CHAPTER 1

TRUE OR FALSE

1. Consumption tax is a tax levied upon business. FALSE

2. A purchase is a form of consumption. TRUE
3. A tax on consumption will effectively causes all residents of the state to pay tax. TRUE
4. Consumption is the acquisition or utilization of goods and services. TRUE
5. Income tax is based on the taxpayer’s capacity to sacrifice for the support of the government.
TRUE
6. Consumption tax is more consistent with the “ability to pay” theory rather than the received the
“benefit received” theory. FALSE
7. A tax on consumption would support savings initiative. TRUE
8. Consumption taxes should not apply to basic necessities. TRUE
9. Both domestic consumption and foreign consumption are subject to consumption tax. FALSE
10. Non-resident sellers are exempt from consumption taxes on their domestic sales. TRUE
11. Resident sellers shall pay consumption tax on foreign consumption. FALSE
12. The sale by non-resident persons abroad is subject to Philippine consumption tax. FALSE
13. The utilization or consumption of goods or services shall be taxable in their country of origin.
FALSE
14. The sale by nonresident persons in the Philippines is subject to consumption tax. TRUE
15. The sale by resident in the Philippines is subject to consumption tax. TRUE

TRUE OR FALSE

1. The consumption of tax for purchases of goods or services from foreign sources shall be payable
by the buyer. TRUE
2. Business tax is a form of consumption tax. TRUE
3. Consumption tax is a form of business tax. FALSE
4. Business tax is imposed on the sales of sellers which is the purchases made by the buyers. TRUE
5. The VAT on importation is payable only by regularly engaged in trade or business. FALSE
6. Business taxes are paid by sellers while the VAT on importation is paid by the buyers. TRUE
7. The statutory taxpayer and the economic taxpayer are the same with the VAT importation.
TRUE
8. Business taxes are usually included in the price of goods and services of the seller but are
remitted by the seller to the government. TRUE
9. In business taxes, the statutory taxpayer is not the economic taxpayer. TRUE
10. The sales or importation of goods is not subject to specific percentage tax. TRUE
11. When the impact and incidence of taxation rests upon different persons, the tax is an indirect
tax. TRUE
12. Domestic pay consumption tax to domestic sellers. VOID
13. Importers pay consumption tax to non-resident sellers. FALSE
14. Domestic sellers pay consumption tax to the government. TRUE
15. Exporters pay consumption tax to the government. FALSE
MULTIPLE CHOICE – THEORY: PART 1

1. Which type of consumption will pay consumption tax? DOMESTIC CONSUMPTION

2. Which is a tax upon the usage of income? CONSUMPTION TAX
3. Which is subject to the VAT on importation? DOMESTIC CONSUMPTION FROM FOREIGN
SELLERS
4. Which is subject to business tax? DOMESTIC CONSUMPTION FROM RESIDENT SELLERS
5. Which is an incorrect statement regarding consumption taxes? THEY ARE ALWAYS INDIRECT IN
NATURE
6. Which is correct regarding consumption tax? IT MAY HELP IN THE DISCTRIBUTION OF WEALTH
TO SOCIETY
7. Domestic consumption is taxable when the seller is. EITHER A RESIDENT OR NON-RESIDENT
8. Foreign consumption shall NOT PAY CONSUMPTION TAX REGARDLESS OF THE RESIDENCY OF
THE SELLER
9. The tax on domestic consumption is referred to as EITHER A OR B (VAT ON IMPORTATION &
BUSINESS TAX)
10. The tax on domestic consumption from foreign suppliers is VAT ON IMPORATATION
11. The vat on domestic consumption from resident suppliers is BUSINESS TAX
12. Which is not a business tax? VAT ON IMPORTATION
13. The percentage tax is generally 3% SALES OR RECEIPTS
14. The Vat as a business tax is 12% OF MARK UP
15. The VAT on importation is 12% OF PURCHASES
16. Which form of consumption is tax-free? SALES TO A NON-RESIDENT
17. As to incidence of tax, the VAT on importation is a form of DIRECT TAX
18. Which of these import consumptions is a tax-free? NEITHER A nor B
19. Which importation is subject to the VAT on importation? BOTH A AND B
20. Who is the statutory taxpayer to the VAT on importation? DOMESTIC BUYER

MULTIPLE CHOICE – THEORY PART 2

1. Generally, the tax basis of business tax is SALES OR RECEIPTS

2. Who is the statutory taxpayer of business taxes? THE SELLER WHO MUST BE ENGAGED IN
TRADE OR BUSINESS
3. The economic taxpayers of consumption taxes are BUYERS, WHETHER OR NOT ENGAGED IN
TRADE OR BUSINESS
4. What is the method used to determine the VAT due and payable? TAX CREDIT METHOD
5. Which statement is conceptually incorrect? THE BUYER PAYS THE CONSUMPTION TAX TO THE
GOVERNMENT
6. Which is correct? THE SALES TO RESIDENTS MUST INCLUDE A BUSINESS TAX
7. The deduction from output VAT is called INPUT VAT
8. Which is a pure form of a sales tax? PERCENTAGE TAX
9. Statement 1: A business which pays VAT normally does not pay percentage tax.
Statement 2: A business which pays percentage tax also pays VAT.
Which statement is correct? STATEMENT 1
10. Which of the following business taxes applies only for domestic consumption? ALL OF THESE
(VAT ON SALES, PERCENATGE TAX, EXCISE TAX)
11. Excise tax is paid by IMPORTERS OR MANUFACTURERS
12. Export sale is (select the incorrect one) EXEMPT FROM VAT
13. Statement 1: Excise tax is always paid together with Vat or percentage tax.
Statement 2: Excise tax is paid at the point of sale.
Which statement is false? BOTH STATEMENTS
14. Which is imposed with a tax or zero percent? EXPORT SALES OF VAT-REGISTERED TAXPAYERS
15. Which is not subject to excise tax? FOOD PRODUCTS
16. The tax basis of consumption tax on foreign purchase is PURCHASE COSTS
17. The consumption tax on domestic purchases is imposed upon the SALES OR RECEIPTS
18. Technically, the excise tax on the manufacture of certain articles is payable only when the article
is intended for DOMESTIC CONSUMPTION
19. Which is correct with the VAT on importation? PAYABLE REGARDLESS OF THE PURPOSE OF THE
IMPORTATION
20. The vat on domestic sales is an example of AN INDIRECT TAX

PROBLEMS

1. Free Company, a resident business, renders services to Mr. Erlwin, a resident person who is not
engaged in business.
Identify the statutory taxpayer and the type of consumption tax.
A. FREE COMPANY – BUSINESS TAX
2. Baliwag Company, a nonresident business, purchased P200,000, form Cauayan Company, a
resident business. Which will pay the consumption tax? NEITHER ANY OF THEM
3. Heidenberg Corporation, a resident business, purchased P100,000 goods from Kiwi Company, a
non-resident business.
Identify the statutory taxpayer and the type of consumption tax
B. HEIDENBERG COMPANY – VAT ON IMPORTATION
4. Mr. Cedric, an employee, SOLD HIS RESIDENTIAL LOT TO Mrs. Corneto, a real property dealer.
Who consumption tax with respect to this transaction? NEITHER ANY OF THEM
5. Mr. Porma made a casual sale involving a car to Mrs. Tutyal, a resident buyer. Mr. Porma is not a
car dealer. Who is subject to consumption tax? NEITHER MR. PORMA NOR MRS. TUTYAL
6. Mr. Llama, an employee, imported a pair of shoes from Hongkong. Which consumption tax is he
liable to pay? VAT ON IMPORTATION
7. Kapederasyon, a charitable non-profit corporation, imports various office supplies from XG
Manufacturing Industries in China. Which is correct? KAPEDERASYON IS SUBJECT TO VAT ON
IMPORTATION
8. Mr. Cavite produces an excisable article for sale in the Philippine market. Which is incorrect with
respect to Mr. Cavite’s business taxation? MR CAVITE PAYS EXCISE TAX IN ADDITION TO VAT
OR PERCENTAGE TAX
9. A person engaged in business is subject to 3% business tax. He has inventories of goods in his
possession costing P77,600 which he intends to sell to earn a mark-up of 25% of cost net of the
3% business tax. He shall invoice the sale of the 77,600 goods at 100,000 (P77,600 x 125%÷
97%)
10. A business wants to male a 10,000 profit from the sale of an inventory costing 30,000. The
business is subject to 3% percentage tax. At what amount shall the business invoice the sale?
P 41,237 ((P30,000 + P10,000) ÷ 97%)
11. A person who imports goods or properties will more likely pay A 12% VAT ON THE
IMPORTATION
12. A person who is not regularly engaged in trade or business made a casual sale of a property for
P100,000. What will be the invoice price of the sale? P100,000
13. Alison is regularly engaged in the sales of goods. He will pay EITHER A OR B (VAT & %TAX)
14. Mr. Ventura is subject to 3% percentage tax. He made a total collection of 206,000 during a
month and paid 103,000 in purchases. Compute his percentage tax. (P206,000 x 3%) = P6,180
15. A business taxpayer purchased goods worth 120,000 from non-residents and sold goods worth
140,000 for 180,000. What is the concept of “value added” for VAT purposes? (P180,000 sales –
P120,000 purchase) not (P180,000 sales – P140,000 cost of sales) = P 60,000
16. In the immediately preceding problem, what is the basis of percentage tax? P 180,000
17. Assuming the same data in the above problem, what is the basis of the VAT on importation? P
120,000
18. Mr. Coroneti imported 300,000 equipment for business use and a 1,200,000 car for personal
use. What is the amount subject to the VAT on importation? (P300,000 + P1,200,000) =
P1,500,000

PROBLEM PART 2

1. A business taxpayer had the following purchases and receipts:

Import of goods or services P 190,000
Domestic purchase of goods or services 100,000
Domestic sales of goods and services 150,000
Export sales of goods or services 50,000
Compute the total amount subject to consumption tax to the business.
(P190,000 importation + P150,000 domestic sales) = P340,000
Note: The domestic purchase is taxable to the seller. Export sales are not subject to consumption
tax
2. In the immediately preceding problem, determine the amount subject to consumption tax if the
taxpayer is not engaged in business
P 190,000
Only the importation is subject to consumption tax since consumption tax on sales (Business tax)
applies only to sellers regularly engaged in business.
3. A VAT-registered taxpayer recorded the following sales and purchases, exclusive of VAT, during
the month:
Sales P 300,000
Purchases 200,000
What would be the output VAT? P300,000 x 12% = P36,000
4. What would be the input VAT? P200,000 x 12% = P24,000
5. What is the VAT payable? P36,000 – P24,000 = P12,000
6. Assuming the taxpayer is a non-VAT taxpayer paying 3% percentage tax, the percentage tax shall
be, P300,000 x 3% = P9,000
7. A business taxpayer recorded the following transactions during the month:

Philippines Abroad Total

Sales P 350,000 P 200,000 P550,000
Purchases 150,000 100,000 250,000
Total P 500,000 P 300,000 P 800,000

Assuming the taxpayer is a VAT-registered taxpayer

Compute the output VAT
P350,000 Philippine sales x 12% = P42,000
8. Compute the VAT on importation
P100,000 purchase from abroad x 12% = P12,000
Assuming the taxpayer is a non-VAT taxpayer
9. Compute the percentage tax.
P350,000 Philippine sales x 3% = P10,500
10. Compute the VAT on importation
same in No. 8 = P 12,000
11. Sindangan Company, a VAT-registered taxpayer, purchased P400,000 worthof goods and sold
the same for P800,000
Assuming that the business operation of Sindangan Company is limited to Philippine residents,
what is the total busines tax it will report on its sales?
P800,000 x 12% VAT = P96,000
12. Assuming that the purchases were imports and the sales were exports, compute respectively
the business tax and total consumption tax.
0% VAT on sales = Business Tax; VAT on importation = 12% x P400,000 = P48,000. Hence, P0
and P48,000
 CHAPTER 2
TRUE OR FALSE

1. The VAT on importation is a business tax. FALSE

2. The final withholding VAT is a business tax. TRUE
3. The VAT on importation is 12% of the value added on importation. FALSE
4. The VAT on importation is 12% of the receipts from the sale of services abroad. FALSE
5. Importation is subject to either VAT or percentage tax. FALSE
6. The final withholding VAT is 12% of the contract price of purchased services from within the
Philippines. FALSE
7. The sale of services abroad is subject to 12% final withholding VAT. FALSE
8. The Vat on importation is paid to the Bureau of Internal Revenue. FALSE
9. The final withholding VAT on services is paid to the Bureau of Internal Revenue. TRUE
10. The importation of any agricultural or marine products is VAT exempt. FALSE
11. The importation of professional instruments and implements is exempt from VAT. TRUE
12. The importation of any product intended for human consumption is VAT-exempt. FALSE
13. The importation of ingredients which are intended for the manufacture of goods for human
consumption is VAT-exempt. FALSE
14. The importation of professional instruments and implements in commercial quantities is VAT-
exempt. FALSE
15. The importation of equipment, machinery and spare parts for marine vessels is VAT-exempt.
TRUE

1. Resident foreigners are not subject to the VAT on importation. FALSE

2. All agricultural or aquaculture inputs are VAT-exempt. FALSE
3. The sale of processed agricultural products is vatable. TRUE
4. The importation of books and newspaper is Vat-exempt. TRUE
5. The importation of life-saving equipment is VAT-exempt. FALSE
6. The lease of aircrafts or vessels from non-residents is exempt from the final withholding VAT.
TRUE
7. The purchase of services from foreign consultants is exempt from final withholding VAT. FALSE
8. The importation of fuel, goods, and supplies by international carriers is VAT-exempt. TRUE
9. The importation of agricultural machineries by farmers is exempt. FALSE
10. The importation of agricultural machineries by agricultural cooperatives is VAT-exempt. TRUE
11. The VAT on importation is payable only by those engaged in business. FALSE
12. The final withholding VAT on importation of services is payable even by those not engaged in
business. FALSE
13. The VAT on importation and the final withholding VAT can be claimed as input Vat creditable
against Output VAT.TRUE
14. In economic reality, the VAT on importation and the final withholding VAT are taxes paid by non-
residents sellers. FALSE
15. Qualified exempt importation is exempt from VAT only if made by an exempt person. TRUE
PROBLEMS
1. Oceanizers, Inc. purchased the following from abroad:
Sea shells and coral décor P320,000
Tuna and salmon 120,000
Total P440,000

What is the amount of taxable importation?

Tuna and salmon are food products in original state = P 320,000

2. Mr. A imported various personal and household effects with a value aggregating P400,000.
P320,000 of these was subjected to a 8% customs duty by the BOC. What is the VAT on
importation?
(P320,000 x 108% x 12%) = P41,472 Note: The 10% customs duties forms part of the VAT base

3. A bookstore company imported the following items:

Landed costs
Books P350,000
Professional instruments 200,000
School supplies 350,000
Total P900,000

What is the total VAT on importation?

(P200,000 prof. instruments + P350,000 school supplies) x 12% = P 66,000

4. Mr. C, a VAT-registered food trailer, imported the following from China:

Landed cost
Fruits P250,000
Vegetables 180,000
Frozen meat 50,000
Marinated milkfish 100,000
Total P580,000

Compute the VAT on importation

all are exempt agricultural food products, except the marinated milkfish which is considered
processed. Hence, P100,000 x 12% = P12,000

5. Alexis Furnitures, a percentage taxpayer, imported the following household equipment:

 Landed cost
Machineries, for business use P1,150,000
Heating system, for home use 250,000
Total P1,400,000

Compute the VAT on importation

P1,400,000 x 12% = P168,000

6. Danes AgriCorp imported the following:

Landed cost
Seeds P400,000
Fertilizers 750,000
Farming equipment 450,000
Herbicides and pesticides 250,000
Total P1,850,000

Compute the VAT on importation

(P450,000 + P250,000) x 12% = P84,000

7. Home appliance company imported the following for personal use:

Furniture P600,000
Rattan 250,000
Lumber 450,000

Compute the VAT on importation

(P600,000 + P250,000 + P450,000) x 12% = P156,000

8. Mr. Huligan imported rice from Vietnam. Details of his importation show the following:

Total invoice value P1,000,000

Freight and insurance in transit 50,000
BOC and other charges 20,000

Compute the VAT on importation

rice is exempt from consumption tax = 0

9. An agricultural supply dealer imported the following:

Corn grits P 200,000

Hog feeds 350,000
 Specialty feeds 300,000

Compute the VAT on importation

(P300,000 x 12%) = P36,000

10. The following data relates to the importation of cigarettes by Mr. Shinto:

Total invoice value P 1,000,000

BOC charges 300,000
Customs duties 200,000
Excise taxes 300,000

Compute the VAT on importation

(P1,000,000 + P300,000 + P200,000 + P300,000) x 12% = P216,000

PROBLEMS 2

1. Don Pepito imported a harvester from the United States with a total cost of P1,100,000 before
Customs duties. The importation is subject to 10% Custom duties. What is the VAT on
importation?
(P1,100,000 x 110%) x 12% = P145,200

2. In the immediately preceding problem, assuming that the importation is made by an agricultural
cooperative, what is the VAT on importation?
exempt if imported by agri-coop = 0

3. Mr. Smile, a professional practitioner, imported the following:

Calculators and computers for his firm P900,000

Books 600,000
Total P1,500,000

How much is subject to VAT on importation?

P900,000

4. Mr. Juan Manuel Marquez arrived in the Philippines with an immigration visa. He had the
following:

Clothing, shoes, and apparel P100,000

 Professional instruments and implements 150,000
Personal car 300,000
Total costs of personal belongings P550,000
Compute the total amount subject to VAT on importation
Only the personal car is subject to VAT = P300,000

5. Mr. Xhi, a non-VAT Taxpayer, made the following domestic purchases of goods:

Purchase of scrap metals from a PEZA-locator P200,000

Purchase of machine from a VAT supplier 800,000

What is the imposable VAT on importation?

(P200,000 x 12%) = P24,000
Note: The P800,000 is a technical importation

6. Atlantis Shipping Company imported P3,000,000 worth of vessel fuels and supplies for domestic
use. The company earmarked 60% of this for domestic use while 40% was reserved for its
international operations.

What is the VAT on importation?

(P3,000,000 x 60%) x 12% = P216,000

7. Mr. Beer, a VAT-registered trader, imported equipment with a dutiable value of $40,000 from
abroad. The importation was subject to P100,000 BOC charges before 10% customs duties on
dutiable value. The exchange rate of peso was P43.00:$1

Compute the VAT on importation

[(P$40,000 x P43/$1) x 110% + P100,000) x 12% = P239,040

8. If an importer paid 15% customs duties in the amount of P24,000 plus P134,000 charges to the
Bureau of Customs, what is the Vat on importation?
Dutiable value (P24,000 / 15%) P 160,000
Customs duties 24,000
BOC charges 134,000
Total P 318,000
Multiply by: 1 2%
VAT on importation P 38,160

9. Shanum Company had the following data regarding its importation:

Invoice price in US dollars $ 12,000
Other costs to bring goods to the Philippines P 145,000
BOC charges 100,000
Customs duties is 10% of dutiable value
Peso-Dollar exchange rate P42.80:$1

Compute the VAT on importation

Purchase cost ($12,000 x P42.80) P 513,600

Other costs 145,000
Total P 658,600
Custom’s duties (P658,600 x 10%) 65,860
BOC charges 100,000
Total landed cost P 824,460
Multiply by: 12%
VAT on importation P 98,935.20
CHAPTER 3

TRUE OR FALSE

1. Once employed, one cannot be considered engaged in business. FALSE

2. All sales by a businessman are considered made in the course of business. FALSE
3. A business involves habitual engagement in a commercial activity. TRUE
4. “Commercial activity” means provision of goods or services to the public for a profit. TRUE
5. To be construed as being engaged in business, one must be employed. FALSE
6. A self-employed individual is engaged in business. TRUE
7. An employee is not engaged in business. TRUE
8. All casual sales of properties are considered not made in the course of business. FALSE
9. The sale of ordinary assets by a business is considered made in the course of business. TRUE
10. The sale of capital assets by a business is also considered made in the course of business being
incidental to business operations. FALSE
11. A business which is not registered is exempt from business taxes. FALSE
12. Government agencies and instrumentalities and non-profit organizations or associations maybe
considered as businesses on their unrelated operations; hence, these are subject to business
tax. TRUE
13. The absence of a profit motive may preclude an activity from being considered as business.
FALSE
14. Government agencies and instrumentalities and non-profit organizations or associations are
generally considered as businesses. FALSE
15. A company director is considered to be engaged in business. FALSE

PART 2

1. Marginal income earners are exempt from both business tax and income tax. FALSE (exempt
from business tax but not to income tax)
2. An employed professional is engaged in business. FALSE (still an employee)
3. Self-employed professionals rendering services to clients are engaged in business. TRUE
4. Agents and brokers are considered as employees; hence, they are not considered engaged in
business. FALSE
5. Consultants and movie artists are not considered engaged in business. TRUE
6. Businesses for mere subsistence are not considered business because they are non-profit. FALSE
(they are for profit but were given exemption due to their too small scale of operation)
7. Businesses for mere subsistence have gross receipts not exceeding P100,000 per year. TRUE
8. The owner of a business for mere subsistence is called a marginal income earner. TRUE
9. A professional, consultant, or artist can qualify as a marginal income earner as long as his
receipts do not exceed P100,000 in any 12-month period. FALSE (professionals cannot qualify
as marginal income earners)
10. A sale made by a non-resident is presumed to be made in the course of business despite
irregularity of sales transactions. TRUE (by revenue regulations)
11. A non-profit organization is subject to business tax on all of its receipts if it engages in activities
subject to business tax. FALSE (Taxable only on unrelated activities)
12. Exemption from income tax means exemption from business tax. FALSE
13. A non-profit organization will be exempt from business tax if it uses the income generated from
activities subject to business tax for non-profit purposes. FALSE (regardless of the disposition
made of such income)
14. An individual, trust, estate, partnership, corporation, joint venture, cooperative or association
will pay business tax. TRUE
15. Only sales outlets are required to pay annual registration fee. TRUE
16. The Certificate of Registration shall be exhibited in a conspicuous place in the principal place of
business. TRUE
17. The husband and the wife are taxable as a single person’ hence, they pay under a consolidated
business tax return. FALSE (spouses are separate business taxpayers)
18. Businesses are required to register in the revenue district office (RDO) which has jurisdiction
over their principal place of business. TRUE
19. Businesses pay an annual registration fee of P1,000. FALSE (P500 not P1,000)
20. Every distinct establishment with or without sales operation shall pay the annual registration
fee. FALSE (only those with sales operation pays the registration fee)

PART 3

1. The term “goods or properties” includes real properties held primarily for sale, lease or use in
the ordinary course of business.
2. The term “goods or properties” includes the right or privilege to use patent, copyright, design,
secret formula, trademark, and other property or right.
3. Businesses are classified as sellers of goods or sellers of services for purposes of business taxes.
4. Sellers of goods are taxable on gross receipts while sellers of services are taxable on gross selling
price.
5. The sale of radio, television, satellite transmission and cable television time are a sale of service
not a sale of goods or properties.
6. Real estate brokerage is considered a sale of goods or properties rather than sale of services.
7. A contractor is a seller of goods or property not a seller of services.
8. Leasing or distribution of cinematographic films is a sale of service.
9. Dealers in securities and lending investors are sellers of goods rather than sellers of services.
10. The sale of electricity by generation, transmission and distribution companies is considered sale
of goods or properties.
11. The term gross selling price excludes taxes on sale.
12. Excise tax is part of the gross selling price.
13. Sales returns and allowances are deductible against gross selling price.
14. Gross selling price includes cash, accounts, and installment sales.
15. Constructive receipts are part of gross receipts.
 16. Constructive receipts are monies which are placed in the control of the seller of services without
restrictions.
17. Only discounts determinable at the point of sale are deductible against gross selling price.
18. The term “gross receipts” includes client or customer advances for unperformed jobs.
19. Gross receipts include only cash received and excludes uncollected income.
20. Promissory notes and other evidence of indebtedness submitted by clients or customers are
part of gross receipts.

True or False: Part 3

1. True
2. True
3. True
4. False
5. False
6. False (brokers are sellers of services)
7. False
8. True
9. False
10. False (sales of service)
11. True
12. True
13. True
14. True
15. True
16. True
17. True
18. True
19. True
20. False (as a rule, except only to life insurers)

PART 4

1. Non-VAT taxpayers pay their quarterly tax in three monthly payments.

2. Loans or agency monies received by the business are part of gross receipts.
3. Receipts that do not redound to the benefit of the taxpayer are not included in gross receipts.
4. There are three types of business taxes: VAT, percentage tax and excise tax.
5. There are two types of business taxpayers: VAT and Non-VAT taxpayers.
6. Normally, VAT and percentage tax are mutually exclusive.
7. Excise tax is an addition to either VAT or percentage tax for businesses manufacturing or
importing excisable articles.
8. The accounting period for business tax is called the taxable year.
9. VAT taxpayers pay their quarterly tax in two monthly and one quarterly payment.
10. The taxable quarters of an individual are patterned after that pf the calendar quarter.
 11. The taxable quarters of a corporation adopting a fiscal year for income tax purposes shall be
synchronized with its fiscal year.
12. Corporations pay quarterly VAT while individuals pay VAT annually.
13. VAT taxpayers use BIR Form 2551 while non-VAT taxpayers use BIR Form 2550.
14. A few percentage taxpayers are required to pay their tax quarterly while most pay their taxes
monthly.
15. Exempt sales will not be subject to VAT or percentage tax.

True or False: Part 4

1. False (quarterly effective January 1, 2018)
2. False
3. True
4. True
5. True
6. True
7. True
8. False (taxable quarter)9
9. True
10. True
11. True
12. False (all VAT taxpayers whether individuals or corporations’ files monthly and quarterly VAT
returns)
13. False (it is the other way around)
14. True
15. True

PART 5
1. Services specifically subject to percentage tax are subject to VAT if not subjected to percentage
tax.
2. Sales from goods or services, other than exempt sales and services subject to percentage tax,
are vatable.
3. The term “vatable sales” means sales automatically subject to VAT.
4. All services specifically subject to percentage tax are taxed at a rate of 3%.
5. All taxpayers with vatable sales or receipts in the past 12-month aggregating P1,919,500 from
whatever type of sales are subject to VAT.
6. A person who wishes to register as a VAT taxpayer despite not meeting the VAT threshold is
called a “registrable person”.
7. The VAT payable is computed as output VAT less 3% percentage tax.
8. If the aggregate sales or receipts from all sources (exempt, specifically subject to percentage tax,
and others) exceed P3,000,000, the person is subject to VAT.
9. Franchise grantees of television or radio broadcasting which exceeded P1,000,000 annual sales
must register as VAT taxpayer.
10. Persons who optionally register as VAT taxpayers can cancel their VAT registration within three
years.
11. Franchise grantees of television or radio broadcasting companies cannot cancel their VAT
registration.
 12. Registrable persons shall be subject to VAT. They shall pay VAT with the benefit of an input VAT
credit plus the percentage tax.

True or False 5
1. False (always percentage tax)
2. True
3. False
4. False (rates vary from ½ of 1% to 30%)
5. False (not all, except those who derives only exempt sales or receipts from services specifically
subject to
percentage tax)
6. False (Registrable person pertains to those who exceed the VAT threshold)
7. False (Output VAT less Input VAT)
8. False
9. False (P10,000,000)
10. False (not within, “AFTER” the 3-year lock-in period)
11. True (they are locked-in forever)
12. False (“without” the benefit)

.
CHAPTER 4
EXERCISE DRILLS
1. Vegetables Exempt
2. Cooked rice Vatable
3. Sundried banana Exempt
4. Canned fish Vatable
5. Fruit shake Exempt
6. Boiled eggs Exempt
7. Fresh fruits Exempt
8. Fresh sea foods Exempt
9. Lumber Vatable
10. Orchids and bonsai Vatable
11. Chicken manure Exempt (fertilizer)
12. Bamboo Vatable
13. Bamboo shoots Exempt
14. Cotton seeds Vatable
15. Cotton Vatable
16. Wheat Exempt
17. Cacao Exempt
18. Cocoa Vatable (processed)
19. Cheese Vatable (processed)
20. Charcoal Vatable (non-food)
21. Furniture Vatable
22. Zoo animals Vatable
23. Tobacco Vatable (non-food)
24. Tea Exempt
25. Aquarium fish Vatable
26. Smoked or dried fish Exempt
27. Canned fish Vatable

TRUE OR FALSE 1
1. The sale of processed agricultural products is vatable.
2. The sale of fruits and vegetables is exempt from business tax.
3. The sale of fertilizers, seeds, and pesticides is exempt from VAT.
4. Exempt sales are exempt from both the VAT and percentage tax.
5. Frozen meat is considered a processed agricultural food product.
6. A fishpond operator is subject to 3% percentage tax.
7. A farmer is subject to business tax on farming occupation.
8. All sales of agricultural or marine food products are subject to business tax.
9. The services provided by agricultural contract growers are vatable.
 10. The employment of chemical treatment to agricultural or marine food products is considered
state altering.
11. The sale of bread is exempt from business tax.
12. The services of an agricultural contract grower are subject to VAT.
13. Restaurants are exempt for VAT.
14. A fruit vendor is exempt from business tax.
15. A manufacturer of canned sea foods is exempt from VAT.

True or False 1
1. True
2. True
3. False (except pesticide)
4. True
5. False
6. False (exempt)
7. False
8. False
9. True
10. True
11. False (processed)
12. False
13. False
14. True
15. False

TRUE OR FALSE 2
1. The transportation services of an international carrier are exempt from VAT.
2. Agricultural cooperatives are exempt from VAT.
3. Electric cooperatives are subject to VAT.
4. The sale of commercial lots where the selling prices do not exceed P1919,500 a unit is exempt.
5. Bookstores are totally exempt from Vat.
6. Schools are subject to VAT.
7. Hospitals are subject to VAT.
8. The export sales by VAT taxpayers are exempt from VAT.
9. The export sales of non-VAT taxpayers are subject to zero-rated VAT.
10. Consultants are exempt from VAT because their services are akin to employment.
11. The leasing residential unit is exempt from VAT if the annual rentals do not exceed P15,000 per
unit.
12. Domestic airliners are exempt from VAT on their transport of passengers.
13. The sale of a residential dwelling by a non-dealer is subject to VAT if the selling price per unit
does not exceed P3,199,200.
14. The sale of an adjacent lot to the same buyer shall be treated as one.
15. The sale of adjacent dwellings to different buyers shall be aggregated as one.

True or False 2
1. True (but is subject to percentage tax)
2. True
3. True
4. True
5. False (generally vatable, except only on their sale of books held as inventory)
6. False
7. False
8. False (subject to 0% VAT)
9. False (exempt from business tax)
10. False
11. False. Monthly rental not annual rental.
12. False
13. False. Non-dealers are not subject to business tax including VAT.
14. True
15. False

THEORIES PART1
1. Which of the following sale is not subject to business tax?
Casual sale of a car by a dealer
2. Which of these pay business taxes?
Gold trader
3. Which is taxable with VAT?
Sale of cotton in original state
4. Which is exempt from business tax?
Meat vendor
5. Exempt sales are not subject to
Neither A nor B (VAT & % tax)
6. All of the following are exempt agricultural procedure, except
Tobacco
7. Which of the following is considered as not in its original state?
Marinated fish
8. Which is exempt from business tax?
Sale of boiled peanuts
9. Which of the following sale is exempt from business tax?
Sale of palay
10. The sale of this agricultural or marine product is exempt from business tax
Mackerel
11. Which of the following establishments may qualify for exemption from business tax?
Boarding house
12. Which of the following is least likely subject to VAT?
Corn grits
13. The sale of which of the following is exempt from business tax?
Boiled eggs
14. The sale of this agricultural supply is exempt from business tax
Fertilizer
15. Which is subject to VAT when sold?
None of these
16. Which is not exempt from business tax?
Miller of sugar cane into refined sugar
17. Which is exempt from business tax?
Agricultural contract growers
18. Which of the following transactions is not subject to business tax?
Sale of genetic materials for poultry
19. Which of the following animals is not considered as a pet?
Livestock
20. Which of the following sales is not exempt from business tax?
Sale of pets, sale of processed marine foods, sale of unprocessed non-food agricultural
products

PART 2
1. Which is subject to business tax?
None of these
2. Which is not subject to business tax?
A purely employed professional
3. All of these pay business tax, except
Employee
4. Which of the following pays business tax?
Regional operating headquarters
5. Which is exempt from business tax?
None of these
6. Which is an exempt medical service?
Hospital services
7. The gross receipts or sales of the hospital from which of the following sources is not exempt
from business tax.
Medicines
8. Which of these is exempt from business tax?
Both A and B
9. Which of these is subject to business tax?
Sales or lease of sea vessels for international transport
10. Which is exempt from business tax?
All of these (Private school, government, and non-profit school)
11. Which of these receipts by a school is more likely to be subject to business tax?
Rent income
12. Which of the following items is exempt from business tax?
Sale of ballpen and notebooks
13. Which is not an accrediting agency for a school to be exempt from business tax?
Department of Health
14. Which of the following activities related to books is exempt from business tax?
All of these (printing, sale, publication)
15. Which of the following statements is correct?
The sale of property held for sale, lease or use in the course of business is subject to tax.
16. The sale of real property by a person not engaged in business is
Exempt from business tax
17. Which of the following may not be subject to business tax when sold?
Property held as investment
18. What is the price limit for the exemption of residential lot?
P1,919,500
19. What is the price limit for the exemption of residential dwellings?
 P3,199,200
20. The lease of residential units is exempt from business tax provided that rent per month per unit
is
Less than P15,000 (not more than)

PART 3
1. Realty dealers, developers or lessors are usually registered as
VAT taxpayers
2. Which of these is vatable?
Properties classified as ordinary assets
3. Which is exempt under certain price conditions?
All of these
4. The rental limit on residential dwellings does not apply to
Motels
5. Which carrier has an exemption form business tax?
International carrier
6. An international carrier is not involved in
Land transport
7. An international carrier is owned by a
Foreign corporation
8. Which of the following activities by any carrier is a foreign consumption exempt from Philippine
business tax for being rendered outside the Philippines?
Inbound transport of passengers and baggage to the Philippines
9. The receipts from outgoing transport of domestic carrier is
Subject to zero percent VAT
10. To an international carrier, the receipts from inbound flights is
Exempt
11. Statement 1: cooperatives are generally subject to VAT
Statement 2: cooperatives are generally subject to percentage tax
Which is correct? NEITHER STATEMENT
12. The sale by non-VAT registered persons to entities in the Philippines with indirect tax exemption
is considered
A foreign consumption exempts from business tax.
13. As a rule, all cooperatives are exempt from business tax, except
Electric cooperatives
14. Which of these entities do not have indirect tax exemption?
Development Bank of the Philippines (DBP)
15. The export sales of non-VAT taxpayers are
Exempt

PROBLEMS 1
1. A seller of goods had the following details of sales and collection during the month:
Receivables, beginning P200,000
Gross sales 400,000
Less: Collection 500,000
Receivables, end P100,000

What is the amount subject to business tax?

 P400,000

2. In the immediately preceding problem, determine the amount subject to business tax if the
taxpayer is a seller of services.
P500,000

3. A farm supply dealer made the following sales during a month:

Fertilizer P 45,000
Hybrid corn and rice seeds 65,000
Pesticides 120,000
Water pumps and hand tractors 240,000
Total P470,000

Compute the sales subject to business tax.

Pesticides and water pump are taxable.
120,000 + 240,000 = P360,000

4. Mang Andrew is a meat vendor. He purchases live hogs from piggery operators, butchers the
hogs, and sells their meat in a public market.
In January 2020, Mang Andrew purchased 12 live hogs for P180,000 from Mang Manso and sold
these to customers for P320,000

Which statement is correct?

Neither Mang Manso nor Mang Andrew shall pay business tax.

5. A farmer sold the following goods in March:

20 sacks rice P45,000
100 sacks corn 90,000
Total P135,000

Determine the gross selling price subject to a business tax

All are agricultural food products (exempt) = 0