Tax Base of the Percentage Tax on General Garments Corporation's Manufactured Articles Sold to Customers

February 21, 1985 BIR RULING NO. 020-85 199 (a) 000-00 020-85 Gentlemen : This refers to your letter dated August 3, 1984 requesting for and in behalf of your client, General Garments Corporation, a ruling on the tax base of the percentage tax on its manufactured articles sold to customers. cdta It is represented that General Garments Corporation is a manufacturer of T-shirts, underwears, etc. which it sells to wholesalers and retailers; and that in invoicing its customers, it included in the sales amount the 10% sales tax and stamped on its sales invoice the phrase "10% Sales Tax Included", as follows: 60 pcs. T-shirts # 301 at P34.25 P2,055.00 Pesos: Two Thousand Fifty Five only. Recap: Cost P1,868.18 10% ST 186.82 Total P2,055.00 ========= 10% SALES TAX INCLUDED P2,055.00 ========== In reply, please be informed that in the preparation of your client's sales invoice, it has substantially complied with the statutory requirement of billing the tax to its customer as a separate item in the invoice. In the computation of the sales tax imposed under Sections 194, 197, 198, 199 and 201 of the Tax Code, in relation to General Circular No. 431, if a manufacturer or producer, in fixing the gross selling price of an article sold by him, has included an amount intended to cover the sales tax in the gross selling price of the article, the sales tax shall be based on the gross selling price less the amount intended to cover the tax if the tax is billed to the purchaser as a separate item in the invoice. (Sec. 5(d), Revenue Regulations No. 8-78) Accordingly, in the illustration above, the basis of the percentage tax is P1,868.18 which is equivalent to the gross selling price less the amount of P186.82 intended to cover the 10% sales tax. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner