Rules and Regulations Relative to the Purchases and Sales of Tax-Free Articles by the New Armed Forces of the Philippines Commissary and the Exchange Services (NAFPCES) now AFPCES and the Integrated National Police Service Stores System (INPSSS).

February 9, 1987 REVENUE REGULATIONS NO. 03-87 SUBJECT : Rules and Regulations Relative to the Purchases and Sales of Tax-Free Articles by the New Armed Forces of the Philippines Commissary and the Exchange Services (NAFPCES) now AFPCES and the Integrated National Police Service Stores System (INPSSS) TO : All Internal Revenue Officers and Others Concerned Pursuant to the Provisions of Section 277 of the National Internal Revenue Code, as amended, i n relations to Executive Order No. 76 dated December 2, 1986, Executive Order No. 93 dated December 17, 1986, and Fiscal Incentives Review Board (FIRB) Resolution No. 5-87 dated April 13, 1987, the following interim Rules and Regulations, governing the purchase of the Armed Forces of the Philippines Commissary and Exchange Service, (AFPCES) formerly NAFPCES and the Integrated National Police Service Stores System (INPSSS) of tax-free articles or commodities from local manufacturers, producers, suppliers or importers and the sales thereof to persons entitled to commissary and PX privileges, are hereby promulgated. A. On Articles Subject to Sales Tax : SECTION 1 . The AFPCES and the INPSSS shall be the only agencies or units of the Armed Forces of the Philippines and the Integrated National Police of the Philippines who are authorized to purchase tax-free articles or commodities from local manufacturers, producers, suppliers or importers for sale to persons entitled to commissary or PX privileges. SECTION 2 . No purchase order for tax-free articles or commodities originating from the AFPCES or the INPSSS shall be honored nor filled by any manufacturer, producer, supplier or importer unless the same is approved by the authorized official of the AFPCES or INPSSS whose full name, rank, branch of service and serial number are indicated therein. The identity of the approving official together with the specimens of his signature shall be furnished the Commissioner of Internal Revenue thru the National Audit Review Division . casia SECTION 3 . In filling out the purchase order, the name of manufacturer, producer, supplier or importer shall be indicated in its invoice the articles or commodities actually sold, the number of units, the gross selling price, the tax due and the net selling price per unit. Each invoice shall be accompanied by a statement showing how the amount of tax due per article was arrived at, certified to be correct by the President, Manager or comptroller. SECTION 4 . The AFPCES or INPSSS as the case may be, shall submit to the Commissioner of Internal Revenue through the National Audit Review Division a quarterly report of its purchases of commodities and corresponding sales of the same to its members. The report shall include a list of the manufacturers, producers, suppliers or importers, a copy of the corresponding sales invoice sold by said manufacturer, producer, supplier or importer, and the corresponding purchase order. SECTION 5 . The manufacturers, producers, suppliers or importers referred to herein shall have a registry book, duly registered with the Bureau of Internal Revenue. All sales made to AFPCES or INPSSS shall be entered in the said registry book not later than the day immediately following the date of the transaction. The book shall be kept and maintained like any ordinary accounting record and shall be opened for inspection at any time during office hours by any duly authorized internal revenue officer. SECTION 6 . In filing his Quarterly Percentage Tax Return, the manufacturer, producer or importer selling articles or commodities to AFPCES or INPSSS shall exclude from his total gross sales subject to tax the sales made to AFPCES or INPSSS during the quarter. The tax-free sales to AFPCES or INPSSS shall, however, be indicated in the return by means of a footnote, or an attachment stating the amount of sales and the percentage, excise or mining taxes paid on the raw materials, parts, accessories or other articles forming part of the finished product sold. Any percentage or excise tax paid on domestically manufactured or imported raw materials, parts, accessories or other articles forming part of the finished product sold to AFPCES or INPSSS may be claimed as a tax credit by the manufacturer or producer in accordance with Revenue Regulations No. 8-78, as amended. B. On Articles Subject to Excise Tax : SECTION 7 . The following articles, when purchased by AFPCES or INPSSS from local manufacturers, compounders, brewers, suppliers or importers for sale to persons entitled to commissary or PX privileges, shall be exempt from the excise taxes prescribed under Title IV of the National Internal Revenue Code, subject to the following conditions: 1. Tobacco Products a. Smoking and Chewing Tobacco provided that in no case shall the total quantity of purchases exceed 50 packages for AFPCES and 25 packages for INPSSS in any given month; b. Cigars provided that in no case shall the total quantity of purchases exceed 50 boxes for the AFPCES and 50 boxes for INPSSS in any given month; c. Cigarettes provided that in no case shall the total quantity or purchases exceed 2,500 cases for AFPCES and 1,000 cases for INPSSS in any given month; 2. Alcohol Beverages/Distilled Spirits a. Compounded Liquors provided that in no case shall the total quantity of purchases exceed 2,500 cases for AFPCES and 500 cases for INPSSS in any given month; b. Wines provided that in no case shall the total quantity of purchases exceed 1,000 cases for AFPCES and 200 cases for INPSSS in any given month; c. Fermented Liquor/Beer provided that in no case shall the total quantity of purchases exceed 15,000 cases for AFPCES and 5,000 cases for INPSSS in any given month; 3. Matches provided that in no case shall the total quantity of purchases exceed 700 cartons for AFPCES and 200 cartons for INPSSS in any given month; 4. Petroleum Products to avail of this privileges, the beneficiary of this regulation must own a motor vehicle and his consumption must not exceed 200 liters a month in case of gasoline-fueled car; or 100 liters a month in case of diesel-fueled car; or 50 liters a month in case of a motorcycle and 4 liters of lube oil or motor oil every 3 months; Provided, however , that in no case shall the purchase of gasoline by AFPCES or INPSSS exceed 300,000 liters and 100,000 liters respectively, in any given month. SECTION 8 . The prescribed ceilings on the total quantity of tax-free articles subject to excise taxes that may be purchased by AFPCES and INPSSS in any given month shall be subject to an annual review and, if so warranted, such ceilings may be adjusted by the Commissioner of Internal Revenue; Provided, however , that the quantity of excisable articles that may be purchased by AFPCES and INPSSS shall include imported products which shall not exceed ten percent (10%) of the prescribed ceiling. SECTION 9 . The commercial labels intended for the above enumerated articles other than petroleum products shall bear the following inscription: "FOR THE EXCLUSIVE USE BY AFP/INP PERSONNEL AND OTHER AUTHORIZED PERSONS UNDER E.O. 76. THE POSSESSION OR USE OF THESE ARTICLES BY UNAUTHORIZED PERSONS IS PROHIBITED BY LAW." In the event that the size and/or existing design of the commercial labels being used for the articles concerned would not allow the printing of the inscription as herein required without disfiguring the usual appearance of those labels, the said inscription may be printed on a separate secondary label to be affixed on a conspicuous side of the pack, package, box, bottle or other form of container of the said articles. However, if the above requirement cannot be complied with as in the case of bottled fermented liquors, the inscription "AFP-INP TAX-FREE" in bold letter shall, in lieu thereof, either be (1) printed, stamped embossed on the commercial labels, or (2) printed embossed or engraved on the side or on the top of the bottle caps or crowns which shall be of a color different from the color of the caps or crowns used in tax-paid products of the same kind . acd SECTION 10 . Strips of paper of the same size or dimensions as that of the regular strip stamps formerly used for locally manufactured cigarettes and other tobacco products and regular auxiliary labels for wines and liquors shall be used for affixture to packs of cigarettes, boxes of cigars, or packages of smoking or chewing tobacco and to bottles of wines and compounded liquor to be sold to AFPCES or INPSSS or any of its authorized post exchanges. These substitute strips or labels shall have a different color and shall bear the inscription "For the Exclusive Use by the AFP/INP Personnel and other Authorized Persons Under E.O. 76." SECTION 11 . The strips or labels referred to in the preceding section shall be placed in the custody and control of the Accountable Forms Division of the Bureau of Internal Revenue. The issuance thereof in favor of manufacturers of cigarettes and other tobacco products, wines and compounded liquors, shall be effected in accordance with the written request of AFPCES or INPSSS as the case may be. SECTION 12 . Manufacturers or importers of cigarettes and other tobacco products, wines and compounded liquors, intending to sell tax-free products to the AFPCES or INPSSS or its authorized post exchange shall turn over their stocks of printed paper strips to be used in lieu of strip stamps or auxiliary labels to the revenue officers who shall be specifically assigned to supervise the said affixtures who in turn shall assume the responsibility of safekeeping, issuing and proper recording thereof on a day-to-day basis. cdt The manufacturer, compounder, supplier or importer concerned shall request the revenue officers assigned to supervise affixtures to issue the requisitioned quantity of printed paper strips to fill a purchase order made by the AFPCES or INPSSS or any of its authorized post exchange. Any paper strip damaged or mutilated in the process of affixture thereof to the packs or bottles of the tax-free articles should be returned to the revenue officer supervising the affixture in the establishment for replacement with an equal number of good paper strips. The said damaged or mutilated paper strips shall be turned over by the revenue officer concerned to the Chief, Accountable Forms Division, through the Chief, Tobacco Tax Division or Alcohol Tax Division, as the case may be, for replacement. The said revenue officer shall make day-to-day entries in a separate record purposely for paper strips in his custody to reflect the following: a. Quantity of paper on hand at the beginning of the day; b. Quantity of paper strips received from the manufacturer; c. Quantity of paper strips issued for affixture during the day; d. Quantity of damaged paper strips returned by manufacturer and the replacement therefor; and e. Quantity of paper strips on hand at the end of the day. A monthly resume of above data shall be submitted by the said revenue officer together with the manufacturer's transcript of official register books on or before the 8th day of the succeeding month. Each copy of the invoice and or other related shipping paper shall bear the signature of the revenue officer assigned in the establishment who is required to verify the articles listed thereon to determine their correct quantity and description and the manufacturer's compliance with existing revenue laws and regulations. SECTION 13 . Purchase by AFPCES or INPSSS of petroleum products on a tax-free basis shall be allowed only after a copy of the supply contract entered into with a local oil company is submitted to the Commissioner of Internal Revenue thru the Oil and Miscellaneous Tax Division on or before January 1 of every year, together with a list of persons entitled to commissary and PX privileges and indicating, if any, the vehicles and the corresponding plate numbers. In case the petroleum products sold to AFPCES or INPSSS are tax-paid, a claim may be filed by AFPCES or INPSSS for tax refund, tax credit, or replenishment under Section 34 and 35 of Revenue Regulations No. 13-77, otherwise known as Petroleum Products Regulations. In case the petroleum products delivered to AFPCES or INPSSS are tax-paid but the purchase price is net of excise tax, the supplier-oil company may file a claim for tax refund, tax credit or replenishment. All invoices covering sales by AFPCES or INPSSS of motor fuel and lubricants shall indicate legibly, among others, the name of the purchaser, make of vehicle, plate number, kind and quantity. A copy of the sales invoice shall in all cases accompany the claim for tax refund, tax credit or replenishment filed either by AFPCES or INPSSS or the supplier-oil company. acd SECTION 14 . The provisions of Sections 1, 2, 3, 4, and 5 of these Regulations shall apply to purchases by AFPCES or INPSSS from local manufacturers, compounders, brewers or suppliers of articles subject to excise tax, except that in the case of identity of the approving official referred to in Section 2, and submission of monthly report of purchases by the AFPCES or INPSSS mentioned in Section 5, both of these Regulations, the same shall be submitted to the Commissioner of Internal Revenue thru the Tobacco Tax Division, Alcohol Tax Division or The Oil and Miscellaneous Taxes Division, as the case may be . aisa dc SECTION 15 . The AFPCES and the INPSSS shall furnish the Bureau of Internal Revenue with a listing of all outlets authorized to sell tax-free items covered by E.O. 76 and these Regulations. Items found outside those outlets and not in the homes of properly authorized persons shall be subject to immediate confiscation by the authorities. SECTION 16 . Only members of the Armed Forces of the Philippines and Integrated National Police, whether in active service or retired veterans of the said forces and widows and orphans of members of the AFP and the INP, may avail of the privileges of patronizing outlets dealing with tax-free goods allowed under E.O. 76 and these Regulations; Provided , that the AFPCES or INPSSS shall regulate the purchase of petroleum products in such a way that beneficiary may only purchase his requirements from one filling station where a record of all his purchases shall be maintained and widows and orphans shall also only be allowed to purchase their requirements from only one outlet at any given time. C. Limitations : The privileges granted herein shall not apply to transactions involving vehicles, watercrafts, aircrafts, perfumes, jewelries and precious stones. casia SECTION 17 . Any existing regulations, order or instructions or portions thereof inconsistent with these regulations are hereby repealed, amended or modified accordingly. SECTION 18 . These Regulations shall take effect on the 10th day of March, 1987, in accordance with the FIRB Resolution No. 5-87 dated April 13, 1987. (Sgd.) JAIME V. ONGPIN Minister of Finance Recommended by: (Sgd.) EUFRACIO D. SANTOS Commissioner