Registered Purchase Invoices Issued to Small-Time Junk Suppliers could be Used as Additional Supporting Documents

April 6, 1994 BIR RULING NO. 085-94 238 311-87 085-94 Yap & Associates Certified Public Accountants Suite 309 Capt. Gonzaga Bldg. 414 Rizal Avenue Manila Attention: Mrs . Dedicacion N . Yap Partner Gentlemen : This refers to your letter dated June 24, 1993 requesting for an opinion on whether your client's registered purchase invoices issued specifically under the name of its individual "small-time junk suppliers" with an attached xeroxed copy of the check payments made to them could be used as additional supporting documents of its cost of goods manufactured. It is represented that your client, ONG TA LEAD FACTORY, INC., of No. 471 Elcano St., San Nicolas, Manila, is engaged in the manufacture of lead products; that as such, some of its raw materials are bought from small-time or "backyard" scrap or junk vendors, who trade their junks by means of push-carts and who are in the same category as the "magdidiyaryo-bote"; that due to their poverty and lack of knowledge and comprehension of the prevailing laws on the matter, they do not and/or could not afford to register their small-time business to the proper agencies; that out of compassion to these people, your client usually buys from them scraps and junks which it could use as raw materials in its lead manufacturing business; and that in order to have a very accurate control of the money payments made to the said junk vendors, your client adopts the method of attaching to its registered purchase invoices a xerox copy each of the corresponding check issued in the name of the individual junk suppliers as proof of payments made to them. In reply thereto, please be informed that this Office has previously opined in BIR Ruling No. 311-87 that public interest is served best when a group of people conducting " marginal economic activity ", like the public market vendors, is allowed to take advantage of modest opportunities without being hampered with government requirements that they cannot comprehend or comply anyway; hence, they were exempted from the requirements of issuing official receipts on their sale or transfer of merchandise. Your client's small-time or "backyard" scrap or junk suppliers, who trade their junks by means of push-carts and who are in the same category as the "magdidiyaryo-bote" can be considered as people conducting "marginal economic activity." The last paragraph of Section 238 of the Tax Code, as amended, in relation to Section 4(c) of Revenue Regulations No. 12-78 dated July 31, 1978 provides that the Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this section. The same Revenue Regulations, however, further provides that in case no receipt or invoice is issued by the vendor or the person rendering the service for the reason that he is exempt from the requirement to issue the same, the purchaser, customer or client may require the vendor or the person rendering the service to sign a purchase or expense voucher indicating his name, address and business style, if any; and shall show the name and address of the purchaser, customer or client, date when the transaction was effected, quantity, unit, cost and description of transaction, merchandise or nature of the service rendered as the case may be. Since your client, ONG TA LEAD FACTORY, INC., in effect voluntarily imposes a burden unto itself in providing for the necessary evidences of its purchases from its small-time junk suppliers by using its registered purchase invoices issued specifically under the name of the individual "small-time" junk suppliers with an attached xeroxed copy of the check payments made to the said supplier/s, this Office hereby authorizes your said client to use its registered purchase invoices provided, however, that the provisions of the aforesaid Section 4(c) of Revenue Regulations No. 12-78 are properly complied with. 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, and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue