Applicability of VAT on Business

February 2, 1988 BIR RULING NO. 019-88 100 (1) 000-00 019-88 Gentlemen : This refers to your letter dated December 2, 1987, requesting a ruling on the applicability of the value-added tax on the following lines of business: 1. Export sales of more than P200,000.00 of roasted coffee beans; 2. Local sales of more than P200,000.00 of roasted and ground coffee beans; and 3. Service income consisting of gross receipts for the cleaning and roasting of coffee for other persons or firms of more than P200,000.00. In reply, please be informed as follows: 1. If you are VAT-registered, your export sales of roasted coffee beans shall be subject to 0% pursuant to Section 100(1) of the Tax Code, as amended by Executive Order No. 273; otherwise, your export sales shall be exempt the value-added tax pursuant to Section 103(v) of the Tax Code, as amended. 2. Roasted and ground coffee beans are not considered manufactured products. (BIR Ruling Nos. 036-86 and 079-86) Hence, your sales thereof are exempt from the value-added tax in all stages of distribution pursuant to Section 103(b) of the Tax Code, as amended. However, if the ground coffee is packed or placed in bottles or cans and sold, the same is already a manufactured product (BIR Ruling No. 315-87); hence, subject to the value-added tax if your sales exceed P200,000.00 during the 12-month period. But if your sales derived from all lines of business do not exceed P200,000.00 during any 12-month period, you are exempt from VAT but subject to 2% of your gross quarterly sales pursuant to Section 103(w) in relation to Section 112 of the Tax Code as amended. 3. Your service income consisting of gross receipts for cleaning and roasting of coffee beans for other persons or firms is subject to the value-added tax of 10% if your gross receipts arising from the performance of such service exceed P200,000.00; otherwise, if your gross receipt is less than P200,000.00 and you did not opt to register under the VAT you are exempt from the value-added tax but subject to the 2% tax based on your gross quarterly sales or receipts. However, if your gross receipt is less than P200,000.00, but you are registered under the VAT, you are subject to the value-added tax of 10% pursuant to Section 112 of the Tax Code, as amended. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner