VAT Ruling No. 060-98

December 15, 1998 VAT RULING NO. 060-98 Sec. 105-000-00-060-98 Manuela Metropolis Corporation Alabang, Muntinlupa City Attention: Mr . Ike Santiago Chief Accountant Gentlemen : This refers to your letter dated December 11, 1997 stating that your company operates Hypermart which sells VAT-exempt commodities (such as fish, prawns, squid, shrimp, crabs and other fresh seafoods, meat, vegetable, fruits); and that under the POS system, such sales are entered in the same cash register machine generating cash register receipts/tapes for vatable items sold. Moreover, your company also operates a Theme Park Resort whereby it derives income from admission tickets which, as you claim has already been subjected to 30% amusement tax imposed by the City of Muntinlupa; tokens in the rides provided inside the theme park; parking tickets which are likewise subject to 30% local tax; and percentage commission from the sale of goods held on consignment and on concession. LLpr In new of the above representations, you now pose the following queries: (1) Whether or not there is a need to issue a separate non-VAT invoice for VAT-exempt transactions or will it be permissible to continue using the cash register tapes used for items subject to VAT whereby the sale of non-VAT items shall just be highlighted and indicated therein as "NV"; (2) Whether or not receipts derived from the Theme Park operations such as admission fees, parking tickets, tokens from rides, commissions from sales on consignment and concession are still subject to VAT and if so what will be the tax basis of the VAT upon those which have already been subjected to the 30% local amusement tax will the same be based on the remaining 70% of gross receipts? In reply, please be informed of the following: (1) Section 4.108-1 of Revenue Regulations No. 7-95, provides that, "if a taxable person is also engaged in exempt operations, he should issue separate invoices or receipts for the taxable and exempt transactions". Thus, there is a need for your company to issue separate Non-VAT Invoices for the sale of fish, prawns, squid, and other exempt commodities. Sales of these Non-VAT items may only be entered in a cash register machine provided that the machine itself is capable of distinguishing between a VAT and Non-VAT transaction. In all instances, the use of cash register machines is subject to the approval and issuance of a permit to operate cash register machines by the Revenue District Officer having jurisdiction over the place where your business is registered, as mandated by Revenue Regulations No. 4-80, as amended. (2) Sec. 105 of the Tax Code of 1997 defines the persons liable to value-added tax as those who in the course of trade or business, sell, barter, exchange, lease of goods or properties, render services, and any person who imports goods. The phrase "in the course of business or pursuit of a commercial or an economic activity including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit organization . . . or government entity". llcd The activity of your company as operator of a theme park and resort very well falls under the purview of this provision, hence, the income derived from admission tickets, tokens, parking tickets, commissions and other income incidental thereto are subject to the imposition of value-added tax of ten percent (10%) provided for under Sec. 108 of the same Code. The basis for the imposition of value-added tax shall be the gross receipts which is defined as "the total amount of money or its equivalent representing contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding the value-added tax." Furthermore, such transactions cannot be considered exempt from VAT for the reason that these are already subject to amusement taxes. It should be noted that while Title V of the Tax Code classifies amusement taxes as percentage taxes for which Sec. 109(j) exempts the transactions already subjected thereto from the imposition of VAT, Sec. 125 of Title V limits the enumeration of amusement taxes paid by operators, lessors of cabarets, cockpits, boxing exhibitions, professional basketball games, Jai-Alai and racetracks as only those which may be considered percentage taxes which taxes are remitted to or collected by the Bureau. The provision does not include amusement taxes paid to local government units which are classified as local taxes under the Local Government Code in contradistinction from the national internal revenue taxes found under the provisions of the National Internal Revenue Code. Therefore, the basis for the imposition of value-added tax on your transactions as theme park operator shall be the total gross receipts (100%) undiminished by whatever local taxes that are imposed by the local municipal government on the receipts generated from admission tickets, parking tickets and tokens, and commissions as well as other incidental income that may be derived therefrom. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue