section 173 of the Tax Code of 1997 which provides that the DST is liability of the person making, signing, issuing, accepting or transferring the taxable document. The lender bank may also be equally liable for DST . It may be noted from Section 173 of the Tax Code of 1997 that the law obligates any of the parties to the transaction to pay the DST. The parties can, therefore, validly enter into agreement as to who will ultimately bear the burden of paying the DST due on the document or transaction. The BIR has in the past issued several rulings to the effect that then Section 222 of the Tax Code, as amended (now Section 173 of the Tax Code of 1997) places the burden of paying the DST upon the parties to the contract and leaves the tax to be paid indifferently by either party and accordingly, the party assuming payment of said taxes becomes directly liable therefor. (BIR Ruling No. 232-82 dated July 19, 1982). Accordingly, by assuming the burden of paying DST on the loan agreement, you became directly liable therefor." On the matter that BIR Bank Advisory Bulletin (BBAB) No. 98-14 dated December 15, 1998 prohibits the use of TCC in payment of DST, we so hold that said prohibition applies only to those taxpayers authorized to use a DST metering machine. The same does not apply to ordinary taxpayers not using said machine. A careful perusal of Revenue Memorandum Order (RMO) No. 83-98, from which BBAB No. 98-14 was lifted in toto , reveals that nowhere in said RMO can you find a statement providing for prohibition against the use of TCC in payment of DST. Or that it would cover all types of taxpayers, whether or not authorized to use a metering machine or not. As a matter of fact, RMO No. 83-98 was addressed to "All Documentary Stamps Metering Machines Users, Revenue Personnel and Other Concerned." Further, No. 1 of the Policies stated in RMO No. 83-98, provides that: "Those authorized to use documentary stamps metering shall use the new metering machine with encryption. Once they use the same, they will be required to apply for registration through the supplier by filling-up the Application Form for permit to use the documentary stamps metering machines with encryption." Thus, RMO No. 83-98 and BBAB No. 98-14 will not effect taxpayers not authorized to use DST metering machine and accordingly, they may utilize their TCC in payment of their DST liability. RMO No. 83-98 does not also seek to nullify the constructive purchase of DST. Section 200(A) and (B) of the Tax Code of 1997 clearly mandates that the DST is required to be paid and the DST return filed within ten (10) days from the close of the month when the taxable document or transaction was made, signed, accepted or transferred. The exception provided in Section 200(D), which is an alternative mode for payment of DST is through actual affixture of the DST or by imprinting the stamps through a DST metering machine, which you imply is the only way by which a taxpayer can pay DST. Section 200(A) and (B) which you apparently refer to as constructive stamping cannot in any way be amended or superseded by a mere Revenue Memorandum Order. It is elementary that administrative rules, regulations and guidelines must conform with the law from which they derive their authority, otherwise such issuances are null and void. cdlex Finally, Section 2.3 of RMO No. 86-98 dated November 10, 1998 explicitly provides that: "Kinds of internal revenue taxes against which a TCC may be applied in payment; Exception. Subject to the provisions of the preceding paragraphs, any TCC duly issued by the Commissioner of Internal Revenue, or his duly authorized representative, under the provisions of . . . may be used by its grantee in payment of his internal revenue taxes, value-added tax, percentage taxes, excise taxes and documentary stamp taxes , except his withholding tax liability." Please be reminded also of the previous warning that this Office aired in BIR Ruling No. DA-161-98, dated April 22, 1998, to wit: "In this regard, it is noted that you have signed and issued several letters directly to affected taxpayers denying their application to use TCCs in payment of their DST liabilities. These letters partake of the nature of a ruling. Please be reminded that, pursuant to the Tax Code of 1997, the power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau is an exclusive power of the Commissioner which cannot be delegated. You are therefore warned that a repetition of this infraction of the law may subject you to appropriate sanctions." In conclusion, this Office reiterates its stand that the utilization of TCCs in payments for tax liabilities, including DST, is proper, except only in the following cases: 1. Payment or remittance for any kind of withholding tax by taxpayers; 2. Payment to a tax reduced by way of compromise authorized under Section 204 of the Tax Code; and 3. Payment of deficiency taxes arising from confidential information (RMO 20-91) LibLex (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue