BIR Ruling No. 051-63

July 12, 1963 BIR RULING NO. 051-63 Messrs. Ross, Selph & Carrascoso Attorneys at Law P.O. Box 781, Manila Gentlemen : This is with reference to your letter dated March 1, 1963 requesting for and in behalf of your client, Colgate Palmolive Philippines Inc. authority to bill as a separate item in the respective invoice issued to its customers only the estimate of the actual sales tax due on its sales. You stated that: cdtech "The manufacture of the products of our client one of which is soap, involves complicated processes necessitating the use of a variety of raw materials. It is, therefore, difficult to bill on the sales invoice the correct or exact amount of sales tax. The total amount of taxes due on the monthly sales is known only at the end of the month. For tax billing purposes, at the end of every quarter our client computes a composite tax factor. For instance, in one quarter it was calculated that the 7% sales tax on all the sales subject to the said rate, after excluding the allowable deductions, was equivalent to 4.20917% of the gross sales. Since this tax factor is only as estimate, the tax billed on each invoice issued in the succeeding quarter does not tally with the sales tax computed at the end of the month based on actual sales and after deducting the cost of the raw, materials actually used. To illustrate, let us assume a sale of 12 case of Palmolive Soap, at a unit selling price of P62.10 which includes the 7% sales tax based on the said predetermined sale tax factor. The invoice issued in accordance with your ruling contains, among other, things, the following information: Quantity Unit Description Unit Price Amount 12 120's PO Soap, Bath P62.10 P745.20 Mdse. Value P713.81 7% Sales Tax 31.37 "At the end of the month, the sales tax on the foregoing transaction, after excluding the cost of raw materials, or P295.67, is P29.27, not the billed amount of P31.37. By computing the tax in such manner that the tax which should have been billed is the same amount to be paid, the actual computation shows a sales tax of P29.41, arrived at as follows: LexLib Invoice total P745.20 Less Sales Tax 29.41 715.79 Less Raw Materials 295.67 420.12 7% sales tax due P29.41 "It will be noted that the invoice shows a sales tax of P31.37 which is based on the predetermined sales tax factor of 4.20917%. On the other hand, the actual amount of sales tax due is P29.41 or a difference of P1.96" In the answer thereto, I have the honor to inform you that in line with BIR Ruling No. 62-0044, you request is hereby granted. However, in the example given by you the amount of P31.37 (sales tax billed by your client as a separate item in the invoice) is the one that should be paid to the government and not P29.41 ( the amount actually due on its sales). This supplement BIR Ruling No. 62-0044. Very truly yours, (SGD.) JOSE B. LINGAD Acting Commissioner of Internal Revenue