VAT Ruling No. 066-92

May 18, 1992 VAT RULING NO. 066-92 NIRC Sec. 102 Precedent Ruling 000-00 Pambato Cargo Forwarder, Inc. 2109-2111 Dimasalang cor. Tiago Sts., Sampaloc, Metro Manila Attention: Mr. Liberato P. Santiago, Jr. President Gentlemen : This refers to your letter dated March 13, 1992 requesting that your registration as a VAT person under VAT Registration No. 75-3-000254 be cancelled on the ground that you are actually doing business as a common carrier, hence, should be considered exempt from value-added tax under Section 103(j) of the NIRC, but, subject to the 3% common carrier's tax under Section 115 of the same Code. It is represented that you are engaged in "cargo forwarding" business; that your actual operation is as follows: The owner of the cargo brings to you in Manila his goods for shipment to the provinces; that you issue waybills to your customers which also serve as their receipts for the said cargo; that you then put the said cargo in a container and take the same to the shipping line (in case of shipment by sea) or to a domestic airline (in case of shipment by air); that upon arrival ( e . g ., in Cebu) your branch office takes deliver of the cargo from the shipping line/airline, and delivers the cargo to the consignee thereof. In reply, please be informed that the "Common Carrier" or "Transportation Contractor" referred to under Section 115, in relation to Section 103(j), NIRC, pertains to the person who, himself, is the owner or operator of the carrier. In this case, the common carrier is the shipping line or the airline company which carriers your client's cargo (See CIR vs. United States Lines, Inc., L-16850, 5 SCRA 175, May 30, 1962) Since you are not the owner or the operator of the said carrier (by sea or by air), you cannot be constituted as the common carrier of your clients. Under Section 194(t) of the old NIRC, the term "Commercial Broker" includes "all persons, other than importers, manufacturers, producers or bona fide employees, who, for compensation or profit, . . . negotiate freights or other business for owners of vessels, or other means of transportation, or for the shippers, or consignors or consignees of freight carried by vessels or other means of transportation . . .". Your cargo forwarding business clearly falls under the said definition. Since commercial brokers are subject to 10% VAT, pursuant to Section 102, NIRC, your aforesaid request cannot be granted for lack of legal basis. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue