Exemption of an Ordinary Book Dealer or Merchant from 10% VAT

October 30, 1989 BIR RULING NO. 219-89 103 (f) 386-87 219-89 Gentlemen : This refers to your letters dated June 14 and July 13, 1989 requesting a ruling as to whether you are a commercial broker or an ordinary book dealer in your capacity as the sole and exclusive distributor of Moran's Comments on the Rules of Court. cd It is represented that in 1952, the late Chief Justice Manuel Moran appointed you as the sole and exclusive distributor of his Comments on the Rules of Court; that on March 1, 1987, you were reappointed to continue the distributorship of said publication subject to the terms and conditions stated in the Memorandum of Agreement executed between you and the Heirs of Manuel Moran; that one of the conditions imposed is that the copies you ordered from the first to the end of a given month must be paid not later than 3rd of the following month; and that the agreed buying price, then and now, is P58.50 net per copy as evidenced by the attached xerox copies of the sales invoice and official receipt issued by Moran's Publishing showing your payment of the amount of P16,906.50 on your purchase of 289 copies of Moran's Rules of Court. In reply, please be informed that a person who acts as sales agent of publishing companies for commission is considered a commercial broker; but if he purchases outright the publication he sells, he is considered a merchant , (Ruling No. 105.02 cited in Aranas Comments and Jurisprudence on the NIRC of 1977) Moreover, it is a rule that the transaction is a sale if the transfer puts the transferee the owner and makes him liable to the transferor as a debtor for an agreed price. (Commissioner vs. Constantino, 31 SCRA 779) Accordingly, in the instant case, since you are required to pay at a specified time and at an agreed price for the books you purchase so much so that the publishing company loses ownership of the books sold, you are an ordinary book dealer or merchant and not a commercial broker. Such being the case, for selling books, i.e. Moran's Comments on the Rules of Court, you are not subject to the 10% value-added tax, in accordance with Section 103(f) of the Tax Code, as amended by Executive Order No. 273, (BIR Ruling No. 386-87) cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner