University of Perpetual Help System laguna – Isabela Campus

Minante 1, Cauayan City, Isabela

College of Business and Accountancy

Business Taxation
nd
2 Semester, A.Y. 2017 - 2018

Name: ________________________________________ Date: ___________

Course Year & Section: _____________________ Score: __________
Midterm Quiz 2

(Erasure/Alteration means wrong)

I. MODIFIED TRUE OR FALSE. Underline True if the statement is correct. If wrong, underline
the incorrect word/s.

1. A small business enterprise with a gross receipts of not exceeding 1.5 million may be taxed
at 12% (VAT) or 3 % (non-vat) at the option of the taxpayer.
True

2. Clubs and caterers are subject to amusement tax.

True

3. A radio station with an annual gross receipts of 2,000,000 but voluntarily subjects itself to
VAT can never cancel its registration and revert back to Franchise Tax even if it later on
decides to abandon VAT.
True

4. Taxpayers which are subject to other percentage taxes are generally required to file its tax
return within 20 days after the end of each month.
True

5. The sale of listed and traded shares of stocks after the initial public offering is exempt from
business tax.
True

6. The 30% amusement tax on jai alai has been abolished when the fronton has been ordered
closed by the government.
True

7. Pedicab (padyak) operators, being engaged in the carriage of passengers, are subject to
common carriers tax.

Page 1 of 6
 True

8. The term “gross annual sales” has no relation to profit; it means actual sales without
deduction of expenses.
True

9. The term “gross annual sales” includes cash sales and credit sales less sales returns,
allowances and discounts
True

10. When the restaurant is maintained within the premises or compound of a night club, the
gross sales of such restaurant is subject to VAT.
True

11. The gross sales of a bar inside a passenger ship is subject to amusement tax of 18%.
True

12. Service charge which nightclubs collect from their customers, and represented as charges in
lieu of cash tip to the employees are included in the term “gross receipts” which are subject
to amusement tax.
True

13. If there are vending machines installed by coca-cola inside the premises of race tracks, the
sales affected in the vending machines shall be subject to Amusement tax of 30%.
True

14. The gross receipts of a bank which operates a canteen where foods are served at subsidized
prices exclusively to its employees is subject to Tax on banks notwithstanding the fact that
the canteen is operated on a non-profit basis.
True

15. A private carrier which undertakes to deliver goods at a particular place without being bound
in law to undertake such transportation and does not bind himself out to the public is subject
to 3% common carriers’ tax.
True

16. The commission of bus drivers and conductors are not deductible in computing gross
receipts.
True

17. Trimobiles are not covered by the minimum monthly gross receipts on common carriers.
True

18. When preferred shares are redeemed for cancellation or retirement when the corporation is
still in its “going concern” the capital gain shall be subject to regular income tax rates.
Page 2 of 6
 True

19. The wash sale provision does not apply in the case of dealer in stock if the sale or other
disposition of stock is made in the ordinary course of business of such dealer.
True

20. Amounts paid for messages transmitted by an Embassy to their own country are exempt from
Overseas Communication Tax.
True

21. The 5% Premium Tax on insurance company is based on gross premiums received less
returned premiums and reinsurance premiums ceded.
True

22. The gross receipts of a cabaret does not include the dance fee that is charged by cabaret as
compensation for its “bailarinas”.
True

23. The stock transaction of ½ of 1% is payable by the seller of the stocks even if he suffers loss
on the sale.
True

24. For purposes of IPO tax, the term “closely held corporation” means any corporation at least
50% in value of the outstanding capital stock or at least 50% of the total combined voting
power of all classes of stock entitled to vote is owned directly or indirectly by or for not more
than five individuals.
True

25. Excise tax as a classification of tax is the same as the excise tax on business.
True

II. MULTIPLE CHOICE. Choose the best answer. Encircle the letter of your choice. Show your
solutions. For questions with no choices, write your answer.

1. Tin is the owner of a small grocery store with gross sales in any one year period that do not
exceed 1,500,000. She is not a VAT registered taxpayer. She submits the following data for the
month of January, 2008.

Merchandise Inventory, Dec 31, 2007 123,450

Gross sales 67,800
Purchases from VAT registered suppliers 156,980

The percentage tax due is

Page 3 of 6
2 to 4
Rustico owns a small eatery near a trimobile parking area. Its annual gross receipts range from 400,000
to 450,000. In January, the gross receipts amounted to 27,500 while purchases of goods subject to VAT
is 6,000 and not subject to VAT, 13,000.

2. If Rustico is not a VAT registered taxpayer, his percentage tax due for the month is

3. Assuming that rustico is a VAT registered taxpayer and the amounts indicated are exclusive of
VAT, the VAT due is

4. Gadil operates 2 pedicabs, 2 passenger jeepneys plying the route Divisoria-Morayta in Manila,
and three cargo trucks. The gross receipts for the month are:

Jeepney No. 1 22,000 Truck No. 7,250

1
Jeepney No. 2 23,300 Truck No. 8,500
2
Pedicab No. 1 800 Truck No. 14,000
3
Pedicab No. 2 1,000

The percentage tax due on Gadil is

5. Malakas owns two passenger buses. Each bus has a seating capacity of 45 passengers. The buses
ply the route Naga City to Legaspi City, and vice versa. During the month, he decided to stop the
operation of one unit to undergo two weeks engine overhaul. Thus, his total gross receipts during
the month amounted to 110,000 only. Malakas is-

A. Subject to income tax but exempt from percentage tax

B. Subject to value-added tax if the gross annual receipts exceed 1,500,000.
C. A marginal income earner and therefore, exempt from common carrier’s tax and VAT
D. Subject to common carrier’s tax of 3,300
Page 4 of 6
6 to 8
Salawahan Transport Company is a transportation contractor. During the month, it had the following
gross receipts:

From transport passengers 485,000

From transport cargo 220,000
From rental of its cargo-trucks to individual lessees 33,000
From rental of its “rent-a-car” tp balikbayans (with chauffer 30,000

Payments to VAT registered persons during the month amount to 99,000.

6. The percentage tax due is

7. Assuming that the amounts given do not include the tax, the VAT due is-

8 to 9
Love Bus Company operates 10 units of buses. During the month, it had the following data in its books:

Receipts from passengers 2,000,000

Receipts from cargoes 500,000
Receivable from transport of passengers 15,000
Receivable from transport of cargoes 5,000
Payments for repair of transport units 30,000
Salaries of personnel 300,000
Purchase of spare parts 60,000
Registration with LTO 10,000
Premiums on insurance 15,000

8. How much is the percentage tax payable

Page 5 of 6
9. How much is the VAT payable

10. Common Carrier 1 : Domestic sea or air carriers for passengers or cargoes.
Common Carrier 2 : International sea or air carriers for passenger or cargoes.

What is the respective business tax rate on the common carriers identified above if they travel
from the Philippines to a foreign country?

Common Carrier 1 Common Carrier 2

A. 0% 3%
B. 3% 3%
C. 0% 0%
D. 12% 3%

Page 6 of 6