VAT Ruling No. 002-89

May 19, 1989 VAT RULING NO. 002-89 102 (a)-353-88-002-89 Dimerco Agency Group Mills, Inc. Ground Floor, Windsor Tower Bldg. 163 Legaspi St.,Legaspi Village Makati, Metro Manila Attention: Mr . Ciriaco I . Sia Accounting Manager Gentlemen : This refers to your letter dated September 13, 1988 bearing on your request for a clarification of item No. 2 of VAT Ruling No. 353-88, dated August 3, 1988, in reply to your query dated April 15, 1988 which states, as follows: LLjur "The tax base in computing your VAT liability is gross receipts ,which means the total amount of money or its equivalent representing the contract price, compensation or service fee including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the service performed for another person, excluding value-added tax." Emphasis supplied. In reply, please be informed that, since you are engaged in business as an agent within the purview of the law on agency (Art. 1868, Civil Code), you are subject to value-added tax based on your gross receipts pursuant to Section 102 of the Tax Code, as amended by E.O. 273. The term "gross receipts" refers to your compensation for services rendered (ibid), hence, does not include amounts received but only held in trust for your principal. " Amounts held in trust ... do not form part of the taxable gross receipts ..." Tours Specialist, Inc. vs CIR, CTA Case No. 3111, Nov. 18, 1983, citing Manila Jockey Club, Inc. vs Col. of Int. Revenue, G. R. No. L-13887, 108 Phil. 821) It has been represented that you are not a travel agent within the purview of Revenue Memorandum Circular No. 7-88; that you are only a general sales agent of your airline principal; that you sell airline tickets and airway bills for and in behalf of your principal; and that your compensation is 3% of sales. In as much as being an agent, you only represent your principal your collections from tickets and airway bills sold do not form part of your taxable gross receipts as the same are collected and held in trust for and in its behalf. In short, the same is not your revenue but rather that of your principal. Hence, your taxable gross receipts is limited to 3% compensation for services rendered. Furthermore, it appears that you deduct your compensation from the sales proceeds of tickets and airway bills sold, and remit to your principal on monthly basis. Thus, said compensation is taxable as your gross receipts during the taxable quarter in which collections of sales proceeds were made. Also, it appearing that you are not a Travel Agent within the purview of RMC No. 7-88, the provisions of the said RMC are not applicable. aisadc This supplements our VAT Ruling No. 353-88 dated August 3, 1988. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue