Written by Susan M. Aquino, 13 December 2007
The Philippines has been known to celebrate the longest Christmas season in the world — just note the Christmas songs being played over the radio and in shopping centres as early as September.
Alongside the hanging of the standard parol in houses and stores during this season, a well-entrenched Filipino tradition is shopping in the so-called tiangges.
These are bazaars that feature a variety of unique items which are sold at temporary venues or open spaces for relatively lower price compared to those sold in big malls or department stores.
From the throngs of people rushing to the Greenhills Christmas tiangge, one could easily see the tiangges’ popularity.
This shopping phenomenon has not escaped the watchful eye of the revenue authorities. In fact, the Bureau of Internal Revenue (BIR) has already issued two revenue regulations (RR) governing the taxation of tiangges, which the bureau has come to call "privilege stores."
The first one, RR No. 24-2003, defines a privilege store as a "stall or outlet which is not registered with the BIR, not permanently fixed to the ground and is normally set up in places like the shopping malls, hospitals, office buildings, hotels, villages or subdivisions, churches, parks, sidewalks, streets and other public places, for the purpose of selling a variety of goods/services for short durations of time or special events."
The definition, however, excludes those stores which exist for more than six months in any taxable year, and therefore are no longer classified as "privilege stores."
Like other forms of activity operating in the underground economy, there is difficulty in monitoring the amount of income generated by each and every privilege store, hence collection of taxes has become a complex and almost impossible task.
In response to this, RR No. 16-2003, later amended by RR No. 24-2003, was issued by the BIR which imposed tax obligations on both the organiser and the operator of these tiangges.
Under RR 12-2003, as amended, tiangge organisers are required to register the tiangge activity with the BIR and to post the corresponding Certificate of Registration (COR) conspicuously in the place where such activity will be conducted.
The COR shall be issued upon submission to the concerned Revenue District Office (RDO) of relevant information, i.e., list of the names of all the persons/entities participating in the event, their respective addresses, stall numbers and location and Taxpayer Identification Numbers; and the venue, duration and specific dates of the event. Rentals on the subleased spaces paid to the exhibitor/operator shall be subject to the 5% creditable tax which the privilege-store-operators must withhold and remit to the BIR on a monthly basis.
On the part of the tiangge operators or stall owners, they are first mandated to register with the RDO where their principal place of business is located.
They are further required to pay percentage tax in advance on a monthly basis at varying rates depending on the venue or location of the event and the physical condition of the specific tiangge area, e.g., whether the event is held in a city or first class municipality or in an air-conditioned or non-air-conditioned place.
Said advance percentage tax payments are considered creditable taxes for the current taxable period, and shall be collected on a monthly basis, unless the duration of the activity or exhibit is for a lesser period.
Compliance with the advance percentage tax payment does not, however, exempt stall owners from the mandatory requirement of the Tax Code to issue duly registered invoices, which as we all know is not a common practice in tiangges and flea bazaars.
The tiangge business is a classic example of a business falling under the so-called underground economy and, thus, their compliance with the invoicing requirements of the Tax Code has not been closely monitored by the BIR.
However, with the proliferation of tiangges all over the country, the government can no longer ignore the taxes that could be generated from such business.
Thus, in order to closely monitor the operations and compliance requirements of the privilege stores or tiangge stall owners, the BIR issued Revenue Memorandum Circular (RMC) No. 80-2007 which directed the different RDOs concerned to establish so-called "BIR-On-Wheels" in commercial centers such as tiangges and bazaars and like establishments.
I have noted, though, that under said RMC, "privilege stores" or tiangge stall owners who are engaged in the sale of goods are required to issue official receipts instead of invoice.
This must have been an oversight since, for purposes of tax compliance, the proper document for sale of goods is an invoice and not an official receipt which applies to sale of service.
As buyers, we can in our own small way help the government by demanding duly registered invoices on our purchases from the tiangges and privilege stores or report any such violations to the BIR-On-Wheels established in the site.
Bear in mind that non-issuance of duly registered invoices or official receipts lead to revenue leakages which we, as good Filipino citizens, must prevent if we want to help in our country’s growth and progress.
