CHAPTER 3

True or False – Part 1

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.
True 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.
False 5. To be construed as being engaged in business, one must be employed.
True 6. A self-employed individual is engaged in business.
True 7. An employee is not engaged in business.
False 8. All casual sales of properties are considered not made in the course of the business.
True 9. The sale of ordinary assets by a business is considered made in the course of business.
False 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.
True 12. Government agencies and instrumentalities and non-profit organizations or associations
may be considered as businesses on their unrelated operations; hence, these are subject to
business tax.
False 13. The absence of 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.

True or False – Part 2

False 1. Marginal income earners are exempt from both business tax and income tax.
False 2. An employed professional is engaged in business.
True 3. Self-employed professionals rendering services to clients are engaged in business.
False 4. Agents and brokers are considered as employees; hence, they are not considered engaged
in business.
True 5. Consultants and movie artists are considered engaged in business.
False 6. Businesses for mere subsistence are not considered business because they are non-profit.
True 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.
False 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.
True 10. A sale made by a non-resident is presumed to be made in the course of business despite
irregularity of sales transactions.
False 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 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.
True 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 the annual registration fee.
True 16. The Certificate of Registration shall be exhibited in a conspicuous place in the principal
place of business.
False 17. The husband and the wife are taxable as a single person; hence, they pay under a
 consolidated business tax return.
Note: Spouses are separate business taxpayers.
True 18. Businesses are required to register in the revenue district office (RDO) which has
jurisdiction over their principal place of business.
False 19. Businesses pay an annual registration fees of P1,000.
False 20. Every distinct establishment with or without sales operation shall pay the annual
registration fee.

True or False – Part 3

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

True or False – Part 4

False 1. Non-VAT taxpayers pay their quarterly tax in three monthly payments.
False 2. Loans or agency monies received by the business are part of gross receipts.
True 3. Receipts that do not redound to the benefit of the taxpayer are not included in gross
receipts.
True 4. There are three types of business taxes: VAT, percentage tax and excise tax.
True 5. There two types of business taxpayers: VAT and non-VAT taxpayers.
True 6. Normally, VAT and percentage tax are mutually exclusive.
True 7. Excise tax is an addition to either VAT or percentage tax for businesses manufacturing or
importing excisable articles.
False 8. The accounting period for business tax is called the taxable year.
Note: Taxable quarter.
True 9. VAT taxpayers pay their quarterly tax in two monthly and one quarterly payment.
True 10. The taxable quarters of an individual are patterned after that of the calendar quarter.
True 11. The taxable quarters of a corporation adopting a fiscal year for income tax purposes shall
be synchronized with its fiscal year.
False 12. Corporations pay quarterly VAT while individuals pay VAT annually.
Note: All VAT taxpayers whether individuals or corporations files monthly and quarterly VAT
returns.
False 13. VAT taxpayers use BIR Form 2551 while non-VAT taxpayers use BIR Form 2550.
Note: It is the other way around.
True 14. A few percentage taxpayers are required to pay their tax quarterly while most pay their
taxes monthly.
True 15. Exempt sales will not be subject to VAT or percentage tax.

True or False – Part 5

False 1. Services specifically subject to percentage tax are subject to VAT if not subjected to
percentage tax.
Note: Always subject to percentage tax.
True 2. Sales from goods or services, other than exempt sales and services subject to percentage
tax, are vatable.
False 3. The term “vatable sales” means sales automatically subject to VAT.
False 4. All services specifically subject to percentage tax are taxed at a rate of 3%.
Note: Rates vary from ½ of 1% to 30%.
False 5. All taxpayers with vatable sales or receipts in the past 12-mpnths aggregating P1,919,500
from whatever type of sales are subject to VAT.
Note: Not all, except those who derives only exempt sales or receipts from services
specifically subject to percentage tax.
False 6. A person who wishes to register as a VAT taxpayer despite not meeting the VAT threshold is
called a “registrable person.”
False 7. The VAT payable is computed as output VAT less 3% percentage tax.
False 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.
False 9. Franchise grantees of radio or television broadcasting companies which exceeded
P1,000,000 in annual sales must register as VAT taxpayer.
False 10. Persons who optionally register as VAT taxpayers can cancel their VAT registration within
three years.
True 11. Franchise grantees of television or radio broadcasting companies cannot cancel their VAT
 registration.
False 12. Registrable persons shall be subject to VAT. They shall pay VAT with the benefit of an input
VAT credit plus the percentage tax.

