Percentage tax regulations on original sales

December 27, 1985 REVENUE REGULATIONS NO. 02-86 SUBJECT : Percentage tax regulations on original sales. TO : All Internal Revenue Officers and Others Concerned: Pursuant to the provisions of Section 277 (326) in relation to Section 4, b oth of the National Internal Revenue Code, as amended, these regulations are hereby promulgated. SECTION 1 . Scope . These regulations shall govern the filing of the quarterly percentage tax return and payment of the tax due thereon, the percentage tax on imported articles and locally manufactured products under the provisions of Sections 162(4). 163, 165, and 168 (193[b], 194, 196, 197, 198, 199, 201, and 203) and the payment of fixed taxes under Section 161 (192) of the National Internal Revenue C ode as amended by PD 1991 and PD 1994, credits against sales tax, compensating and advance sales taxes. SECTION 2 . Definition of terms . In applying the provisions of these regulations, the following words and phrases shall have the sense and meaning indicated below: (a) "Material" any article, which when used in the manufacture of another article, becomes a homogenous part thereof, such that it can no longer be identified in its original state nor may it be removed therefrom without destroying or rendering useless the finished article to which it has been merged, mixed or dissolved. cdtai (b) "Part or accessory" any article adopted for use as a component part of another article or is a replacement part thereof, and not included in the definition of the term "material." (c) "Gross selling price or gross value in money" the total amount of money or its equivalent which the vendee pays to the vendor for the goods. (d) "Original sale" The first sale, barter, exchange or transfer of an article of the person liable to excise tax (specific and/or ad valorem ) or manufacturer's, producer's, importer's or miller's percentage tax. (e) "Person" any individual, a trust, estate, partnership or corporation. acd SECTION 3 . Filing of returns and payment of the tax due thereon . - (a) Who shall file (1) Every person conducting a business on which a percentage tax is imposed under Title V of the Tax Code (Sections 163, 164, 165 (A) (1) (2) (3) and (4), and 168) (old Sec. 194, 195, 196, 197, 198, 199, 201 and 203) shall file a return of the amount of his gross quarterly sales, or gross value of output actually removed from the factory or mill warehouse within twenty days after the end of each quarter. (2) Any person retiring from business subject to sales or miller's tax shall notify the nearest internal revenue officer, file his return and pay the tax due thereon within twenty days after closing his business. (b) Where to file . The return shall be filed in duplicate with the Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality where such taxpayer has his legal residence or principal place of business. (c) When to pay . The tax due shall be paid by the person subject thereto not later than the last day prescribed for filing the return. SECTION 4 . Sales tax on imported articles . (a) Advance sales tax . - The advance sales tax is imposed on the importation of goods, wares or merchandise for sale, barter or exchange or to be used in the preparation or manufacture of articles for sale, barter or exchange at the rates prescribed under Sections 163, 164, and 165 (A) (1) (2) and (3) of the Tax Code. It shall be paid in advance of the importer prior to the release of such articles from customs custody. The tax shall be based on the total value used by the Bureau of Customs in determining tariff and customs duties, including customs duties and other charges. When the importer himself sells, barters, exchanges or transfers such imported articles, a sales tax on original sale at the same rate imposed on importation shall be levied, assessed and collected based on the gross selling price or gross value in money of the articles so sold, bartered, exchanged, or transferred. However, the sales tax due shall be reduced by the amount of advance sales tax paid on importation in the manner prescribed in these regulations. The advance sales tax does not apply to articles to be used by the importer himself in the manufacture or preparation of articles subject to excise tax under Title IV of the Tax Code. Where the National Economic and Development Authority certifies to the availability of local raw materials of sufficient quantity, comparable quality and price to meet the needs of manufacturers subject to excise tax, the importation of such raw materials shall be subject to advance sales tax. aisa dc Any advance sales taxes paid on articles imported prior to January 1, 1986 shall be considered as a final tax. Any imported article unsold as of December 31, 1985 which are subsequently sold by the importer himself without such article having undergone processing or manufacturing shall be considered as an original sale of a tax paid article and therefore the corresponding sales tax on original sale shall no longer be imposed. All articles imported on or after January 1, 1986 when sold "as is" by the importer himself, shall be subject to the sales tax on original sale. (b) Compensating tax . (1) the compensating tax is imposed upon the importation of commodities, goods, wares or merchandise which are neither for sale nor for use as inputs of manufactured products. The tax rates are prescribed in Sections 163, 164 and 165(A) (1) (2) and (3) of the Tax Code. It shall be based on the total value used by the Bureau of Customs in determining tariff and customs duties including customs duty and all other charges. The tax due shall be paid before the withdrawal of the said articles from customs custody. (2) Non-exempt persons or entities who are recipients or purchasers of tax-free articles imported into the Philippines by persons, entities or agencies exempt from tax shall be considered the importer thereof and shall be liable for the duty and internal revenue tax due on such importation. The tax due on such articles shall constitute a lien on the article itself, superior to all other charges or liens. (3) An importer becomes liable for advance sales tax if at any time after importation of articles on which the compensating tax has been paid such articles such articles are used by the importer in the manufacture of articles subject to tax under Sections 163, 164 and 165(A) (1) (2) and (3) of the Tax Code or are sold, bartered or exchanged "as is." As such, he shall be considered as an original seller subject to tax under Sections 163, 164 and 165 (a) (1) (2) and (3) of the Tax Code depending on the classification of the articles sold. The compensating tax paid by him shall be considered as advance sales tax which can be credited to the extent of the sales tax due on the original sale. acd SECTION 5 . Percentage tax on sales . (a) On original sale on imported, manufactured, or produced articles or products . - The percentage tax imposed by Sections 163, 164 and 165(A) (1); 165(A) (2); 165(A) (3); and 165(A) (4) of the Tax Code is levied, assessed and collected once only on every original sale, barter, exchange or similar transaction for nominal or valuable consideration intended to transfer ownership of or title to the articles or products sold, bartered or exchanged. The tax shall be paid by the manufacturer, producer, or importer of said articles or products. (b) Tax based on gross sales . The percentage tax on sales shall be determined by applying the appropriate rate of tax on the gross selling price or gross value in money of the articles sold, bartered, exchanged or transferred. In computing the taxable base, discounts may be allowed as a deduction from gross selling price provided said discounts are given at the time of the sale and are expressly indicated in the sales invoice. Sales returns and allowances shall be allowed as deductions from gross sales in the period where such returns and allowances are made. If the returns or allowances exceed the gross sales for the period, the excess may be carried over to the succeeding period or periods. (c) Tax credit . V (1) On original sale of manufactured products . Any excise or percentage tax paid under Titles IV and V of the Tax Code on domestically manufactured, processed or produced or imported raw material, part, accessory or other articles purchased during the taxable quarter and intended by the manufacturer for conversion into and to form part of a finished article for sale may be credited against the sales tax for the same taxable quarter. In case the raw materials are purchased from a pioneer enterprise registered with the Board of Investments, enjoying full or partial exemption from the payment of sales taxes, the sales or excise tax which the pioneer enterprise would have paid had it been taxable may also be credited against the sales tax due for the same taxable quarter. Any unused tax credit as of December 31, 1985 may be carried over to the succeeding taxable quarter. In case the allowable tax credits during the taxable quarter exceeds the amount of the sales tax due on the finished products sold during the same taxable quarter, the excess may be carried over to the succeeding taxable quarter or quarters. The amount of tax credits carried over from the previous quarter and all excise and percentage taxes separately billed on purchases of raw materials, parts or the amount of tax on raw materials, parts, accessories or other articles which are sold, transferred, disposed of, or used in the manufacture of articles which are not for sale, such as samples or promotional give-aways, or those which for any other reason can no longer be used in the manufacture of the finished product during the same quarter. In case a tax credit certificate has been issued to a manufacturer-exporter in accordance with paragraph (d) of Section 167 (202) of the Tax Code, the amount of tax credit available to him during the quarter shall be reduced by the amount of the certificate. If the amount of the tax credits hereinabove required to be deducted exceeds the total available tax credits during the current quarter, the excess shall be paid by the manufacturer in addition to the sales tax due for the same taxable quarter. (2) On original sale of imported articles . Any advance sales tax paid by the importer shall be credited against the sales tax due on the sale of articles taxable under the same rate. If, for example, he imports various articles for which advance sales tax is paid at the rates of 10%, 20%, 30% and 50%, the advance sales tax paid may only be credited to the sales tax due on the same rates, i.e., 10% to 10%, 20% to 20%, 30% to 30%, and 50% to 50%. For this purpose, the importer shall maintain separate deferred accounts for advance sales tax payments according to tax rates. cd (3) Pioneer enterprise . In case the manufacturer is a pioneer enterprise registered with the Board of Investments enjoying full or partial exemption from the payment of sales tax on original sale, the available tax credits during a taxable quarter shall first be applied to the gross sales tax due. The exemption is then deducted from the net sales tax due to arrive at the amount payable. Example 2 hereunder illustrates the method of computing the sales tax due from a manufacturer who is 20% exempt from the payment of sales taxes. Illustrative Examples Example 1 : Assume that on January 1, 1986, a manufacturer has P100 as unapplied tax credits. He also has 100 units at P10 per unit of raw material inventory. During the first quarter, he purchased 1000 units of raw materials by P15 per unit and manufactured 600 units into 600 units of ordinary finished articles which he sold for P30 per unit in the same quarter. During the second quarter, he purchased 200 units at P20 per unit of raw material and sold 400 units of raw material " as is " which he originally bought at P15 per unit. He used the remaining 300 units of raw material in manufacturing 300 units of finished articles which he sold for P35 per unit. Assuming further that the supplier separately billed the 20% tax on the raw materials (which is not included in the selling price) the manufacturer's sales tax and the amount payable by the manufacturer for the first and second quarters shall be computed as follows: FIRST QUARTER Sales Finished articles (600 units x P30) P18,000 Gross sales tax due thereon at 20% P 3,600 Less: Tax credits Unapplied tax credits, beginning P100 For current quarter raw material purchases: Purchase price - 1000 units x P15 = P15,000 Tax separately billed (20%) 3,000 Total tax credits P3,100 Net sales tax payable P500 SECOND QUARTER Sales Finished articles (300 units x 35) P10,500 Gross sales tax due thereon at 20% P2,100 Less: Tax credits Unapplied tax credits, beginning P None For current quarter raw material purchases: Purchase price - 200 x 20 = P4,000 separately billed tax (20%) P800 800 Net sales tax payable P1,300 Tax credits on 400 units raw materials sold at P15: 400 units x P15 = P6,000 Rate of tax = 20% Tax credit on raw materials sold P 1,200 Total amount payable P2,500 Example 2 . Same conditions as in Example 1 except that the manufacturer is a BOI registered pioneer enterprise entitled to 20% exemption. cd FIRST QUARTER Sales Finished Articles P18,000 Gross Sales tax due thereon 3,600 Net sales tax payable 500 Less BOI exemption (20%) 100 Amount due P400 SECOND QUARTER Sales Finished articles P10,500 Gross sales tax due 2,100 Less: Tax Credits 800 Net sales tax due P1,300 Less: BOI exemption (20%) 260 Balance 1,040 Add: Sales tax on sold items already claimed 1,200 Total amount due P2,240 Example 3 . An importer made the following purchases during the taxable quarter: Article A Article B Article C Amount Tax (10%) Amount Tax (20%) Amount Tax (30%) P150,000 P15,000 P100,000 P20,000 P100,000 P30,000 During the quarter he made the following sales: Article A Article B Article C S.P. Tax S.P. Tax S.P. Tax P200,000 P20,000 P140,000 P28,000 none Tax credits P15,000 P20,000 Tax due P 5,000 P8,000 The accumulated advance sales tax of P30,000 on articles subject to tax at 30% cannot be credited to the tax due on the sale of articles subject to tax at 10% or 20%. (4) Conditions for availment of tax credit . (i) Manufacturers . A manufacturer can avail of the benefits of tax credit only if the requirements for the availment of sales tax credit prescribed in Revenue Regulations No. 19-84 are complied with. (ii) Importers . Importers should maintain separate deferred accounts for advance sales tax payments in their books for each and every different rate of importation. (d) Computation of tax base when tax is billed as a separate item in the invoice . In the computation of the sales tax imposed in Section 162(4), 163, 165(A) (1), (2) and (3) of the Tax Code, if the manufacturer, in fixing the gross selling price of an article sold by him, has included an amount intended to cover the sales tax in the gross selling price of the article, the sales tax shall be based on the gross selling price less the amount intended to cover the tax, if the tax is billed to the purchaser as a separate item in the invoice. Unless billed to the purchaser as a separate item in the invoice, the amount intended to cover the sales tax shall be considered as part of the gross selling price of the article sold. To Illustrate : Example 1 . "A" Knitting Company purchased yarn from ABC Spinning Mills Corporation under the following invoice: ABC Spinning Mills Corporation No. 1 Tanque, Paco, Manila Invoice No. 0001 January 1, 1986 SOLD TO: "A" Knitting Company Malabon Rizal 1,000 kilos yarn at P10 per kilo P10,000 20% sales tax 2,000 Total P12,000 In the above example, the gross selling price for purposes of the percentage on sales is P10,000. When "A" Knitting Company pays its sales tax for a taxable quarter it can claim a tax credit of P2,000, the tax billed separately. Example 2 . Same buyer and seller as above but sales tax indicated as follows: Invoice No. 0001 January 1, 1986 SOLD TO: A Knitting Company Malabon, Rizal 1,000 kilos yarn P12,000 (sales tax of 20% included) Total P12,000 In this example, the sales tax is not billed separately. The gross selling price for purposes of the sales tax is P12,000. "A" Knitting Company cannot claim tax credit for this taxable quarter on this purchase because the tax was not separately billed. acd SECTION 6 . Classification of articles and corresponding tax rates . For purposes of the percentage tax on sales, articles are classified into the following categories and are taxed at the corresponding rate for each category: I. Articles enumerated below are classified as non-essential articles, taxable at the rate of 50% (Section 163[194], National Internal Revenue Code) A. 1. Jewelry, whether real or imitation; 2. Pearls; 3. Precious and semi-precious stones and imitations thereof; 4. Articles made of, or ornamented, mounted or fitted with precious metals or imitations thereof, or ivory Exceptions (a) Surgical and dental instruments; (b) Silver plated wares; (c) Frames or mountings for spectacles or eyeglasses; and (d) Dental gold or gold alloys and precious metals used in filling, mounting or fitting of teeth; casia 5. Opera glasses; and 6. Lorgnettes. The term "precious metals" shall include platinum, gold, silver and other metals of similar or greater value. The term "imitations" thereof shall include platings and alloys of such precious metals. B. 1. Perfumes; 2. Essences; 3. Extracts; 4. Toilet waters; 5. Cosmetics; 6. Hair dressings; 7. Hair dyes; 8. Hair restoratives; 9. Aromatic cachous; and 10. Toilet powders. Exceptions: (a) Tooth and mouth washes; (b) Dentifrice; (c) Tooth paste; (d) Talcum; (e) Medicated toilet powders; and (f) Hair oils and pomades. C. 1. Dice; 2. Mahjong sets; and 3. Playing cards. D. Jukeboxes E. Manufactured parts and accessories of automobiles which are principally for ornamentation or embellishment. F. Similar or analogous articles, substances or preparation to those enumerated above as determined by the Minister of Finance upon the recommendation of the Commissioner of Internal Revenue based on the inherent essentiality of the product. G. Any material, part or accessory of the above-mentioned articles. II. Articles enumerated below are classified as semi-essential articles taxable at the rate of 30% (Section 165 (a) (1) of the National Internal Revenue Code) A. 1. Luggage; 2. Trunks; 3. Valises; 4. Traveling bags; 5. Suitcases; 6. Satchels; 7. Overnight bags; 8. Hat boxes for use of travellers; 9. Beach bags; 10. Bathing suit bags; 11. Briefcases made of leather or imitation leather; 12. Salesman's sample and display cases; 13. Handbags; 14. Cards, pass and key cases; and 15. Toilet cases and other cases, bags and kits (without regard to size, shape, construction, or material from which made) for use in carrying toilet articles or articles of wearing apparel. B. 1. Harpsichords; and 2. Accordions. C. Firearms and cartridges or other forms of ammunition. Exceptions: ".22 Caliber firearms and cartridges as well as other forms of ammunition sold or delivered directly to the Armed Forces of the Philippines or any government instrumentality or agency engaged in maintaining peace and order for their use or issue." cd i D. 1. Electric, gas or oil water heaters; 2. Electric, gas or oil appliances, stoves and ranges; 3. Electric mixers, whippers and juicers; and 4. Household type electric vacuum cleaners or polishers. E. 1. Washing machines; 2. Cloth dryers; and 3. Combination washing and cloth dryers of all types. F. Mechanical lighters G. 1. Textiles wholly or in chief value of silk, wool or linen; 2. Nylon or other synthetic and/or chemical fabrics Exception: Nylons or other synthetic and/or chemical fabrics primarily intended for clothing. 3. Wool and silk hats; and 4. Furs and manufacturers thereof. H. Toys and playthings of all sorts. I. The following when having or being primarily designated for use with a mechanical refrigerating unit operated by electricity, gas, kerosene or other means: 1. Beverage cooler; 2. Ice cream cabinets; 3. Water coolers; 4. Food and beverage storage cabinets; 5. Ice making machines; and 6. Mild cooler cabinets. J. Electricity and/or battery operated beauty equipment and accessories. cdasia K. 1. Pianos; and 2. Electric or electronic musical organs. L. Fountain pens. M. 1. Chairs; 2. Sofas; 3. Beds; 4. Showcases; 5. Lockers; and 6. Cabinets - Exception: Filing cabinets and dental chairs. N. 1. Watches; 2. Clocks; and 3. Cases and movements. O. 1. Electric fans; and 2. Exhaust fans. P. 1. Television sets; 2. Phonographs or gramophones; 3. Combination radio-phonograph sets; 4. Tape recorders; 5. Video tape recorders; 6. Tape decks; 7. Car stereos; 8. Cassette-radios; and 9. Similar articles or reproducing and/or recording music or sound images and any combination thereof. Q. Household type refrigerators and freezers. R. Air-conditioning units. S. Similar or analogous articles to those mentioned above. III. Articles classified as ordinary articles, taxable at the rate of 20% (Section 165 (A) (2) of the National Internal Revenue Code: A. Articles not covered in sections 163, 164, 165,(A) (1); 165(A) (2); and 168 of the Tax Code. cdt B. Articles specifically exempted under Section 163 of the Tax Code: 1. Surgical and dental instruments; 2. Silver-plated wares; 3. Frames or mountings for spectacles or eyeglasses; 4. Dental gold or gold alloys and other precious metals used in filling, mounting or fitting of the teeth; 5. Tooth and mouth washes; 6. Dentifrices; 7. Tooth paste; 8. Talcum; 9. Medicated toilet powders; 10. Hair oils and pomades. C. Articles specified in Section 164 of the Tax Code: 1. Parts and accessories of automobiles imported as completely knocked down (CKD) parts by assemblers registered under the progressive car manufacturing program (PCMP) of the Board of Investments or their replacements; 2. Imported and locally manufactured spare parts and accessories with which automobiles are usually equipped; and 3. Motor vehicles classified as trucks, jeeps and utility vehicles. casia D. Articles specifically exempted under Section 165(a) (1) of the Tax Code: 1. Nylon or other synthetic and/or chemical fabrics primarily intended for clothing; 2. Filing cabinets; and 3. Dental chairs. IV. Articles classified as essential articles, taxable at the rate of 10% (S ection 165(a) (3) of the National Internal Revenue Cod e): A. Processed meat, beverages, vegetables, milk and dairy products, fish and other seafoods. B. Wheat flour. C. Bread and ordinary bakery products. D. Medicine. E. Laundry soap and detergents. F. Writing pads, notebooks, and ordinary lead pencils. G. Cement, hollow blocks, lumber, roofing materials, steel bars, sand and gravel. H. Fish, poultry, swine and cattle feeds, and I. Fertilizers. V. Articles classified as agricultural products taxable at zero rate percent (Section 165(A) (4) [198] of the National Internal Revenue Code): All locally produced agricultural products when sold, bartered or exchanged in their original state by their producer or owner of the land where produced. "Original state" includes the transformation of said products by the application of simple processes to preserve or otherwise prepare such products for market such as freezing, drying, salting, smoking or stripping. Rice and corn shall be considered in their original state even if they have gone undermilling. Exception : Agricultural products milled and taxed under Section 168 (203) of the Tax Code. SECTION 7 . Articles or transactions not subject to percentage tax on sales . The following shall be exempt from percentage taxes on original sales imposed in Sections 163, 164 and 165 (a) of the Tax Code: (a) Articles subject to tax under Title IV of the Tax Code; (b) Articles subject to tax under Section 168 of the Tax Code; (c) .22 Caliber firearms and cartridges as well as other forms of ammunition sold or delivered directly to the Armed Forces of the Philippines or any government instrumentality or agency engaged in maintaining peace and order for their use or issue; (d) Articles shipped by the manufacturer or producer, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the articles so exported; (e) Sales by registered export producers to (1) other 'export producers', (2) 'registered export traders' or (3) foreign tourists or travellers which are considered as 'export sales'; and (f) Sales by manufacturers or producers direct to foreign tourists paid for in convertible foreign currency if the articles so sold are actually brought out of the Philippines by the buyers upon their departure. SECTION 8 . Miller's Percentage tax. (a) Persons liable . The persons subject to tax under this Section are proprietors or operators of: casia 1. Rope factories; 2. Sugar centrals and mills; 3. Coconut oil mills; 4. Palm oil mills; 5. Cassava mills; and 6. Desiccated coconut factories. (b) Rate and base of tax . The rate of tax is three (3%) per cent of the gross value in money of all the rope, sugar, coconut oil, palm oil, cassava, flour or desiccated coconut manufactured, processed or milled, including the by-products of the raw material from which said articles are produced, processed or manufactured. The tax shall be based on the actual selling price or market value of the said articles at the time they leave the factory or mill warehouse. The tax accrues from the time the articles leave the factory or mill warehouse, although payment thereof may be made not later than the twentieth (20th) day after the end of the taxable quarter. "By-products" refer to those products which, in the process of cultivation or manufacture of any given commodity, remain over, and which possess or can be brought to possess a market value of their own. The by-products produced as a result of the processing or manufacturing of raw materials into the articles herein enumerated are also subject to the three (3%) per cent tax. casia Exception : The tax shall not apply to the following articles where such articles shall be removed for exportation by the proprietor or operator of the factory or mill himself, and are actually exported without returning to the Philippines, whether so exported in their original state or as an ingredient or part of any manufactured article or product: 1. Rope; 2. Palm oil; 3. Coconut oil; 4. Copra by-products; and 5. Desiccated coconuts. (c) Tax on share of planter or owner . In case the raw materials are processed, manufactured or milled in pursuance of a contract where the factory, central or mill receives a share of the finished products, the tax on the share pertaining to the planter or owner of the raw materials shall be charged to the planter or owner and withheld by the proprietor or operator of the factory, central, mill and paid by him to the Commissioner. (d) Tax credits . (1) Miller's taxes . Any sales miller's or excise taxes paid on raw material or supplies used in the milling process shall not be allowed as a credit against the miller's tax due. However, in the case of a proprietor or operator of a refined sugar factory, the miller's tax paid on the raw sugar used as inputs in the production of refined sugar shall be credited against the tax due on the refined sugar. (2) Exports by planter or owner of raw materials . Where the planter or owner of the raw materials exports his share of the rope, palm oil, coconut oil, copra by-products or desiccated coconuts whether in their original state or as an ingredient or part of any manufactured article or product, he shall be entitled to a tax credit equivalent to the miller's tax paid on the milled products exported. He shall file an application for the issuance of a tax credit certificate which may be used against any internal revenue tax directly due from him. casia (3) Credibility of miller's tax to sales tax . Where articles are manufactured out of articles subject to the miller's tax imposed in Section 168 (203) of the Tax Code, the miller's tax paid shall be credited against the sales tax due on the finished products subject to tax under Section 163, 164 and 165(A) (1), 165(A) (2) and 165(A) (3) (194, 195, 196, 197, 199 and 201) of the Tax Code. SECTION 9 . Transitory provisions . (1) Submission of inventory of imported articles . In addition to the regular year-end inventory, any importer selling "as is" articles he imported shall submit on or before January 30, 1986 a separate inventory, as of December 31, 1985, of all such unsold articles. The inventory list shall indicate the quantity , description, unit cost and the total cost of every item of his stock- in-trade. Thereafter, any unsold article imported by the importer himself prior to January 1,1986 shall be separately indicated in the regular year-end inventory. (2) Fiscal quarter . Taxpayers whose fiscal quarter commence before December 31, 1985 and extend to 1986, shall file their quarterly returns within twenty days after the end of the fiscal quarter. However, they should attach to their percentage tax return an "Auxiliary Statement" segregating their gross sales in 1985 and gross sales in 1986. Example : A taxpayer whose fiscal quarter ends January 31, 1986. Period Taxable Sales Rate Tax Due Nov. 1 to Dec. 31, 1985 P600,000 10% P60,000 January 1-31, 1986 400,000 20% 80,000 P140,000 Less: Tax credits P100,000 Net sales tax due P40,000 SECTION 10 . Payment of privilege taxes . Beginning January 1, 1986, any person subject to the percentage tax on original sale shall secure an annual privilege tax in the amount of P200.00, except those required to secure a privilege tax under Section 161[3] (192[3]) of the Tax Code, in which case he should pay the fixed taxes imposed on the manufacture of articles specifically identified therein, on or before the last day of the first month of the taxable year he adopted for income tax purposes. Any person first beginning a business must pay the privilege tax before engaging therein. SECTION 11 . Repealing Provision . All regulations, ruling or orders, or portions thereof issued in connection with the implementation of Title V of the Tax Code which are inconsistent with the provisions of these regulations are hereby revoked. aisa dc SECTION 12 . Effectivity . These regulations shall take effect on January 1, 1986. (SGD.) CESAR E.A. VIRATA Minister of Finance Recommending Approval: (SGD.) RUBEN B. ANCHETA Acting Commissioner