Tax Imposed on the Purchase of a Brand New Car to be Used as the Major Prize in a Raffle Draw

April 7, 1989 BIR RULING NO. 065-89 29 (h) 000-00 065-89 Gentlemen : This refers to your letter dated December 7, 1988 requesting that you be exempted from the payment of tax on your purchase of a brand new car which you are going to use as the major prize in a raffle draw, and exemption from the payment of the 15% final tax by the winner thereof pursuant to Section 21(c) of the Tax Code. It is represented that you are a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission; that you are sponsoring a raffle draw called "Pa-Kotse Bonanza "89" on February 11, 1989 at the Army and Navy Club of Manila for the benefit of the Philippine Military Academy Alumni Association (PMAAA) Educational Trust Fund; and that the grand prize in the said draw is a brand new Nissan Sentra 1.3 LX which you hope to purchase from the ticket sales of the said raffle draw, membership fees, dues and contributions from the major service chapters of the Philippine Military Academy (PMA) Sandigan Class of 1982. In reply, please be informed that said automobile is subject to the ad valorem tax; in addition to the value-added tax, pursuant to Section 149, in relation to Section 126, both of the Tax Code. Under Section 127 of the Tax Code, the party liable for the payment of the ad valorem (excise) tax, is the manufacturer or producer of the finished product. On the other hand, under Section 99 of the Tax Code as amended by Executive Order No. 273, the persons liable for the payment of the value-added tax are not the buyers/purchasers but the sellers or importers of goods and those performing services for a fee. Such being the case, you as purchaser, cannot claim exemption from the ad valorem tax and the VAT on your purchase of the car in question since you are not the party directly liable therefor although such tax can be shifted or passed on to you as part of the purchase price. Once shifted, it is no longer a tax but an additional cost of the car which you have to pay in order to obtain the same. (Phil. Acetylene Co. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967) Moreover, under Section 21(c)(1) of the Tax Code, as amended, the winner of the said car, whether he is a citizen or a resident alien, is subject to a final tax of 20% based on the fair market value of said car which under Section 50(a) of the Tax Code should be withheld by you as withholding agent in the same manner and subject to the same conditions as provided in Section 51 of the same Code. Accordingly, your above requests cannot be granted for lack of legal basis. cd Very truly yours, (SGD.) JOSE U. ONG Commissioner