VAT Ruling No. 002-92

January 3, 1992 VAT RULING NO. 002-92 NIRC Sec. 100 (a) Wrigley Philippines, Inc. P.O. Box 661 Makati Commercial Center Makati D-708, Rizal Attention: E.G. Cabrera Finance Director S i r s : This refers to your letter dated March 20, 1990 stating that Wrigley Philippines, Inc. is a domestic corporation engaged in the manufacture and sale of chewing gum (tabs and sticks), bubble gum and menthol gum; that as a marketing tool, WPI wants to adopt the jobbing system common to other manufacturers of consumer products; that under the jobbing system, WPI will sell its products to the jobbers at WPI price list, net of 8% discount; that WPI will issue to the jobbers VAT sales invoice and official receipts of payment and will pay the VAT based on the net price of 92%; that WPI sales representatives, who are its own employers, will then withdraw jobbing stocks which are WPI products from the jobbers and pay the jobbers with cash provided by WPI at the same prices at which the sales representatives will sell to retailers; that the jobbers will issue VAT sales invoices to the sales representatives with WPI's name appearing as buyer; that the jobbers will pay the VAT based on the sales made to WPI, thru its sales representatives, net of creditable input tax arising out of its purchases from WPI; and that the sales representatives will sell the jobbing stocks to retailers at the same price they paid the jobbers and the sales representatives will issue a retail order form which is in a WPI letterhead to document the sale made to the retailer. Based on the foregoing, you now request for a ruling on the tax consequences of Wrigley Philippines, Inc. (WPI) on its proposed jobbing operation to wit: 1) Is WPI subject to VAT on its sales to jobbers based on the selling price, net of discount? 2) Is WPI liable for VAT on the sale made by its sales representatives, who are its own employees, to the retailers such as the sari-sari stores and other small outlets? 3) Can WPI representative issue to the retailers only a Retail Order Form and not sales invoice? In reply thereto, please be informed as follows: a) Wrigley Philippines, Inc. is subject to VAT on its sales to "jobbers" based on the selling price, net of discounts; b) Sales made by WPI sales representatives to the retailers and other small outlets are subject to VAT pursuant to Section 100(a) of the Tax Code; c) The WPI sales representatives cannot issue retail order forms to replace the sales invoice. Retail order form may be issued but there should be a corresponding sales invoice. This revokes No. 3 of BIR Ruling No. 220-88. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue