April 15, 1959

BIR RULING NO. 270-59

Tax Service of the Philippines

Floor Three, MRS Building
Plaza Cervantes
Manila

Gentlemen :

Reference is made to your letter dated October 14, 1958 stating the following:
cdphil

"A client of ours manufacture window frames for sale to owners of

house and buildings under construction, building contractors and other persons.
There are cases where our client accepts orders to manufacture window frames
and to install the same in large office buildings under construction or in old
buildings to replace the old windows. There are standard prices per square foot
ex factory. If the purchasers desire to have the frames delivered, the invoice
price includes an additional charge for delivery. Where our client is engaged to
install the window frames sold by him, there is a separate charge for
installation, in which case, two invoices are issued: one covering the sales price
plus delivery charges, and the other, covering the service charge for
installation."

You now pose the question of whether your client, in those cases where the
contract of purchase and sale includes installation, shall pay the sales tax on the total
amount comprising the sales price of the window frames, the charge for delivery, and
the service charge for installation or on only the sales price plus delivery charge, and
the contractor's tax on the service charge for installation.

In reply thereto, I have the honor to inform you as follows:

The question of whether expenses for the transportation, cartage, insurance

premiums, etc. form part of the selling price of the articles depends entirely upon the
place where title to the articles passes from the vendor to the vendee. If the sale is
effected at the place of the vendee, that is, if title to the articles passes from the
vendor to the vendee at the place of the latter, the said expenses form part of the

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 selling price although the expenses were charged to the vendee. All expenses up to
the passing of title form part of the selling price; those after passing of title are not.
(Arañas Annotations and Jurisprudence on the National Internal Revenue Code as
amended, Vol. II, p. 292). Accordingly, if the sales contract had by your client with
his customers call for delivery at the latter's places, the expenses of delivery form part
of the selling price even if charged to the customers.

Where the sales contract calls for the delivery and installation of the window
frames, the costs of delivery and installation forms part of the gross selling price. We
do not subscribe to your view that the installation of the window frames in such case
is a separate contract distinct from the sale thereof. To our mind the installation is,
aside from being a mere incident of the sales contract, part and parcel thereof. We
must take cognizance of the fact that there are various commodities of commerce
which require the rendition of service by the seller in connection with the sale thereof.
The sale of big machineries for instance, as well as such appliances as refrigerators,
electric ranges, and air-conditioning units, to cite a few, ordinarily includes
installation because the buyers of such articles are not in a position to effect the same.
As a matter of fact, this Office had consistently held that in case of sales which
requires installation, the cost of installation forms part of the selling price. In view
thereof, it becomes unnecessary for us to discuss the question of whether or not your
client, for services of installation, is subject to tax under section 191 of the National
Internal Revenue Code. cd

Very truly yours,

(SGD.) JOSE ARAÑAS

Commissioner of Internal Revenue

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