Sales and Percentage Taxes Regulations

May 2, 1967 REVENUE REGULATIONS NO. 08-67 SUBJECT : Sales and Percentage Taxes Regulations TO : All Internal Revenue Officers and Others Concerned SECTION 1. Scope of Regulations : Pursuant to the provisions of Section 338, in relation to Section 4, both of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, the following regulations relating to the filing of monthly percentage tax return and payment of the tax due thereon, sales tax payable by manufacturers or importers of toilet preparations and the billing of sales tax as a separate item in the invoice are hereby promulgated for the information and guidance of all concerned. These regulations shall be known as Revenue Regulations No. 8-67 or the Sales and Percentage Taxes Regulations. These regulations deal with the taxes provided for under Sections 183(c), 184, 185, 185-A, 185-B, 186, 189, 191, 192 and 195, all of the National Internal Revenue Code. SECTION 2. Filing of Monthly Percentage Tax Return and Payment of the Tax Due Thereon : SECTION 2(a) Who Shall File It shall be the duty of every person conducting a business on which a percentage tax is imposed under Title V of the National Internal Revenue Code (Sections 183(c), 184, 185, 185-B, 186, 189, 191, 192 and 195), to make a true and complete return of the amount of his, her or its gross monthly sales, receipts or earnings, or gross value of output actually removed from the factory or mill warehouse within twenty (20) days after the end of each month and pay the tax due thereon. Where any person retires from business subject to the percentage tax provided in the above-mentioned sections, he shall immediately notify the nearest internal revenue officer, file his return or declaration, and pay the tax due thereon within twenty (20) days after closing his business. SECTION 2(b) Where to File The return should be filed in duplicate under BIR Form No. 25.021-A (Annex A) and must be verified by the oath of the party rendering it. The returns (original and duplicate) must be filed with the Collection Agent and/or Cash Clerk of the City or municipality where the place of business is located and where the books of accounts are kept within twenty (20) days after the end of each month. If no Collection Agent or Cash Clerk is assigned to the municipality or municipal district, the return should be filed with the Municipal Treasurer thereat. SECTION 2(c) When to Pay The total amount of percentage tax due as shown in the return must be paid within twenty (20) days after the end of each month at the same time as the filing of the return. SECTION 2(d) Preparation of the Return The taxpayer is required to fill in the appropriate schedule in the return corresponding to his business or businesses and a summary thereof together with the computation of the tax due must likewise be prepared in the appropriate space provided for in the return. cdt SECTION 2(e) Application of Tax Credit and Payment by Check If the taxpayer has any tax credit which is being deducted from the tax due in the return, the original of the letter evidencing the tax credit must be presented to the Collection Agent, Cash Clerk or Municipal Treasurer, if there is no Collection Agent or Cash Clerk assigned, for proper annotation of payment. If payment is to be made by check or money order such check or money order must be drawn payable to the order of the Commissioner of Internal Revenue. SECTION 2(f) Keeping of Records The books of accounts and other records from which the figures shown in the percentage tax return were based should always be kept on file at the principal place of business of the taxpayer and shall be subject to inspection by internal revenue officers duly authorized to examine the books of accounts of the said taxpayer. Invoices, receipts and other supporting papers and documents relating to deductions from sales or receipts should be filed separately, kept and preserved in the manner prescribed by Revenue Regulations No. V-1. Deduction of the cost of raw materials used in the manufacture or production of the articles sold shall not be allowed, unless the invoices supporting the source thereof show the kind or description of the raw materials and the rate of tax to which they have been subjected as provided by Section 15 of the aforesaid regulations, as amended. Except where an authority is granted by the Commissioner of Internal Revenue authorizing taxpayer to transfer its books of accounts to its accountant or auditor for audit purposes, in which case the inspection shall be conducted in the office of the accountant or auditor. The books of accounts and other records shall be maintained for a period of five years from the date of the last entry in the said books and records. SECTION 2(g) Transmittal of Returns All Collection Agents, Cash Clerks and Municipal Treasurers who received the monthly percentage tax returns shall forward both copies (original and duplicate) to the Regional Office, within the month the returns are filed, duly listed. The list should contain the name of the taxpayer, address, amount paid and official receipt number. SECTION 2(h) Processing of Returns The Regional Office shall process the returns in the same manner as the processing of income tax returns, particularly the listing, auditing, numbering and separation of original and duplicate. SECTION 2(i) Examination of Return The duplicates shall be kept in the Assessment Branch, and shall be released for examination on an annual basis. Examination of monthly percentage tax returns shall be done only once a year to cover the period from January to December, if the taxpayer is on a calendar year basis; if on a fiscal year basis, the returns shall be investigated on an annual basis covering the twelve months of the fiscal year. In all cases where fraud has been established, the examination by inspection of said monthly percentage tax returns shall be conducted at any time when the same has been established or ascertained. SECTION 3. Toilet Preparations This section of these Regulations deals with the tax on toilet preparations imposed by Section 184(c) of the National Internal Revenue Code, which provides as follows: "SEC. 184. Percentage Tax on Sales of Jewelry, Automobiles Toilet Preparations, and Others . There shall be levied, assessed, and collected once only on every original sale, barter, exchange, or similar transaction for nominal or valuable considerations intended to transfer ownership of, or title to, the articles therein below enumerated a tax equivalent to fifty per centum of the gross value in money of the articles so sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer or producer: Provided, That where the articles enumerated hereinbelow are manufactured out of materials subject to tax under this section, the total cost of such materials, as duly established, shall be deductible from the the gross selling price or gross value in money of such manufactured articles; "(c) Perfumes, essences, extracts, toilet waters, cosmetics, petroleum jellies, hair oils, pomades, hair dressings, hair restoratives, hair dyes, aromatic cachous, toilet powders, and any similar substance, article, or preparations, by whatsoever name known or distinguished; and any of the above which are used or applied or intended to be used or applied for toilet purposes; except tooth and mouth washes, dentifrices, toothpaste; and talcum or medicated toilet powders." SECTION 3(a) Definition of Terms . In applying the provisions of the following sections of these regulations, words and phrases shall be taken in the sense and extension indicated below: (1) "Toilet preparations" includes perfumes, essences, extracts, lotions, toilet waters, cosmetics, hair oils, pomades, hair dressings, hair tonics, hair-dyes restoratives, hair dyes and any similar substance, articles or preparations by whatsoever name known or distinguished which are used or applied or intended to be used or applied for toilet purposes. Any article advertised or held out to be suitable for toilet purposes or for any purposes for which the articles enumerated in section 184(c) are customarily used, will be subject to tax as toilet preparations, regardless of the name by which it may be known or distinguished. Shampoo, oils and liquids containing 5% or less of saponaceous matter are taxable as toilet preparations. (2) "Cosmetics" comprises all toilet preparations for external application intended to beautify and improve the complexion, skin or hair. In any case where the taxability of a particular article under Section 184(c) of the National Internal Revenue Code is in question, a sample of the article or product in question or the manufacturer's quantitative formula, together with labels and other advertising matter, showing the purposes for which it is to be used, should be submitted to the Commissioner of Internal Revenue for decision. SECTION 3(b) Tax on Toilet Preparations Containing Alcohol . (1) Toilet preparations which contain alcohol as chief ingredient are taxable as distilled spirits under Section 133 of the National Internal Revenue Code, in accordance with sections 127 and 184(c) of the same Code. Alcohol shall be considered the chief ingredient of toilet preparations, if, after excluding water, alcohol constitutes more than 50% of the preparation by volume. If the specific tax on the alcohol used as chief ingredient in the manufacturer of toilet preparations had already been paid under section 133 of the National Internal Revenue Code, no further percentage or specific tax is due on the manufactured toilet preparations. (2) Tax on Toilet Preparations not Containing Alcohol . All other toilet preparations which do not contain alcohol are subject to the sales tax imposed under section 184(c) of the National Internal Revenue Code. SECTION 3(c) Tax Treatment of Materials Used in the Manufacture of Toilet Preparations . (1) Imported materials to be used by the importer himself in the manufacture or preparation of toilet articles subject to specific tax (Sec. 3 of these regulations) and are to form part thereof are exempt from the advance sales tax and compensating tax imposed under sections 183(b) and 190 of the National Internal Revenue Code, respectively. (2) Imported materials to be used by the importer himself in the manufacture of toilet articles subject to the sales tax (Sec. 3-B and sec. 4 of these regulations) are subject to the advance sales tax imposed under section 183(b) of the National Internal Revenue Code. However, the total landed cost of such imported materials plus the corresponding mark-up (exclusive of the advance sales tax) may be deducted from the gross selling price of the manufactured toilet articles for purposes of the sales tax due on the manufactured articles, regardless of whether such imported materials are taxed under sections 184, 185 and 186 of the National Internal Revenue Code. (3) Imported materials subject to specific tax under Title IV of the National Internal Revenue Code to be used by the importer himself in the manufacture of toilet articles shall be subject to the corresponding specific tax, regardless of whether the manufactured toilet articles are subject to the specific tax or to the sales tax. SECTION 3(d) Articles Not Taxable as Toilet Preparations . (1) Section 184(c) of the National Internal Revenue Code, expressly provides that tooth and mouth washes, dentifrices, tooth paste and talcum or medicated toilet powders are not subject to the sales tax imposed therein. In other words, the above-mentioned articles are subject to the sales tax imposed under section 186 of the National Internal Code. Likewise, shampoo oils and liquids intended solely for cleansing purposes containing more than 5% saponaceous matter are taxable at the rate prescribed in section 186 of the National Internal Revenue Code. (2) Talc or medicated toilet powders based on the following formulas shall be classified as talcum or medicated toilet powders mentioned in section 184(c) of the National Internal Revenue Code: Talc 70% Zinc Oxide 17% Zinc Stearate 6% Osmo Kaolin 5% Boric Acid 2% Essential oil & coloring matters 2% Talc 78% Zinc Oxide 5% Zinc Stearate 2% Osmo Kaolin 13% Boric Acid 2% Essential oil & coloring matters 2% Talc 80.50% Zinc Oxide 9.50% Zinc Stearate 2.50% Magnesium Carbonate 6.00% Essence 1.50% Pure Talc (highest grade) 85% Precipitated Cal. Carbonate 5% Magnesium Carbonate (light) 2.50% Magnesium Stearate, U.S.P. 2% Titanium Dioxide 2% Zinc Oxide, U.S.P. 2% Oxyquinoline sulphate 0.30% Hexacholorphane (G-11) 0.20% Complexion extract 1.00% Manufactured talc powders based on the above formulas shall be taxed at the rate imposed under section 186 of the National Internal Revenue Code, by virtue of the exceptions provided for in section 184(c) of the National Internal Revenue Code. As a general rule, manufactured toilet powder shall be classified as talcum or medicated toilet powder if talc and/or other chemicals which are used in medicinal preparations constitute 70% or more of the manufactured articles. All other manufactured toilet powders in which talc and/or other chemicals which are used in medicinal preparations constitutes less than 70% thereof shall be classified under the terms "cosmetics" and "any similar substance, article or preparations, by whatsoever name known as distinguished" and therefore taxable at the rate of tax imposed under section 184(c) of the National Internal Revenue Code. LLjur SECTION 4. Billing of Tax as a Separate Item in the Sales Invoices . Sections 184, 185 and 186 of the National Internal Revenue Code, provide for the levy, assessment, and collection once only on every original sale, barter, exchange, or similar transactions intended to transfer ownership of, or title to, the articles described in said sections a tax of fifty per centum (50%), thirty per centum (30%) and seven per centum (7%), as the case may be, on the gross selling price or gross value in money of the articles sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer, producer, or importer; Provided, That where the articles are manufactured out of materials subject to the same percentage tax in each case mentioned, the total cost of such materials, as duly established, is deductible from the gross selling price or gross value in money of the manufactured articles for purposes of the tax. SECTION 4(a) Definition of Terms . In applying the provisions of the sections indicated herein, words and phrases shall be taken in the sense and extension, to wit: (1) "GROSS VALUE IN MONEY OR "GROSS SELLING PRICE" of the articles sold, bartered, exchanged, or transferred, as the term is used in the aforementioned sections of the National Internal Revenue Code, is the total amount of money or its equivalent which the purchaser pays to the vendor to receive or get the goods. SECTION 4(b) Computation of Sales and Billing the Same as a Separate Item in the Invoice : In connection with the computation of the sales tax imposed under Sections 184, 185, and 186 of the Tax Code, in relation to General Circular No. 431, that if a manufacturer, producer, or importer, 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 articles; the sales tax shall be based on the gross selling price less the amount intended to cover the tax, if the same is billed to the purchaser as a separate item in the invoices. Unless billed to the purchaser as separate items in the invoice, the amounts intended to cover the sales tax shall be considered as part of the gross selling price of the articles sold, and deduction thereof will not be allowed. SECTION 5. Additions to the Tax . If the percentage tax on any business is not paid within the time specified, the amount of the tax shall be increased by twenty-five (25%) per centum, the increment to be a part of the tax. In case of willful neglect to file the return within the period prescribed herein, or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax, in case any payment has been made on the basis of such return before the discovery of the falsity or fraud, a surcharge of fifty per centum (50%) of its amount in addition to the 25% surcharge for late payment. The amount so added to any tax shall be collected at the same time and in the same manner as part of the tax unless the tax is being paid before the discovery of the falsity or fraud in which case the amount so added be collected in the same manner as the tax. SECTION 6. Penal Provisions . Any person who shall fail or neglect to make a return or pay the percentage taxes prescribed in Sections 183(c), 184, 185, 185-A, 185-B, 186, 189, 191, 192 and 195 of the National Internal Revenue Code within the time prescribed in Section 183(a) of the same Code shall be punished by a fine in a sum not exceeding P1,000.00 or by an imprisonment for a term not exceeding six (6) months or both. Any person who shall make a false or fraudulent return shall, besides being liable to the surcharge prescribed in the preceding paragraph, be punished by a fine of not less than P2,000 but not more than P10,000 and by an imprisonment of not less than six (6) months but not more than six (6) years. Any person who shall violate any provisions 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 352 of the aforesaid Code by a fine of not more than P300.00 or by imprisonment or not more than six (6) months, or both. SECTION 7. Repealing Provision . The provisions of Revenue Regulations No. 3-64 and Revenue Regulations No. V-42, and any other regulations or circulars inconsistent herewith are hereby repealed. SECTION 8. Date of Effectivity . These regulations shall take effect upon promulgation in the Official Gazette. PEDRO M. ALMANZOR Acting Secretary Recommended by: MISAEL P. VERA Commissioner of Internal Revenue ATTACHMENT 1st Indorsement December 2, 1969 Respectfully returned to the Commissioner of Internal Revenue, Manila, the attached proposed Revenue Regulations No. 8-67, dated May 2, 1967, which shall be known as the Sales and Percentage Taxes Regulations, relating to the filing of monthly percentage tax return and payment of the tax due thereon, sales tax payable by manufacturers or importers of toilet preparations and the billing of sales tax as a separate item in the invoice, approved. PEDRO M. ALMANZOR Acting Secretary