MGO Enterprises

March 4, 2014 BIR RULING NO. 083-14 Section 109 (1) (R) of the Tax Code of 1997, as amended; BIR Ruling No. 007-11; BIR Ruling No. 340-11 MGO Enterprises 513 J. Marzan Street, Barangay 448, Zone 44, Sampaloc, Manila 1008 Attention: Marissa Olle Galero Proprietress Madame : This refers to your letters dated June 8, 2011 and December 14, 2012 , requesting for exemption from the payment of Value-Added Tax (VAT) in connection with the sale of publication materials, like textbooks, workbooks and other educational materials pursuant to Republic Act (R.A.) No. 8047 in relation to R.A. No. 9337. It is represented that MGO Enterprises is duly registered with the Department of Trade and Industry (DTI) under Certificate No. 01168917 as a retailer of books, school and office supplies, instruction materials, garden tools, agricultural supplies and equipment, and marine products and BIR Tax Identification Number 180-101-070-000. In support of its request, MGO Enterprises submitted the following documents: 1. Original DTI Certification dated July 16, 2012; 2. BIR Certificate of Registration; 3. Certified true copy of NBDB Certificate of Registration No. 1539 1 covering the following classification: 3.1. Book Wholesale/Retailer, Distribution 3.2. Non-print Information Materials Wholesaler/Retailer 3.3. Non-print Information Materials Importer In reply, please be informed that Section 109 (R) of the 1997 Tax Code, as amended, the "sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin, which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements is exempt from the imposition of the VAT." aHADTC The above provision is being implemented by Revenue Regulations (RR) No. 16-2005. Section 4.109-1 (B) (r) thereof, provides that "(r) Sale, importation, printing or publication of books and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements;" shall be exempt from VAT. Based on the above-cited provisions, it is clear that there are four (4) activities that are exempt from the coverage of VAT, i.e. , sale, importation, printing and publication of books, newspapers, magazines, reviews and bulletins . Moreover, the features of the said items, like magazine, should appear at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements. In view thereof, MGO Enterprises' sale of books are exempt from the payment of VAT and from the 3% percentage tax under Section 116, in relation to Section 109 (V) of the 1997 Tax Code. (BIR Ruling No. 007-11 dated January 19, 2011) However, with regard to the importation and sale of non-print information materials and electronically printed materials, such as electronic books, this Office had the occasion to rule in BIR Ruling No. 340-2011 dated September 7, 2011, that the term "book" for purposes of the VAT law only applies to printed matters in hard copy. It does not, however, apply to electronic copy of any book or publication, thus: "CD-ROM comes within the purview of the 'goods or properties', hence, the sale thereof made in the course of trade or business of the seller is subject to VAT pursuant to Section 99 in relation to Section 100 of the aforesaid NIRC. An electronic copy of any publication does not come within the purview of the terms 'books, newspapers, periodicals, magazine, review or bulletin' for the purpose of VAT exemption as provided under Section 103(y) of the aforesaid NIRC. The said terms only apply to printed matters in hard copy as expressly provided therein. The term "book" has been defined as "A literary composition which is printed; a printed composition bound in volume." (Scoville V Toland 21 Fed. Cas. 864 BLACK'S LAW DICTIONARY) Accordingly, it does not come within the purview of the VAT exemption provided under Section 109 (y), NIRC, as amended by RA No. 8241, and as renumbered by R.A. No. 8424 (now Sec. 109 (R) of the 1997 Tax Code), as follows: (y) Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements." In view of the foregoing and considering that MGO Enterprises is engaged in the sale school and office supplies, instructional materials, garden tools, agricultural supplies and equipment and aqua marine products, its importation and sale of the same as well as non-print information materials, electronic copies of books and other instructional materials, being outside the purview of the term "books or any similar publication" for purposes of Section 109 (R) of the 1997 Tax Code, are subject to the 12% VAT. Thus, it is required to continue as a VAT business entity and issue a separate VAT invoice/receipt therefor to record such transactions. CScTDE This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Valid from November 29, 2012 to April 30, 2015.