Tax Liability of a Sales Representative of the Different Publishing Firms in Manila

June 22, 1960 BIR RULING NO. 288-60 The Philippine Free Press, Inc. Information Department 708 Rizal Avenue, Manila Attention : Mr . A . R . Torres Gentlemen : This is with reference to the letter of Mr. Urso C. Busa of Butuan City, dated April 7, 1960, requesting information as to the internal revenue tax liability of his business under the following facts: cd "I am a sales representative of the different Publishing firms in Manila. My payments for all orders are made in advance with either discounts or bonuses per order. If my remittance is late, I do not have any discount or bonus. Some periodicals are returnable unsold but other are not. "With reference to the above facts, may I know (1) whether I have to pay BIR license and have to be required to open up or keep books of account (Journal and Ledger), (2) Do I fall on the meaning of commission agent? (3) If I am required to keep books of account, which shall I enter in the books, the gross sales of the magazines or the commission or profit derived from the sales to the news-magazine stands and newspaper boys? (4) What about if I sell the magazine or subscription, whether paid in advance or on account or installments to dealers, newspaper boys and direct readers, in single copy or in several copies, do I have to be a commission agent and pay the required taxes and license?" Based on the foregoing facts, as presented, please be informed that Mr. U. C. Busa is engaged in two distinct kinds of businesses, namely: (1) as ordinary "merchant", the term as defined in Section 194(w) of the Tax Code, and (2) as "commercial broker" (the term includes "commission merchant"), as defined in Section 194(t) of the same Code. The query states that some copies of the periodicals or magazines ordered from different publishing firms in Manila, if not sold, are not returnable to the latter. Under such facts, there is deemed an outright sale of the articles so ordered upon delivery and Mr. Busa would merely be considered as an ordinary "merchant" engaged in buying and selling said periodicals to the public. This kind of business is not subject to any percentage tax under the provisions of the Tax Code (People vs. Pastor, 77 Phil. 1000) but the person (Mr. Busa) engaged therein is required to pay a graduated fixed annual tax (C-13) imposed under Section 182(A)(2) of the same Code, the initial payment of which is P10.00 and for the succeeding calendar years, the payment will depend upon the amount of gross sales during the preceding calendar year. It may be stated here that, if his gross annual sales in this particular business do not exceed P2,000.00, he is exempt from the graduated fixed annual tax aforestated. The letter, on the other hand, states that he is a "sales representative of the different publishing firms in Manila", that he is given "discounts or bonuses per order", and that "some periodicals are returnable unsold copies." Under these facts, we can safely presume that there is no outright sale of the periodicals ordered by Mr. Busa. In other words, the ownership of said periodicals is retained by the publishing firm in Manila and that Mr. Busa is merely given a commission or compensation for this services in bringing about the sale of said articles to the public. Such being the case, Mr. Busa is considered a "commercial broker", the term (which includes commission merchant) as defined in Section 194(t) of the Tax Code, subject to a fixed annual tax of P150.00 imposed in Section 182(A)(3)(s) of the same Code and to the percentage tax of 6%, based on his monthly gross compensation received from his principal in Manila, in accordance with Section 195, likewise, of the same Code. In this connection, if the gross monthly compensation received by Mr. Busa from his principal, for bringing about the sale of the articles for other persons, is P200.00 or less, he is exempt from the fixed annual tax payment of P150.00, pursuant to Section 182(C)(1) of the Tax Code. Furthermore, Mr. Busa is required to keep books of accounts pursuant to Section 334 of the same Code, the provisions of which require that the gross annual sales, which include cash and credit sales, commission received from sub-dealers of magazines and newspapers, and "discounts and bonuses" received from the publishing firms in Manila, must be entered accordingly. It may be stated here that Mr. Busa is further subject to the income and residence taxes, pursuant to Section 21 of the Tax Code and Commonwealth Act No. 465, as amended, respectively. cdta Attached hereto is the basic query of Mr. U. C. Busa, dated April 7, 1960, as requested. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue