Sales Tax Regulations on Automobiles

May 22, 1978 REVENUE REGULATIONS NO. 07-78 SUBJECT : Sales Tax Regulations on Automobiles TO : All Internal Revenue Officers and Others Concerned Pursuant to the provisions of P.D. No. 1357 in relation to Section 326 and Section 4, both of the National Internal Revenue Code of 1977, as amended, these regulations are hereby promulgated. SECTION 1. Scope . These regulations shall govern the percentage tax on sales of automobiles, as provided for under Section 195 of the National Internal Revenue Code of 1977 as amended by P.D. No. 1357. SECTION 2. Definition of Terms . For purposes of these regulations, the following definition of terms are hereby adopted: (a) " Suggested retail or list price " shall mean the price net of tax, at which locally manufactured automobiles are offered for sale to the public, as fixed by the assemblers, which shall in no case be less than fifteen (15%) per centum over and above the selling price of the assembler to the dealer; or not less than thirty (30%) per centum over and above the manufacturing cost, in case of direct sales to the public by the assemblers. For purposes of this definition, the selling price of the assembler to the dealer shall be the total amount billed against the dealer excluding the sales tax. (b) " Actual retail price " shall mean the actual price at which an automobile is sold, bartered or exchanged by the dealer/assembler to the purchaser-end user, excluding freight, insurance and/or tax shifted to the purchaser, if the said items are billed separately in the sales invoice. (c) " Manufacturing cost " the sum of direct cost consisting of direct materials and direct labor plus indirect cost. (d) " Standard Parts and Accessories " shall mean the ordinary, regular and essential components with which an automobile is usually equipped at the time it is offered for sale to the public. (e) " Parts and Accessories of Automobiles which are Principally for Ornamentation or Embellishment " shall mean accessories which are not essential in the operation of an automobile but principally for adornment, embellishment and ornamental purposes such as, but not limited to mag wheels; musical or multiple tone type horns; roof or boat racks; competition headers; console boxes; chrome stick shift knobs; hood lock pins; back up horn; steering wheel 12" or less in diameter; sliding roofs; fancy and chrome pedal pads; back light louvers; wind deflectors; sequential turn signal kits; hood scoops and rear spoilers; outside sunvisors; and chrome mufflers. (f) " Sale of an Automobile " shall be considered to be a sale of the chassis and of the body together with parts and accessories with which automobiles are usually equipped including other parts and accessories permanently attached thereto at the time of the original sale. The term "automobiles" used herein shall not include motor vehicles classified as trucks and jeeps. SECTION 3. Bases and Rates of Tax . The percentage tax due on sale of automobiles shall be 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 automobiles, to be paid by the manufacturer or importer. The tax base and the rate of percentage tax due shall depend on whether the automobile is locally manufactured or imported, as follows: A. For locally manufactured automobiles . 1. Basis of Tax . The tax shall be based on either the "suggested retail or list price" or "the actual retail price", whichever is higher. In every case where the actual retail price is higher than the suggested retail or list price, the tax shall be recomputed based on the actual retail price and the difference between the tax computed on the basis of the latter and that computed based on suggested retail or list price shall be assessed and collected from the assembler, any agreement between the latter and the dealer to the contrary notwithstanding. In the event, however, that the suggested retail or list price is less than fifteen (15%) per centum over and above the selling price of the assembler to dealer or is less than thirty (30%) per centum over and above the manufacturing cost in case of direct sales to the public by the assembler, the suggested retail or list price shall be recomputed to conform to the minimum requirement of the law and any deficiency tax arising therefrom, including the surcharge and interest shall be assessed and collected from the assembler. 2. Rates of Tax . In determining the gross sales tax due on locally manufactured automobiles, the rates of tax are as follows: "Suggested retail or list price" or "actual retail price", which- ever is higher Gross Sales Tax Due Not exceeding P35,000 10% Over P35,000 but not exceeding P40,000 P3,500 plus 20% of excess over P35,000 Over P40,000 but not exceeding P45,000 P4,500 plus 30% of excess over P40,000 Over P45,000 but not exceeding P50,000 P6,000 plus 40% of excess over P45,000 Over P50,000 but not exceeding P55,000 P8,000 plus 50% of excess over P50,000 Over P55,000 but not exceeding P60,000 P10,500 plus 60% of excess over P55,000 Over P60,000 P13,500 plus 70% of excess over P60,000 3. Illustrative Examples . The applicability of the provisions of the paragraph immediately preceding in relation to paragraph (1) and Section 2(a) and (b) may be illustrated by the following examples: (a) Given: Wholesale Price (WP) of an Automobile P40,000 Gross Sales Tax (GST) 6,400 (1) If the sale is made by the assembler to dealer, the law provides that the suggested retail or list price shall in no case be less than fifteen (15%) per centum over and above the selling price of the assembler to the dealer; hence: SRP = WP + .15 (WP) SRP = P40,000 + (.15 x P40,000) SRP = P40,000 + P6,000 SRP = 46,000 ===== To compute the sales tax due with SRP as basis thereof: Tax due on P45,000 P6,000 Tax due on excess of P45,000 (40% x P1,000) 400 ______ Total Sales Tax Due P6,400 ===== (2) If the sale is a direct sale to the public by the assembler the law provides that the suggested retail price shall in no case be less than thirty (30%) per centum over and above the manufacturing cost (MC); hence, if the manufacturing cost is P35,384.00 SRP = MC + .30 (MC) SRP = P35,384 + (.30 x P35,384) SRP + P35,384 + P10,616 SRP = P46, 000 ====== (3) If the actual retail price (ARP) is higher than the suggested retail/list price : Assume: The same car was sold by the dealer for a total selling price of P60,000 exclusive of freight and insurance charges but including the tax passed on to him by the assembler in the amount of P6,400.00. To determine the base of the sales tax Whether suggested retail price (SRP) or actual retail price (ARP) SRP P46,000 ===== ARP Total selling price P60,000 Less: Sales tax shifted 6,400 P53,600 ===== Since the actual retail price is higher than the suggested retail price, the law dictates that the base of the tax should be the actual retail price, hence, New Base of Tax P53,600 Sales Tax Due Thereon: Tax on P50,000 P8,000.00 Tax on excess of P50,000 (50% x P3,600) 1,800.00 P9,800.00 Less: Tax Previously Paid 6,400.00 Tax Still Collectible from Assembler P3,400.00 ======== B. For imported automobiles . 1. Basis of Tax . For advance sales tax purposes the basis of the tax shall be the total landed cost plus mark-up, as established by Section 193(b) of the National Internal Revenue Code of 1977, as amended. 2. Rates of Tax . In determining the advance sales tax due on imported automobiles the rates of tax, based on landed cost plus mark-up, are as follows: Landed Cost plus Mark-up (Sec. 195(b), NIRC of 1977, Advance Sales as amended Tax Due Not exceeding P35,000 100 % Over P35,000 but not exceeding P40,000 P35,000 plus 125% of excess over P35,000 Over P40,000 but not exceeding P45,000 P41,250.00 plus 150% of excess over P40,000 Over P45,000 but not exceeding P50,000 P48,750 plus 175% of excess over P45,000 Over P50,000 P57,500 plus 200% of excess over P50,000 ILLUSTRATION : Computation of the percentage tax due on an imported automobile, the landed cost of which, including customs duty and other charges is P23,000.00 For Advance Sales Tax Purposes: Landed Cost P23,000.00 Add: 100% Mark-up (Sec. 193 (b)) 23,000.00 Base of Tax P46,000.00 ======= Computation: Tax due on P35,000.00 P35,000.00 Add: 125% of P5,000.00 (excess over P35,000.00) 6,250.00 150% of P5,000.00 (excess over P40,000.00) 7,500.00 175% of P1,000.00 (excess over P45,000.00) 1,750.00 Advance Sales Tax Due P50,500.00 ======== or Landed Cost P23,000.00 Add: 100% Mark-up (Sec. 193(b)) 23,000.00 Base of Tax P46,000.00 ======== Computation: Tax due on P45,000.00 P48,750.00 Tax on excess of P45,000 (175% x P1,000) 1,750.00 Advance Sales Tax Due P50,500.00 ======== C. For Parts and Accessories . (1) Standard parts and accessories with which automobiles are usually equipped, as imported as completely knocked down parts (CKD) by assemblers registered under the Progressive Car Manufacturing Program of the Board of Investments, or their replacements, other than those referred to in Items 4 and 6 hereof 10% based on landed cost, plus 25% mark-up. (2) Imported spare parts and accessories with which automobiles are usually equipped other than those referred to in Items 4 and 6 hereof 10% based on landed cost plus 25% mark-up. (3) Locally manufactured spare parts and accessories with which automobiles are usually equipped other than those referred to in Item 5 hereof 10% of the gross selling price or gross value in money. (4) Imported parts and accessories of automobiles which are principally for ornamentation or embellishment 70% based on landed cost, plus 100% mark-up. (5) Locally manufactured parts and accessories of automobiles which are principally for ornamentation or embellishment 70% of the gross selling price or gross value in money. (6) Imported standard automobile parts and accessories certified by the Board of Investment as being locally manufactured and available in sufficient quantity and comparable quality and price 70% based on landed cost, plus 100% mark-up. SECTION 4. Tax Credit . Any percentage, specific or mining tax paid under Title V, Title IV or Title VII, of the Tax Code, on domestically manufactured, processed or produced, or imported raw material, part, accessory or other article forming part of the finished product shall be credited against the sales tax due on the finished product: Provided , however, That in case the total tax paid on the raw materials, part, accessory or other article exceeds the amount of the sales tax due on the finished product, the excess shall be credited against the sales tax liabilities of the manufacturer for the succeeding taxable quarter or quarters: Provided , Further, That the amount of the tax on the raw material, part, accessory, or other article is indicated as a separate item in the sales invoice. Whenever a tax-exempt material, part, accessory or other article is utilized or used in the manufacture or production of a finished product subject to sales tax, the tax otherwise due on said tax-exempt material, part, accessory or other article shall be deemed to have been paid and the same shall be credited against the sales tax due, on the finished product. SECTION 5. Submission of Reports and Publication thereof . Automobile assemblers shall submit to the Commissioner of Internal Revenue a sworn statement of the "Suggested retail or list price" of each particular brand, make or model of their automobiles and publish the same in a newspaper of general circulation, at least ten (10) days before the same are offered for sale. Any change in the price list mentioned above shall likewise be reported and published within the same period of time. SECTION 6. Penal Provisions . Any person who shall fail to make a return or pay the percentage taxes prescribed in Section 195 of the National Internal Revenue Code within the time prescribed in Section 193(a) of the same Code shall be punished by a fine not exceeding five thousand pesos and by imprisonment for a term not exceeding one year. Any person who shall make a false or fraudulent return shall, besides being liable to the surcharge prescribed in Section 193 of the Tax Code, be punished by a fine of not less than two thousand pesos but not more than ten thousand pesos and by imprisonment of not less than six (6) months but not more than six years. Any person who shall violate any provision of these Regulations, for which violation the National Internal Revenue Code or any other law does not provide any specific penalty, shall be penalized under Section 337 of the said Code by a fine of not more than three hundred (P300) pesos or by imprisonment of not more than six (6) months, or both. SECTION 7. Transitory Provision . To provide a cut-off date for the effective enforcement of these regulations, all taxpayers covered by the provisions of Section 195 of the National Internal Revenue Code of 1977, as amended by P.D. No. 1357, shall submit in duplicate to the Commissioner of Internal Revenue not later than July 31, 1978 an inventory of their raw materials, parts, accessories, goods in process and finished goods as of June 30, 1978. The list shall contain the following information: (a) Description of each item of inventory; (b) Indications as to whether the item of inventory is directly imported or locally purchased or locally manufactured; (c) Quantity; (d) Unit Price; (e) Total value; and (f) Any percentage, mining or specific taxes appropriately classified, the corresponding rate, and the amount paid therefor. If the sales tax on an inventory item acquired on or before June 30, 1978 cannot be ascertained and/or was not billed separately in accordance with these regulations, a tax credit equivalent to the appropriate rate prescribed on the date the item was acquired may be imputed for purposes of computing the quarterly percentage tax on sales. SECTION 8. Repealing Clause . All Rules and Regulations contrary to or inconsistent herewith shall be deemed revised, revoked or amended accordingly. SECTION 9. Effectivity . Presidential Decree No. 1357 took effect upon its approval April 21, 1978. However, the provisions thereof and those of these regulations relating to the computation and payment of the quarterly percentage tax on sales of locally manufactured automobiles shall take effect beginning July 1, 1978. CESAR VIRATA Secretary of Finance Recommending Approval: EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8