Determining the Deficiency Advance Sales Tax on Imported Business Machines

November 18, 1966 BIR RULING NO. 060-66 Messrs. Ozaeta, Gibbs & Ozaeta Attorneys at Law P.O. Box 758 M a n i l a Gentlemen : This refers to your letter dated November 7, 1966 requesting information on the following: cdtech "Out client, a dealer in electrically operated business machines, regularly imports these equipment mainly for lease to its customers. At the time of importation, therefore, our client pays the compensating tax due pursuant to Section 190 of the Tax Code. Now, some of our client's customers, pursuant to their lease contracts with option to purchase, elect to buy the machines leased to them. At the time of such a sale, our client pays a 7% sales tax less the compensating tax previously paid. "Our client would like to know, however, on what the sales tax should be based on the original landed cost plus mark-up at the time of importation or the gross selling price at the time of sale? "It should be presumed, of course, that the difference between the landed cost and the gross selling price is certainly more than 25%, the mark-up provided for under Section 183 of the Tax Code." In reply, I have the honor to inform you that for purposes of determining the deficiency advance sales tax on the imported business machines in which the compensating tax had already been paid before the same were released from customs custody, the original landed cost thereof, plus the corresponding mark-up at the time of importation shall be the basis of the advance sales tax. Accordingly, the deficiency advance sales tax is the difference between the advance sales tax computed at the time of importation less the compensating tax paid on the articles. LLjur Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue