VAT Ruling No. 054-98

December 2, 1998 VAT RULING NO. 054-98 108 (A)-000-00-054-98 Ms. Cecilia R. Patricio AVP, Tax Division SHOEMART, Inc. 400 C. Palanca Street Quiapo, Manila M a d a m : This refers to your letter dated October 1, 1998 requesting for a clarificatory ruling on whether or not the business of receiving promotional materials and eventually advertising them in newspapers is subject to the value added tax (VAT). In reply, please be informed that the above-described service or business shall fall with the comprehensive taxability clause of Section 108(A) of the Tax Code, the relevant portion of which is partly quoted as follows: "SEC. 108. Value-Added Tax on the Sale of Services and Use or Leave of Properties . "(A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties. xxx xxx xxx "The term 'gross receipts' means the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax. xxx xxx xxx" As correctly stated in your letter, the taxability of the service or business of receiving advertisement for publication in newspapers/magazines or providing the delivery thereof has been settled in Revenue Memorandum Circular (RMC) No. 4-96. In fine, the service undertaken thereof partakes that of a "service agent". Section 103(y) of the Tax Code is not applicable in this case as the sale therein stated is one which is not principally devoted to the publication of paid advertisements or materials. LLjur Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue