Tax Imposed on WL and Its Sale to "Jobbers"

May 30, 1988 BIR RULING NO. 220-88 100 (a) 000-00 220-88 Gentlemen : This refers to your letter dated March 14, 1988, requesting a ruling in behalf of your client, Warner-Lambert Philippines, Inc. (WL) regarding the value-added tax. You stated that as a marketing strategy, WL distributes its confectionery and health care products, as follows: "a) It sells the aforecited products to certain independent wholesalers and traders known in marketing parlance as "JOBBERS". These "JOBBERS" buy the products at WL list price, net of discount ranging from 3% to 5%. WL pays value-added tax based on the selling price, net of discounts which are agreed upon at the time of sale and shown in the invoices; "b) To promote the sales of said products, WL instructs its own sales representatives to buy (using WL funds) their stock requirements from the aforecited wholesalers and traders (Jobbers) at WL list prices. The "JOBBERS" issue sales invoices to WL sales representatives and pay value-added tax based on their selling prices to the sales representatives (selling prices are also the same as WL list prices); "c) WL sales representatives sell the goods purchased from the "JOBBERS" to sari-sari stores and other small outlets which are mostly non-VAT registered (annual sales are below P200,000.00) at the same prices (WL list prices) that the products were purchased from the "JOBBER". In other words, the WL sales representatives do not add any mark-up because the purpose of the arrangements is only to promote sale or help keep the products moving." cdti In reply, please be informed as follows: 1. WL is subject to VAT on its sale to "jobbers" based on the selling price, net of discounts. 2. "Jobbers" are subject to VAT on their sale of WL products to WL sales representatives. 3. Sales representatives are not subject to VAT since it is their job to promote the sale of their products; they do not add any mark-up and use the "retail order form" instead of the sales invoices. cd Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner