DST Exemption Granted on Pawnshop Tickets

July 13, 1988 BIR RULING NO. 325-88 195 000-00 325-88 Gentlemen : This refers to your letter dated March 28, 1988 requesting further reconsideration of BIR Ruling No. 305-87 dated September 24, 1987 subjecting pawnshop tickets to documentary stamp tax imposed by Section 208 (renumbered as Section 195 by Executive Order No. 273) of the Tax Code. In reply, please be informed that after a further study of the said ruling, we find your request to be well-taken. Under Section 195 of the Tax Code, documentary stamp tax is imposed on every pledge of personal property "where the same (personal property) shall be made as a security for the payment of any definite and certain sum of money lent at the time or previously due and owing or forborne to be paid being payable, . . . ." In other words, a document evidencing a pledge of personal property which is made as a security for payment of a loan is subject to the documentary stamp tax. This implies that, under the document subject to tax, the pledgor is indebted to the pledgee and, therefore, the former has pledged personal property to secure payment of the debt. In the case of the pawnshop business, the pawnee (pawnshop or pawnbroker) issues a "pawn ticket" to the pawner (borrower from a pawnshop). The pawn is the personal property delivered by the pawner to the pawnee as security for a loan. The "pawn ticket" is the pawnbroker's receipt for a pawn. It is neither a security nor a printed evidence of indebtedness . (Sec. 3, P.D. No. 114 or the Pawnshop Regulation Act) Accordingly, considering that, the document taxable under Section 195 of the Tax Code must show the existence of debt and inasmuch as, under the law, a pawn ticket is not a printed evidence of indebtedness, such pawn ticket cannot be considered as a document subject to the documentary stamp tax imposed by Section 195 of the Tax Code. Accordingly, BIR Ruling Nos. 305-87 and 018-88 subjecting pawn tickets to the documentary stamp tax are hereby revoked. BIR Ruling dated March 21, 1974 which ruled that pawnshop ticket is not subject to documentary stamp tax has to be, as it is hereby, sustained. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner