Exemption from Withholding Tax — Sale of Imported Articles to Government Agencies

December 14, 1979 BIR RULING NO. 129-79 Exemption from withholding tax sale of imported articles to government agencies In reply to your letters dated May 22, July 31 and September 24, 1979, please be informed that Republic Act No. 1051 requires all bureaus, offices, agencies and instrumentalities of the government, to deduct and withhold any and all taxes the amount of which can be fixed, determined, computed or ascertained, due from the payees thereof on account of said money payments, provided, however, that no deductions and withholdings shall be required in case previous payments of the aforesaid tax liability or liabilities had already been made by the corresponding payee. Inasmuch as the advance sales tax due on the imported articles had already been paid before the same are released from customs custody, your sales of said imported articles to government offices, bureaus, agencies and instrumentalities are not subject to the withholding of taxes under the provisions of Republic Act No. 1051. However, your sales of your locally manufactured products such as transformers, safety switches, panel-board and electrical control equipment and devices to government bureaus, offices, agencies and instrumentalities shall be subject to withholding tax under R.A. No. 1051. Under P.D. No. 1358, amending the sales tax law, the manufacturer is authorized to credit the sales tax, specific tax and mining tax which was paid on the raw materials, part or accessory which he used in the manufacture of the finished product. Consequently, the amount of sales tax due on your sales of the aforesaid products to government offices can be computed or ascertained by crediting the sales tax, specific tax or mining tax paid on the raw materials used in the manufactured of the products sold, provided that the amount of tax paid on the raw materials has been indicated as separate item in the invoice issued to you. Such sales tax thus ascertained and computed by you shall be billed separately in your invoice and the same shall be subject to deduction and withholding by the government agency concerned, in accordance with R.A. No. 1051. aisa dc