Taxes, Licenses and Documents on the Sale of Philippine Products in Hawaii

September 16, 1988 BIR RULING NO. 458-88 161 000-00 458-88 M a d a m : This refers to your letter dated October 29, 1986, stating that your sister who is engaged in the sale of Philippine products in Hawaii would like to appoint you as her buyer in the Philippines of products she needs in said place such as (a) fresh or dried frozen marine products and foodstuffs like patis, vinegar, bagoong etc. (b) handicrafts and furniture (c) garments (d) fruits, plants and other things that may be needed therein; that for your services, you will be paid a fixed amount of compensation plus allowances for office rental, telephone, transportation, packing and all other incidental expenses in the operation of the agreement; that you will not sell but only buy and ship goods she needs in Hawaii; and that you now request opinion as to the taxes, licenses and documents that must be secured conformably with any regulation. In reply, please be informed that for buying the goods here and sending them to your sister in Hawaii where the same are to be sold, you are not subject to any fixed and percentage taxes before the effectivity of the VAT law on January 1, 1988. After said date, you are not also subject to the value-added tax (VAT) on said goods, since you do not sell the goods. VAT is imposed only on the sale of goods. However, for rendering services to your sister, you are subject to VAT based on the compensation paid to you. (Sec. 102(a), Tax Code, as amended by Executive Order No. 273) Likewise, your income derived from your services are subject to income tax, pursuant to Section 21(a) of the Tax Code, as amended. Finally, you are required to register your business name and books of accounts and other related accounting records with the Revenue District Office where your principal place of business in located. aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner