Rules and Regulations Relative to the Purchases and Sales of Tax-Free Articles by the AFP Commissary and Exchange Service

September 2, 1976 REVENUE REGULATIONS NO. 07-76 SUBJECT : Rules and Regulations Relative to the Purchases and Sales of Tax-Free Articles by the Armed Forces of the Philippines Commissary and Exchange Service TO : All Internal Revenue Officers and Others Concerned Pursuant to the provisions of Section 338 of the National Internal Revenue Code, as amended, in relation to Presidential Decree No. 83 dated December 20, 1972, the following rules and regulations governing the purchases of the Armed Forces of the Philippines Commissary and Exchange Service, hereinafter known as AFPCES, of tax-free articles or commodities from local manufacturers, producers or suppliers, and the sales thereof to persons entitled to commissary and PX privileges under Letter of Instructions No. 31 dated October 23, 1972, are hereby promulgated. A . On Articles Subject to Sales Tax : aisa dc SECTION 1. As envisioned in Presidential Decree No. 83, the AFPCES shall be the only agency or unit of the Armed Forces of the Philippines which is authorized to purchase tax-free articles or commodities from local manufacturers, producers or suppliers for sale to persons enlisted to commissary or PX privileges under Letter of Instructions No. 31, as amended. SECTION 2. No purchase order for tax free articles or commodities originating from AFPCES shall be filled by any manufacturer, producer or supplier unless the same is approved by the authorized official of AFPCES 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 Indirect Taxes Division. SECTION 3. In filling out the purchase order, the manufacturer, producer or supplier shall indicate 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 as correct by the President, Manager or Comptroller. SECTION 4. The AFPCES shall submit to the Commissioner of Internal Revenue through the Indirect Taxes Division a bi-monthly report of its purchases. The report shall include a list of the manufacturers, producers or suppliers, a copy of the corresponding sales invoice and the statement of the sales tax due on each article or commodity sold by said manufacturer, producer or supplier, and the corresponding purchase order. SECTION 5. The manufacturers, producers or suppliers referred to herein shall have a registry book, duly registered with the Bureau of Internal Revenue. All sales made to AFPCES 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 its quarterly percentage sales tax return, the manufacturer, producer or supplier shall declare its total gross sales for the quarter minus the gross sales made to AFPCES. The tax-free sales to AFPCES shall, moreover, be indicated in the return by means of a footnote together with the corresponding amount of raw materials used in the manufacture thereof. B . On Articles Subject to Specific Tax : SECTION 7. The following articles, when purchased by AFPCES from local manufacturers, compounders, brewers or suppliers, for sale to persons entitled to commissary or PX privileges, shall be exempt from the specific taxes prescribed under Title IV of the National Internal Revenue Code: 1. Tobacco products a. smoking and chewing tobacco b. cigars c. cigarettes 2. Alcoholic beverages a. compounded liquors b. wines and imitation wines c. fermented liquor-beer 3. Matches SECTION 8. The commercial labels intended for the above enumerated articles shall bear the following inscription: "FOR THE EXCLUSIVE USE BY AFP PERSONNEL AND OTHER AUTHORIZED PERSONS UNDER P.D. NO. 83. 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. The color of the crowns or bottle caps of fermented liquor and other alcoholic beverages sold to AFPCES shall be different from the color of the crowns or caps being used on tax-paid products of the same kind. Moreover, the said bottle caps shall bear the inscription "AFP-TAX-FREE" in bold letters printed or engraved on the top or on the side of the cap or crown. SECTION 9. The requirement of affixing strip stamps or auxiliary labels on containers of all the aforesaid articles is hereby waived or dispensed with. In lieu thereof, strips of paper of the same size or dimension as that of the regular strip stamps for locally manufactured cigarettes and other tobacco products and of the regular auxiliary labels for wines and liquors shall be used for affixture to packs of cigarettes, box of cigars or packages of smoking or chewing tobacco and to bottles of wines, imitation wines and compounded liquor to be sold to AFPCES or 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 Personnel and Other Authorized Persons Under P.D. No. 83." SECTION 10. The substitute 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, imitation wines and compounded liquors shall be effected in accordance with the written request of AFPCES. SECTION 11. Manufacturers of cigarettes and other tobacco products, wines, imitation wines and compounded liquors intending to sell tax-free products to the AFP Commissary & Exchange Service or its authorized post exchanges shall turn over their stocks of printed paper strips to be used in lieu of strip stamps or auxiliary labels to the revenue officers assigned in their respective establishments who in turn shall assume the responsibility of safekeeping, issuance and proper recording thereof on a day-to-day basis. The manufacturer, compounder, brewer or supplier concerned shall request the revenue officer assigned in his establishment to issue the requisitioned quantity of printed paper strips to fill a purchase order made by the AFPCES or any of its authorized post exchanges. 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 assigned in the establishment for replacement with an equal number of need paper strips. The 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 replaced with an equal quantity good ones; 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 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 12. The provision of sections 1, 2, 3, 4 & 5 of these regulations shall apply to purchases by AFPCES from local manufacturers, compounders, brewers or suppliers of articles subject to specific tax, except that in the case of identity of the approving official referred to in Section 2, and submission of bi-monthly report of purchases by the AFPCES mentioned in Section 5, both of these regulations, the same shall be submitted to the Commissioner of Internal Revenue thru the Manufactured Tobacco Tax Division, or Alcohol Tax Division, as the case may be. SECTION 13. Any existing regulations, orders, or instructions or portions thereof inconsistent with these regulations are hereby repealed, amended or modified accordingly. cdt SECTION 14. These regulations shall take effect immediately. CESAR VIRATA Secretary of Finance Recommended by: EFREN I. PLANA Acting Commissioner of Internal Revenue ANNEX A MALACAANG PALACE MANILA PRESIDENTIAL DECREE NO. 83 AUTHORIZING PHILIPPINE VETERANS BANK TO OPERATE A COMMISSARY AND PX FACILITIES FOR VETERANS, THEIR WIDOWS AND ORPHANS, AND MEMBERS OF THE AFP AND THEIR DEPENDENTS WHEREAS, pursuant to Proclamation No. 1081, dated September 21, 1972, martial law is in effect throughout the land; WHEREAS, in order to extend further assistance to the Veterans of the Philippines is World War II, and their windows and orphans, as well as to the members of the Armed Forces of the Philippines (who are now carrying the greater part of the burden of suppressing the activities of groups of men actively engaged in a criminal conspiracy to seize political and state powers in the Philippines and of eradicating widespread lawlessness, anarchy, disorder and wanton destruction of lives and property) and their dependents, I ordered the Philippine Veterans Bank to set aside the sum of five million pesos (P5,000,000.00) in Letter of Instruction No. 31, dated October 23, 1972, as amended, for the operation and maintenance of a commissary and PX facilities for the aforementioned veterans, their widows and orphans, and the members of the Armed Forces of the Philippines and their dependents; WHEREAS, to better realize the objectives of the aforestated Letter of Instructions and in order to render fuller meaning to said objectives, it is necessary that certain commodities which are to be sold by the commissary from local producers, manufacturers or suppliers be free of all taxes, duties and/or charges imposed by the Government; NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me vested by the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to the Letter of Instructions cited above, do hereby promulgate and decree as part of the law of the land that all purchases from local sources, manufacturer, suppliers and producers of commodities or items decided by the AFP Exchange and Commissary Service to be sold to persons entitled to commissary and PX privileges under Letter of Instructions No. 31, dated October 23, 1972, as amended, shall be free of all taxes, duties and other charges prescribed for similar commodities or items under existing revenue and other laws and regulations. The Chief of Staff, AFP, with the approval of the Secretary of National Defense is authorized to promulgate rules and regulations to carry out the provisions of this decree. DONE in the City of Manila, this 20th day of December, in the year of Our Lord, nineteen hundred and seventy-two. (SGD.) FERDINAND E. MARCOS President of the Philippines ANNEX B 6 July 1976 CESA Honorable Efren Plana B.I.R. Commissioner Finance Bldg., Manila Dear Commissioner Plana: This has reference to Presidential Decree No. 83 (Incl I) which authorized the AFP Commissary and Exchange Service (AFPCES) to purchase tax free from local sources, manufacturers, suppliers and producers of commodities or items decided by the AFPCES to be sold to its authorized customers, the veterans, their widows and orphans as well as retired and active members of the AFP and their dependents. cdta The spirit and intent of PD No. 83 was not, however, followed and/or implemented by AFPCES because of the publication of Memo No. 54-73 (Incl II) which brought about divergent interpretation as to its coverage in so far as AFPCES procurement is concerned. In a series of conferences attended by BIR, Customs representatives and that of AFPCES (under BG Antonio Tamayo) the conferees then agreed that all AFPCES procurement regardless of source (be it locally or imported) be tax paid which up to now AFPCES is implementing. When the AFP submitted to the Budget Commissioner its request for fund releases for AFPCES Tax Refund, the Budget Commissioner has questioned the amount involved and the system adopted by AFPCES on its procurement when the two references cited (PD No. 83 and Memo No. 54-73) clearly delineated its applicability as to sources of commodities or items. For purchases from local sources, manufacturers, suppliers and producers PD No. 83 applies and therefore AFPCES purchases shall be tax-free, and for imported items, Memo No. 54-73 applies hence AFPCES purchases from these sources shall be tax-paid. The AFPCES concurs with the comments and observations made by the Budget Commissioner that based on PD No. 83 all its purchases from the local sources, manufacturers, suppliers and producers of commodities or items shall be tax-free and based on Memo No. 54-73 purchases of imported items shall be tax-paid. In view of the above, we have taken initial steps to categorized our suppliers into two: that of local and imported items. It has also revised its procurement system to conform with the actual intent and spirit of the PD No. 83 and Memo No. 54-73 as stated by the Budget Commissioner. Since then we have advised our local suppliers that henceforth our purchases from them shall be tax-free and that whatever sales they made to the Commissary shall be included as their deductibles during the preparation of their Quarterly Business (Percentage) Tax Refund with copies of our Purchase Orders, Sales Invoices and certification as supporting documents. The solution we have adopted is, of course, subject to the concurrence and/or of your good office. Thus, we would greatly appreciate if the B.I.R. will be able to come out with a regulation to implement the Decree which would run parallel to the system we have began especially on items where specific taxes is imposed like POL products and cigarettes which requires BIR stamps. Your kind and immediate attention on the matter will surely go a long way in enhancing the more effective and responsive business operations of the AFPCES. Very truly yours, MRS HELEN BELLE H. ESPINO Chairman, AFP Ladies Council NAPOLEON G. BASCO Colonel, PA Administrator Incl: PD #83 Memo #54-73 cc Commissioner of Budget ANNEX C April 4, 1973 54-73 MEMORANDUM For: The Secretary of Finance The Commissioner of Customs The Commissioner of the Budget With reference to the request of the A.F.P. Commissary and PX for exemption from the payment of customs duties and fees, it shall be our policy that instead of granting the request for exemption the Government, through the Commissioner of the Budget, shall immediately release the fund needed for such duties and fees. President of the Philippines