Deductibility of Sales Discounts and Purchase Discounts

March 8, 1966 BIR RULING NO. 010-66 The 20th Century Nylon Shirt Co., Inc. Plaza Calderon de la Barca Binondo, Manila Attention : Mr . Panfilo G . Pilapil Accountant Gentlemen : This refers to your letter dated November 19, 1965 requesting information on the following: "1. Are sales discounts allowed to customers upon collection of such receivables deductible from the gross sales for sales tax purposes? "2. Are purchase discounts allowed by a supplier/seller upon payment of such liabilities deductible from the gross purchases for sales tax purposes?" In reply, I have the honor to inform you as follows: 1. Sales discounts are deductible from the gross selling price of a manufacturer for purposes of sales tax, provided that they are determinable and definitely agreed upon at the time of sale and not in the nature of rebates or partial remissions of indebtedness. (BIR Ruling 105.02, Sept. 4, 1952; BIR Quarterly Bulletin, Vol. I, No. 3) If the discounts are determined and given after the consummation of the sales, they are not deductible from the gross selling price of the manufacturer in computing his monthly sales tax. (BIR Ruling 105.02, May 27, 1954; BIR Quarterly Bulletin, Vol. III, No. 2) 2. Purchase discounts allowed by a supplier and/or seller of merchandise upon payment of such liabilities are not deductible from the gross purchases for sales tax purposes for the reason that such discounts were not determined at the time of sale, (BIR Ruling No. 97, s. 1960) aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue