Marius Dejess, if you have time, please read Section 237(as amended) of the 1997 Tax Code.
The said provision provides the following:
" all persons subject to an internal revenue tax shall
***for EACH (please do take note of the word EACH)
1. sale or transfer of merchandise;
2. sale of service rendered
*** valued at P 25.00 or more,
issue duly registered receipts or sales or commercial invoices
** prepared at least in duplicate
** showing the :
1. date of the transaction
3. unit cost
4. description of the merchandise
5. (description) or nature of the service.
IF YOU MAY NOTICE,
1. the law mandates all persons who are required to pay taxes
to issue official receipts for EACH TRANSACTION if the value of said services (or merchandise) is valued at 25pesos or more.
(side note. please disregard this side note if you think that the value of each services that they have rendered was valued at 25 pesos or more.
if you think that the value of each services was valued at less than 25 pesos, ganito ang mangyayari:
What if the value of each services (or goods as the case maybe) is valued at less than 25 pesos, does it mean that those persons are no longer required to issue official receipts/sales invoices?
The answer is yes. they are not required to issue an official receipt for each transaction valued at less than 25 pesos. The reason for the law is anchored on practicality purposes and on cost-benefit principle. Hence, where a bookstore is able to sell on a daily basis 1,000 ballpens valued at 10 pesos each to their 1,000 customers (on the assumption that each customer buys one ballpen), the said bookstore will for sure be hampered in its operation if it is required by law to issue one receipt for each customers.
However, the government has placed a safeguard in order that there will be no tax leakages. The same rule provides that for each transaction, they are required to make a memorandum entry for each amount and number of items that they were able to sell. And at the end of the day, they are required to add the individual amounts of all the small items and issue a single receipt for the said total. All they have to do is to put the word miscellaneous items in the particular portions of the official receipt. In the said manner, the taxpayer has followed the principle that all sales must be declared to the government without exceptions.
Going back to the main issue (if the value of each service/good is valued at 25 pesos or more as in your case) , the law provides that each services must be covered by a single receipt or if there be various services rendered, the taxpayer is required to list all the services individually with the nature of the services listed in the particulars portion.
The underlying principle behind such mandatory requirement (individual listing of the nature of services and the individual listing of same nature of services) are:
1. it will give the customer the chance to verify the accuracy of the amount/s for individual services billed against them. Hence, where you are billed 500,000.00 and you don't know how they were able to arrive with such billed amount, that is practically deceiving the customers.
2. Second reason , i believe , is to comply with withholding provision of the Tax Code. As you may notice also under the Amended Section 237 of the Tax code, it further provides the following:
" That where the receipt is issued to cover payment made as rentals, commissions, compensations, or fees,
receipts or invoices shall be issued which shall show the
b. business tyle, if any
c. address of the purchase, customer or client
that where the purchaser is a VAt registered person, in addition to the information herein required, the invoice or receipt shall further show the Tax Identification Number (TIN) of the purchaser).
To make my point comprehensible, please take note of the following transactions and illustrations.
Found on the accounting books of Cosmopolitan services are the following entries:
1. January 1- internment services rendered to Mr. Dejes in the amount of P 100,000.00
2. January 1- billed 100,000 to cover the cost of the coffin for his deceased wife(pardon me. im not familiar with the services rendered by funeral parlors)
3. January 1- deceptively billed Mr. Dejes the amount of 100,000 to cover the amount malversed by the cashier of Cosmpolitan Services.
4. January 1- billed 100,000 for commissions earned by the funeral services for brokering the sale of the property owned by Mr. Marius Dejes. This is practically Commission Income and not Income from its funeral services.
5. January 1- billed Mr. Dejes the amount of 100,000 to cover the rental payments on the lease of space made by Mr. Dejes on one of the commercial properties owned by the Funeral Services. This is sales from rental services on the part of the Funeral Company/.
Thereafter, the accounting staff of the funeral services erroneously billed Mr. Dejes the amount of P 600,000 ( not 500,000.00) and just listed in the official receipt the words " Various Services- 600,000.00".
if you may notice, Mr. Dejes was billed the amount of P 600,000.00 and he does not even know how the Funeral Parlor was able to arrive at such amount. that deceptive practice is not uncommon. That practice of not giving the itemized description or the nature of the services and their individual amounts are designed by unscrupulous individuals to avoid detection or presumably to evade being duducted of the withholding taxes that are due to the government.
if the amount of the services and the respective nature of services were just individually listed , Mr. Dejes could have discovered the following:
1. that 100,000.00 billed against him for interment services rendered by the funeral parlor was correct.
2. same also with the amount of 100,000.00 for the cost of the coffin. that was a correct billing.
3. that the amount of 100,000.00 billed against him by the eering cashier (the one who malversed the funds) was definitely not chargeable against him.
4. that the amount of 100,000.00 for brokers commissions earned by the funeral parlor (for brokering the sale of Mr. Dejes) was correctly billed. But Mr. Dejes was required to deduct the amount of 10-15% (it seems that it is already 15% under the new revenue regulations. but im not sure) because broker's commissions are subject to the withholding tax rate of 10-15%. Mr. Dejes is duty bound to deduct the said amount (10-15%) from the 100,000 brokers commission due to the funeral parlor. Thereafter, the said amount shall be remitted by Mr. Dejes to the Government.
5. same also with the rental payments made by the lessee , Mr. Dejes. Rental Income earned by the Funeral Parlor are subject to the withholding taxx rate of 5%. again, the said amount (5%of the 100,000.00) should have been deducted from the gross amount and remitted to the government).
6. the 100,000.00 is not covered by any legitimate transaction. it was only deceptively included.