Proper Interpretation of Section 3.A2(1) of Revenue Regulations No. 20-86 on the Withholding of the 1.5% Subsequent Sales Tax

October 19, 1987 BIR RULING NO. 319-87 164 000-00 319-87 S i r : This refers to your letter dated July 20, 1987 requesting proper interpretation of Section 3.A2(1) of Revenue Regulations No. 20-86 relative to the withholding of the 1.5% subsequent sales tax. You stated that your Office used to buy articles, machines and office supplies and equipment for its two line Bureaus, e.g., the Bureau of Energy Development (BED) and the Bureau of Energy Utilization (BEU); that when billing comes, your Accounting Division withholds the corresponding 1.5% subsequent sales tax on money payment but the contractors and suppliers contend that it is they who should remit the sales tax while the local importers contend that they have paid the same in advance to the BIR. You now request information as to whether that Office should deduct and withhold the 1.5% tax due from the payees on account of money payments. In reply, please be informed that Section 1 of Revenue Regulations No. 20-86 expressly provides that all bureaus, offices, and instrumentalities of the government, including government-owned or controlled corporations, provinces, cities and municipalities, shall, before making any money payment to private individuals, corporations, partnerships and/or associations, deduct and withhold the taxes due from the said payees on account of such money payments. It will be noted however, that Section 4 thereof provides that only the internal revenue taxes that can be fixed, determined, computed or ascertained at the time of payment shall be deducted and withheld from money payments. Accordingly, the 1.5% subsequent sales tax which can be fixed, determined, and computed at the time of payment is now one of the internal revenue taxes subject to withholding. Such being the case, that Office is now required to deduct and withhold said tax and thereafter remit the same to this Office within ten (10) days following the close of the calendar month during which the withholding was made. This is of course on the assumption that the articles which that Office buys are subject to the 1.5% subsequent sales tax . These articles are domestically acquired and they have not undergone any further processing or transformation by the transferor or seller. (Sec. 2(b), Revenue Regulations No. 20-86). It may be stated in this connection, that in case of failure of any officer or employee charged with the duty to deduct and withhold any internal revenue tax and to remit the same, said officer or employee should be punished by a fine of not less than five thousand pesos (P5,000.00) and imprisonment of not less than one (1) year nor more than two (2) years, aside from dismissal from the service (Sec. 9, Revenue Regulations No. 20-86). Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner