Taxability of Service and Commodity Vendors

May 28, 1958 BIR RULING NO. 301-58 The American Embassy Manila Gentlemen : The following information on the taxability of service and commodity vendors is being provided that Embassy pursuant to the request of your Mr. Grigler. cdt Service vendors are subject to a percentage tax on their gross receipts. Service vendors comprised within the purview of Section 191 of the Internal Revenue Code pay a 3% tax. Transportation contractors, keepers of garages and common carriers pay a 2% tax. Service vendors are required to file monthly returns of their gross receipts and pay the percentage tax due thereon. The return should be filed not later than the 20th of the month following the taxable month. The receipts derived by service vendors from that Embassy are subject to tax, pursuant to the rules adopted by the Philippines Cabinet on September 30, 1947, regarding the general scope and extent of the tax-exemptions to be accorded to United States Government civilian agencies. Commodity vendors consist of the importers, manufacturers, producers and dealers. Manufacturers and producers pay a sales tax on their original sales. Importers pay the sales tax in advance prior to the release of the imported goods from customs custody. Dealers are those who purchase from importers, producers and manufacturers for the purpose of resale. Sales by dealers are no longer subject to the sales tax because they are not original sales anymore. Sales by manufacturers and producers to the Embassy are exempt from the sales tax. Sales by importers to the Embassy are likewise exempt provided that the importation is expressly earmarked for the Embassy. All such sales must be duly covered by tax-exemption certificates. Commodity vendors must pay the sales tax monthly. The taxable sales include credit sales. In other words, consummated sales are taxable in the month when consummated regardless of whether or not payment is made during the month. The internal revenue law requires both service and commodity vendors to issue sales invoices or receipts for every transaction had by them valued at two pesos or more. However, if their gross sales or receipts during the preceding year exceeds P20,000.00, they must issue a sales invoice or receipt for every transaction had regardless of the amount thereof. Where a commodity vendor is both a dealer and manufacturer or producer, he must issue separate sales invoices to cover the sales of his manufactured or produced products and his sales of goods he purchased from others. In such cases, only the sales of the manufactured or produced products need be covered by tax-exemption certificates, the sales by a dealer as adverted to above not being subject to the sales tax anymore. prcd Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue