VAT Ruling No. 038-90

February 14, 1990 VAT RULING NO. 038-90 KMM, Incorporated 2275 Pasong Tamo Extension Makati, Metro Manila Gentlemen : This refers to your letter dated January 24, 1989 requesting for a ruling as to whether or not you can include in your bill the 10% value-added tax for services rendered to the Metro Manila Commission for collecting garbage. It appears that the Commission refused to pay you on the ground that it is tax exempt, and is not supposed to pay the 10% value-added tax. In addition, you request for clarification as to whether you can classify yourself as a common carrier subject to common carrier's tax or as an independent contractor subject to the contractor's tax. In reply, please be informed that VAT is an indirect tax; hence it can be shifted to the customer. Once shifted to a non-VAT person it is an additional cost which the customer has to pay to obtain the goods. (Philippine Acetylene Co. vs. Commissioner of Internal Revenue G.R. No. L-19707, August 17, 1967) Accordingly, the exemption status of the customer, other than those for whom sales of goods or services are authorized to be zero-rated, cannot be invoked to avoid the payment of the VAT on your billing for sanitation services rendered by you. In connection with your other query, please be informed that you cannot be classified as a common carrier which, pursuant to Article 1732 of the Commercial Laws of the Philippines, refers to "persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both , by land, water, or air, for compensation, offering their services to the public". The collection and disposal of garbage at designated dumpsite is essentially a contract for the performance of a specific service rather than a mere contract of transporting or hauling garbage. In this connection, since you are engaged in the collection and disposal of garbage, gross payments to you shall be subject to the 1% creditable withholding tax, pursuant to Section 1(e)(2)(o) of Revenue Regulations No. 6-85, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations. However, the tax base for purposes of the 1% withholding tax excludes the VAT. (BIR Ruling No. 073-89) prll Very truly yours, JOSE U. ONG Commissioner of Internal Revenue