Tax Liability of Dealers

February 24, 1958 BIR RULING NO. 127-58 Mr. Leandro G. Anselmo Attorney-at-Law Rm. 202 Samanillo Bldg. Escolta, Manila S i r : Reference is made to your letter dated February 21, 1958 stating substantially the following: "Real, Inc. is engaged in the exportation of handicrafts produced by cottage industries like place-mats, baskets of coconut midribs, buri handbags, buri mats and like articles. This corporation buys these handicrafts from small homes for which purchase vouchers are issued. The corporation exports the handicrafts thus purchased." "Question: (1) When the corporation purchases the aforesaid handicrafts for purposes of exportation, is it subject to the payment of percentage tax; "(2) If not, to what taxes is the corporation liable to pay thereon. In reply thereto, I have the honor to inform you that a person who purchases from local producers or manufacturers articles produced or manufactured by them for the purpose of resale, either locally or abroad, is a mere dealer, subject only to the graduated fixed annual tax prescribed in Section 182 of the Tax Code. The percentage (sales) tax is due only on the original sales made by the producers or manufacturers of the articles produced or manufactured by them, the same to be paid by the latter although ordinarily they shift the tax to the customer. Accordingly, the Real, Inc., for purchasing and selling handicrafts from cottage industries, is not liable to any percentage (sales) tax, but to the graduated annual fixed tax prescribed in Section 182 of the Tax Code, the amount of which at the start or commencement of business is P10.00 and, thereafter, it shall depend upon the amount of the gross sales during the preceding calendar year. cdpr Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue