Taxability of An Operator or Proprietor of a Refreshment Parlor or Eating Place

February 11, 1988 BIR RULING NO. 038-88 114 012-88 038-88 Gentlemen : This refers to your letter dated January 27, 1988 requesting a ruling as to whether or not you are subject to the 10% value-added tax. You have represented that you are the operator of various coffee shops located at Timog, Cubao, Quezon City, Greenhills, Pasig, Makati and Manila, wherein you serve bread, cakes and pastries together with coffee, soft drinks and fruit juices to your patrons the general public; that for the convenience of your customers, you also maintain a take-out counter; and that to save in raw materials and costs, you bake some of the bread and other bakery products served in your coffee shops and sold over your take-out counter. In reply, please be informed that under the foregoing facts, you are an operator or proprietor of a refreshment parlor or eating place; hence, your gross receipts are subject to the 4% caterer's tax under Section 114 (formerly Section 171) of the Tax Code, as amended by Executive Order No. 273. However, a take-out counter is considered incidental to the operation of an eating place which is the main line of business. In other words, the take-out counter is not ordinarily taxed as an independent business, in which case, the sales in said counter forms part of the gross receipts of the operator of the eating place subject to the 4% caterer's tax. Such being the case, the sales in the take-out counter are not subject to the 10% value-added tax pursuant to Section 103(j) of the Tax Code, as amended by Executive Order No. 273. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner