Acceleration of Agricultural Production in Nueva Vizcaya

October 7, 1988 VAT RULING NO. 476-88 Mai Philippines, Inc. 114 Amorsolo St., Legaspi Village Makati, Metro Manila Attention: Teresa V . Taroy Chief Accountant Gentlemen : This refers to your letter dated April 26, 1988 stating that you are a VAT registered firm deriving income from selling/leasing computers and from maintenance services rendered to your various clients; that prior to the adoption of the Value-Added Tax Systems (VAT), you were paying to the Bureau the 4% contractor's tax based on gross receipts computed as follows: aisadc Beg. Accounts Receivable P . . . Add: Billings TOTAL P . . . Less: A/R, end, Gross Receipts P . . . 4% Contractor's Tax 4% Percentage Tax Payable P . . . Based on the foregoing facts, your query is whether or not you can use the same basis and method in computing the VAT. In reply, please be informed that your basis and method of computing the 4% contractor's tax can no longer be used in the determination of the VAT. Gross Receipts is defined in Sec. 2(m) of Revenue Regulation 5-8, which implements E.O. 273, as the total amount of money or its equivalent representing the contract price or service fee, including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding the value-added tax. In other words, the tax base which is gross receipts should be net of tax. However, the taxable sales on selling of computers is the gross selling price which is defined under Sec. 2(k) of Revenue Regulation 5-87 as follows: "Gross selling price means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods, excluding the tax." Pursuant to Sec. 102(b)(1) and (2) of the Tax Code, as amended by E.O. 273 the tax may be billed in either of the following manners: (1) If the tax is billed as a separate item in the invoice, the tax shall be based on the gross receipts, excluding the tax. (2) If the tax is not billed separately or is billed erroneously in the invoice, the tax shall be determined by multiplying the gross receipts (including the amount intended to cover the tax or the tax billed erroneously) by 1/11. Please be guided accordingly. Very truly yours, EUFRACIO D. SANTOS Deputy Commissioner