BIR Ruling No. 255-12

April 20, 2012 BIR RULING NO. 255-12 Sec. 109 of the Tax Code, as amended; BIR Ruling No. 007-2011 Panasia Book Exchange, Inc. 165 Quirino Highway Brgy. Baesa, Quezon City Attention: Franklin Naig Legal Counsel Gentlemen : This refers to your letter dated September 10, 2010 requesting for a VAT exemption certificate pursuant to the provisions of Section 109 (R) of the Tax Code of 1997, as amended. TDcCIS It is represented that PANASIA BOOK EXCHANGE, INC. located at 165 Quirino Highway, Baesa, Quezon City is engaged primarily in the business of printing, bookbinding, engraving, stereotyping, electrotyping, lithographing of various reference books, trade books, journals and other literary works for use of schools and other educational institutions; and that it is duly registered with Taxpayer's Identification No. 247-342-787-000. In reply, please be informed that Section 109 (R) of the Tax Code of 1997, as amended, sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin, which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements, is exempt from the imposition of the Value-Added Tax. As such, regardless of the amount of the said transaction, if PANASIA BOOK EXCHANGE, INC. is actually engaged in the sale, importation, printing or publication of books, it will not be subject to the VAT provided that such books and newspaper, magazine, review or bulletin appear at regular intervals with fixed prices for subscription and sale and which are not devoted principally to the publication of paid advertisements. Neither will you be required to pay the 3% percentage tax under Section 116, in relation to Section 109 (V) of the same Code, as amended. In view thereof, your business of printing and selling of books is exempt from the payment of Value Added Tax and from the 3% percentage tax. However, if you have other transactions (such as the printing of brochures, bookbinding, engraving, stereotyping, electrotyping, lithographing of various reference books, trade books, journals and other literary works), which are subject to the Value Added Tax, you will also be required to register as a VAT business entity and issue a separate VAT invoice/receipt to record such transaction. (BIR Ruling No. 007-2011 dated January 11, 2011) Moreover, VAT is an indirect tax payable by the seller and not the purchaser of goods. However, being an indirect tax, it can be shifted or passed on to the buyer/purchaser, transferee or lessee of the goods, properties or services. Once shifted to the buyer/customer as an addition to the cost of goods or services sold, it is no longer a tax but an additional cost which the buyer/customer has to pay in order to obtain the goods or services. Thus, the shifting of the VAT to PANASIA BOOK EXCHANGE, INC. does not make it the person directly liable and therefore, PANASIA BOOK EXCHANGE, INC. cannot invoke its tax exemption privilege under Section 109 (R) of the Tax Code of 1997, as amended, to avoid the passing on or shifting of the VAT. Hence, notwithstanding that PANASIA BOOK EXCHANGE, INC. is a publication company, its purchases of goods, properties or services from its suppliers shall nevertheless be subject to the 12% VAT pursuant to Section 107 of the same Code. HICATc This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue