BIR Ruling No. 246-61

August 4, 1961 BIR RULING NO. 246-61 Messrs. Stewart, Cunanan & Co. 107 13th Street, Port Area P. O. Box 2288 Manila Gentlemen : This is in reply to your letter dated January 30, 1961, wherein you requested this Office to issue a ruling on a query, stated as follows: "Some of our clients engaged in the sale of locally-purchased merchandise desire to be clarified with respect to the basis of exemption from the graduated fixed annual tax imposed by Section 188(A)(2) of the National Internal Revenue Code. cdll "Under this section of the Code, a fixed annual tax of ten pesos is imposed if the amount of the gross annual sales exceeds two thousand pesos but does not exceed ten thousand pesos. "On the other hand, Section 182(C)(1) of the same Code provides: "'(C) Exceptions . The following shall be exempt from the tax imposed in this section: "'(1) Persons whose gross monthly sales or receipts do not exceed two hundred pesos .'" "In explaining the features of the amendment introduced by Republic Act No. 1856 to Section 182 of the Tax Code, General Circular No. V-254, dated July 17, 1957, states; "'5. Exemptions from the fixed tax . Under the amendment to paragraph (1) of Section 182(C), the basis of exemption was changed from gross annual sales or receipts of not more than P2,000 to gross monthly sales or receipts of not more than P200. In order to be entitled to exemption under this sub-paragraph, the gross sales or receipts of the person concerned should not exceed P200 during any month of a given year.'" llcd "If Section 182(C)(1) is held to be the basis of exemption from the graduated fixed annual tax, there would be an irreconcilable conflict between it and Section 182(A)(2) cited above because it may happen that a person may have a gross monthly sales or more than P200 during one month of a given year, but his total gross sales for the entire year does not exceed P2,000. In this case, he would not qualify for exemption from the graduated fixed annual tax under Section 182(C)(1) but under the provisions of Section 182(A)(2) he is exempt from this tax." "In view of the foregoing, we shall greatly appreciate your early opinion on the above query for the information and guidance of our clients. "Additionally, our clients also wish to be informed as to what would constitute sufficient proof of exemption from the graduated fixed annual tax inasmuch as internal revenue collecting officers usually demand the production of the previous year's tax receipt before issuing a receipt for the current year." There is no conflict between the provisions of Section 182(A)(2) and Section 182(C)(1), both of the National Internal Revenue Code. Section 182(A)(2) refers to the graduated annual fixed tax (C-13) which has to be paid by persons not subject to percentage taxes under Sections 184, 185 and 186 of the Tax Code, depending upon the amount of their gross annual sales. Thus a dealer, whether at wholesale or retail of locally manufactured or produced articles with a gross annual sale of less than P2,000.00 is exempt from tax even if in any month of the calendar year he is capable of making a sale of more than P200.00. On the other hand, Section 182(C)(1) refers only to persons subject to percentage tax such as manufacturers, producers, importers and contractors. Such persons are subject to the fixed tax of P20.00 if their sales exceed P200 even in only one month of the preceding calendar year and even if their gross annual sales is less than P2,000.00. LibLex The taxpayer's books of accounts and invoices if properly kept are the best evidence determinative of his gross sales for purposes of exemption. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue