VAT Ruling No. 061-02

September 16, 2002 VAT RULING NO. 061-02 105 VAT No. 066-2001 Philippine Long Distance Telephone Company Tax Management Sector 15/F, Ramon Cojuangco Building Makati Avenue, Makati City Attention: Ms. Ma. Criselda B. Guhit AVP-Tax Management Sector Gentlemen : This refers to your letter dated April 30, 2002, requesting for a ruling on whether your sale of telecommunication services to Zamboanga City Electric Cooperative (ZAMCELCO, for brevity) is exempt from the value-added tax (VAT). It is represented that ZAMCELCO is a cooperative created under Presidential Decree No. 269 and registered with CDA under Certificate of Provisional Registration No. T-001-93 issued on March 1, 1993; that ZAMCELCO insists that it is exempt from VAT by virtue of Republic Act No. 6938; and that the Office of the Regional Director, Revenue Region No. 15, Zamboanga City, issued a letter dated August 28, 1998 advising PLDT to desist from collecting VAT from ZAMCELCO. It is your opinion that your sale of services to ZAMCELCO is subject to the 10% VAT since it is an indirect tax. In reply, please be informed that your opinion is correct. Sales to cooperatives whether or not registered with the Cooperative Development Authority (CDA) under R.A. No. 6938, are subject to VAT because the value-added tax is the statutory liability of the seller of goods and services so that absent any showing that the said seller is exempt from tax, the sale could not be exempted from the imposition of the VAT. As correctly pointed out by you, the VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. (Section 105, Tax Code of 1997) Accordingly, since cooperatives, like ZAMCELCO, do not enjoy exemption from indirect taxes, they are liable to shoulder the burden of the passed-on VAT on their purchases of goods and services which tax forms part of their cost of acquisition. (VAT Ruling No. 066-2001 dated October 8, 2001) This revokes the letter dated August 28, 1998 issued by the BIR Regional Director of Zamboanga City. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group