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    Bir Ruling No. 004-80

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    Ren Mar Cruz
    This document provides clarification from the Bureau of Internal Revenue (BIR) on deducting discounts and credits from the gross selling price for computing manufacturer's tax. The BIR rules that only discounts expressly indicated in sales invoices at the time of sale can be deducted. Credits given via memo for discounts, allowances, or price adjustments after the sale cannot be deducted. However, credits for factory defects or billing errors that adjust the true selling price can be deducted. The previous rule on deducting returns also still applies if the original receipt is returned and a new invoice issued.

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    Bir Ruling No. 004-80

    Uploaded by

    Ren Mar Cruz
    15 views2 pages
    This document provides clarification from the Bureau of Internal Revenue (BIR) on deducting discounts and credits from the gross selling price for computing manufacturer's tax. The BIR rules that only discounts expressly indicated in sales invoices at the time of sale can be deducted. Credits given via memo for discounts, allowances, or price adjustments after the sale cannot be deducted. However, credits for factory defects or billing errors that adjust the true selling price can be deducted. The previous rule on deducting returns also still applies if the original receipt is returned and a new invoice issued.

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    This document provides clarification from the Bureau of Internal Revenue (BIR) on deducting discounts and credits from the gross selling price for computing manufacturer's tax. The BIR rules that only discounts expressly indicated in sales invoices at the time of sale can be deducted. Credits given via memo for discounts, allowances, or price adjustments after the sale cannot be deducted. However, credits for factory defects or billing errors that adjust the true selling price can be deducted. The previous rule on deducting returns also still applies if the original receipt is returned and a new invoice issued.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    15 views2 pages

    Bir Ruling No. 004-80

    Uploaded by

    Ren Mar Cruz
    This document provides clarification from the Bureau of Internal Revenue (BIR) on deducting discounts and credits from the gross selling price for computing manufacturer's tax. The BIR rules that only discounts expressly indicated in sales invoices at the time of sale can be deducted. Credits given via memo for discounts, allowances, or price adjustments after the sale cannot be deducted. However, credits for factory defects or billing errors that adjust the true selling price can be deducted. The previous rule on deducting returns also still applies if the original receipt is returned and a new invoice issued.

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    January 3, 1980

    BIR RULING NO. 004-80

    Sycip, Gorres, Velayo & Co.


    Certified Public Accountant
    P.O. Box 589, Manila
    Attention: Mr. M . Gutierrez
    Tax Division

    Gentlemen :

    This refers to your letter dated July 31, 1978 on behalf of the Tire
    Manufacturers Association of the Philippines requesting a clarificatory ruling
    on the new method of computing the 10% manufacturer's tax payable by the
    members of the Association in the light of P.D. No. 1358 and its
    implementing Regulations No. 8-78. Specifically, you would like our opinion
    on the following set of facts stated in your letter, viz: cdt

    "Prior to P.D. 1358, your Office has consistently ruled that


    discounts (e.g., cash discounts, prompt payment discount, volume
    discounts, special or confidential discounts) can be deducted from the
    gross selling price for purposes of computing sales tax provided that
    such discounts are ascertainable or actually given at the time of sale,
    and that although not shown in the invoices, they must be accurately
    shown in credit memoranda, credit note, or other supporting papers.
    We believe the reason for the deductibility of the said discounts from
    the 'gross selling price' can be found in the definition of the term 'gross
    selling price' which stated that —
    "'Gross selling price' or 'gross value in money' of
    articles sold, bartered or exchanged is the total amount of
    money or its equivalent which the vendee pays to the
    vendor for the goods."

    "Since the amount paid by the buyer to the seller to acquire the
    goods is the net discounted value, then the sales tax should be based
    on this amount.
    "Above premises considered, we would like to know whether the
    following credits given before the sale can be deducted from the gross
    selling price, although they are not indicated in the sales invoices but
    expressly shown in the credit memoranda or credit notes issued to the
    customers:

    "a) Credits given to customer by way of credit


    memo or note to cover prompt payment discount, volume
    discount and/or other special or confidential discount;
    "b) Credit for price adjustments due to factory
    defects;

    "c) Credits for price adjustments to correct billing or


    CD Technologies Asia, Inc. © 2021 cdasiaonline.com
    invoicing errors;

    "d) Credits for sales returns; and


    "e) Credits for allowances to cover rollback in prices
    and other price adjustments."

    In reply, I have the honor to inform you that the second paragraph of
    Section 5(b) of Revenue Regulations No. 8-78 provides as follows:
    "In computing the base of the tax, discounts may be allowed as a
    deduction from the gross selling price provided said discounts are
    given at the time of the sale and are expressly indicated in the sales
    invoice."

    Under the regulations, only bona-fide discounts which are given to


    purchasers as a consideration in the sales contract and which are
    ascertainable and definitely agreed upon by the vendor and the vendee at
    the time of sale are deductible from the gross selling price for the purposes
    of the sales tax. Such discounts must be expressly indicated in the invoice.
    Thus, credits given to customer by way of credit memo or note to cover
    prompt payment discount, volume discount and/or other special or
    confidential discounts which although granted to the vendee at the time of
    sale but are not expressly indicated in the sales invoice are not deductible
    from gross sales in determining the sales tax due on the finished products.
    Likewise, credits for allowances to cover rollback in prices and other price
    adjustments are not deductible for sales tax purposes.
    However, credits for price adjustments due/to factory defects and
    credits for prices adjustments to correct billing or invoicing errors may be
    deducted since these credits are not actually discounts but credits to reflect
    the true and correct selling price of the articles sold.
    The adoption of the tax credit method of computing the sales tax has
    not changed the previous rule on the deductibility of the value of articles
    returned by the customer for purposes of the sales tax. The previous rule is
    where part of the goods delivered is returned by the customer and such
    goods returned are placed in stock for resale to others, the selling price
    thereof may be deducted from the gross selling price during the quarter in
    which the return was made if the said goods are not resold during the said
    quarter. If the returned goods were also sold during the quarter, then no
    deduction is made. However, under the present system, in order that sales
    returns may be deducted from the gross sales of a manufacturer, the original
    receipt evidencing the sale should be returned by the purchaser and a new
    invoice issued by the seller to reflect only the actual sales and the tax billed
    as a separate item in the new receipt. cdtai

    Very truly yours,

    RUBEN B. ANCHETA
    Acting Commissioner
    CD Technologies Asia, Inc. © 2021 cdasiaonline.com

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