Multiple Choice – Theory: Part 1

1. Which of the following entities below is not considered as a business?
a. A sari-sari store with P500,000 annual sales
b. A news stand with sales exceeding P100,000
c. A cigarette vendor with sales not exceeding P100,000
d. An employed professional earning part-time self-employment income not exceeding P100,000

2. Which of the following is not considered as engaged in business?

a. A purely self-employed individual
b. A self-employed and employed individual
c. A purely employed individual
d. A and B

3. Which of the following is not subject to business tax even if made by a registered business?
a. Sale of goods
b. Sale of services
c. Sale of properties considered as ordinary assets
d. Sale of properties considered as capital assets

4. Which is not engaged in business?

a. A corporate director
b. A broker
c. An agent
d. A security dealer

5. Which of these is least likely to be subjected to business tax?

a. Sale of stocks held as inventory
b. Sale of bonds held as inventory
c. Sale of stocks held as investment
d. None of these
6. Which is considered engaged in business even if not regularly engaged in trade?
a. A non-resident seller who exports to the Philippines
b. An importer who imports goods into the Philippines
c. A seller who makes a one-time sale of real property
d. Any seller who sells goods or services at a price above P100,000 during the year

7. Which of the following are considered engaged in business?

A. Government agencies
B. Non-profit organization
C. Sales agents
D. Consultants
 a. A and B
b. C and D
c. B and C
d. None of these

8. Which of these is always presumed to be made in the course of business; hence, it is subject to
business tax under the regulations?
a. Export sales
b. Importation
c. Domestic sales
d. All of these

9. The business tax on exempt sales is

a. VAT
b. Percentage tax
c. A or B
d. None of these

10. The consumption tax on importation is

a. VAT
b. Percentage tax
c. A or B
d. None of these

11. The consumption tax on domestic sales is

a. VAT
b. Percentage tax
c. A or B
d. None of these
12. The business tax on services specifically subject to percentage tax is
a. VAT
b. Percentage tax
c. A or B
d. None of these

13. Which is more likely to qualify as a marginal income earner?

a. Artist
b. Consultant
c. Sales agent
d. Operator of a single unit tricycle

14. Statement 1: Sellers of goods are subject to percentage tax.

Statement 2: Sellers of services are subjected to VAT.
Which statement is correct?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement

15. Statement 1: Both the husband and the wife are subject to either VAT or percentage tax.
Statement 2: The husband may pay VAT while the wife may pay percentage tax.
Which statement is false?
a. Both statements
b. Neither statement
c. Statement 1 only
d. Statement 2 only

16. Statement 1: An employed taxpayer will pay an annual registration fee.

Statement 2: A self-employed taxpayer will pay an annual registration fee.
Which statement is correct?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement

17. The term “gross selling price” excludes

a. The contract price of the goods sold
b. Discounts which are contingent upon future events
c. Delivery charges
d. Sales returns and allowances
18. The term “gross receipts” excludes
a. Reimbursements for customer expenses paid by the service provider
b. Reimbursements for out-of-pocket expenses incurred by the service provider
c. Advances made by the client for services yet to be rendered
d. Cash collections for services rendered

19. Which is not a constructive receipt?

a. Bank deposits made available to the service provider without restriction
b. Transfer of amounts retained by the payor to the account of the contractor-service provider
c. Judicial consignation by the payor of the contract price which the service provider wishes to
donate to the payor
d. Collection of revenue for past services rendered

20. Which is part of gross receipts?

a. Amounts received which will be remitted to other persons
b. Receipt of notice from a debtor to offset the consideration of the service for the debt of the
service provider
c. Receipt from bank loans
d. Receipt from issuance of stocks or issuance of certificates of indebtedness

Multiple Choice – Theory: Part 2

1. A non-VAT registered service provider shall pay
a. 3% percentage tax on its gross receipts
b. 12% VAT on its value added
c. 12% VAT on its export sales or receipts
d. 3% percentage tax on its export sales

2. Which must be present to construe the existence of a business?

a. Regularity of transaction
b. Offering of services or goods to the public for a profit
c. Actual presence of profit during the period
d. Both A and B

3. A person who made a one-time or casual sale of properties is

a. Exempt from business tax.
b. Subject to percentage tax.
c. Subject to value added tax.
d. Subject to either percentage tax or value added tax.
4. A VAT-registered persons hall pay
a. 3% percentage tax and VAT
b. 12% VAT on its sales or receipts
c. 12% VAT on its value added
d. 12% VAT on its export sales

5. Who are subject to VAT?

a. Those who optionally register as VAT taxpayers.
b. Those who are mandatorily required to register as VAT taxpayers.
c. Those who are registrable to VAT.
d. Any of these.

6. Who are not required to register to the VAT system?

a. Those who are below the VAT threshold
b. Those whose only sales are exempt sales
c. Those who only derive receipts from services specifically subject to percentage tax
d. Any of these

7. A non-VAT registered seller of goods shall pay

a. 3% percentage tax on its gross receipts
b. 12% percentage tax on its value added
c. 3% percentage tax on its sales
d. 3% percentage tax on gross receipts

8. A VAT-registered seller of goods shall be subject to

a. 12% output VAT on sales
b. 12% output VAT on gross receipts
c. 3% percentage tax on sales
d. 3% percentage tax on gross receipts

9. Who is entitled to claim (deduct) input VAT against output VAT?

a. VAT registered persons only
b. VAT registrable persons only
c. Non-VAT registered persons
d. All of these

10. Who pays percentage tax?

a. Those who exceed the VAT threshold and opt to be register as non-VAT
b. Those who did not exceed the VAT threshold but are registered as VAT taxpayers
c. Only those service providers specifically subject to percentage tax
d. Those providers of services specifically subject to percentage tax and those whose sales or
receipts in any 12-month period are below the VAT threshold.
11. When the receipts from services specifically subject to percentage tax exceeds the VAT threshold,
future receipts from these services are
a. exempt from percentage tax.
b. still subject to the same percentage tax.
c. subject to VAT.
d. subject to 3% percentage tax.

12. A VAT-registered person who did not exceed the VAT threshold will pay
a. VAT
b. Percentage tax
c. Both A and B
d. Either A or B at his discretion

13. Once the vatable sales or receipts exceed the VAT threshold, future monthly sales from vatable sales
or receipts shall be subject to
a. 3% percentage tax.
b. Percentage taxes of various rates.
c. 12% VAT
d. 0% VAT.

14. A marginal income earner shall pay

a. 3% percentage tax.
b. 12% VAT.
c. Either A or B
d. Neither A or B

15. The export sales of VAT-registered taxpayers are

a. Subject to zero-rated VAT.
b. Exempt from business tax.
c. Subject to 12% VAT.
d. Subject to 3% percentage tax.

16. The export sale of non-VAT registered taxpayers are

a. Subject to zero-rated VAT.
b. Exempt from business tax.
c. Subject to 12% VAT.
d. Subject to 3% percentage tax.
17. A non-VAT person with exempt sales exceeding the VAT threshold is still
a. Exempt from business tax on exempt sales
b. Exempt from VAT on all its sales
c. Exempt from percentage tax on all sales
d. A and B

18. A VAT-registered person who exceeded the VAT threshold will pay
a. VAT
b. Percentage tax
c. Both A and B
d. Either A or B at his discretion

19. A non-VAT registered person who exceeds the VAT threshold shall pay
a. VAT
b. Percentage tax
c. Both A and B
d. Either A or B at his discretion

20. A non-VAT registered person who did not exceed the VAT threshold shall pay
a. VAT
b. 3% percentage tax
c. Percentage tax at various rates
d. Either A or B at his discretion

21. What is the general VAT threshold?

a. P1,919,800
b. P1,919,500
c. P3,000,000
d. P10,000,000

22. Which is a special VAT threshold?

a. P1,919,800
b. P1,919,500
c. P3,000,000
d. P10,000,000

23. The mandatory or voluntary registration as VAT taxpayers under the special threshold is
a. revocable anytime.
b. revocable after the lapse of three years.
c. revocable within a year.
d. perpetually irrevocable.
24. Mandatory or voluntary registration as a VAT taxpayer under the general threshold is
a. revocable anytime.
b. revocable after the lapse of three years.
c. revocable within a year.
d. perpetually irrevocable.

25. The VAT registration upon commencement of operation based upon expectation of exceeding the
VAT threshold shall be
a. revocable anytime.
b. revocable after the lapse of three years.
c. revocable within a year if sales do not actually exceed the VAT threshold.
d. perpetually irrevocable.

Multiple Choice – Problems 1

1. Mrs. Belle, self-employed, generated the following receipts during the year:
Proceeds of health insurance 300,000
Receipts from business advisory services 250,000
Receipts of rentals from boarding house 100,000

What is the total amount subject to business tax?

a. P150,000
b. P250,000
c. P350,000
d. P650,000

2. A person engaged in business sold the following properties:

Sales of goods held for sale 200,000
Sale of personal residence 2,000,000
Sale of personal car 500,000

Compute the sales in the course of business subject to business tax.

a. P0
b. P200,000
c. P2,200,000
d. P2,700,000
3. Mr. Julio, employed, received the following from his employer:
Proceeds of property insurance 200,000
Proceeds of bank loan 300,000
Compensation income 500,000

What is the amount subject to business tax?

a. P0
b. P200,000
c. P300,000
d. P500,000

4. Mr. Jun Kim, a security broker, effected the sales of several securities of Kim Jong-un. The following
relates to the sale:
Sales Commission
Sale of stocks 120,000 1,200
Sale of bonds 280,000 2,800
Total 400,000 4,000

Compute the amount of receipts or sales of Mr. Jun Kim subject to business tax.
a. P0
b. P4,000
c. P400,000
d. P404,000
Note: The sale do not pertain to the broker because the securities sold are not his inventories

5. Assuming Kim Jong-un is an investor in stocks, what is the amount subject to business tax?
a. P0
b. P4,000
c. P400,000
d. P404,000
Note: An investor is not subject to a business tax. Only dealer of securities (those engaged in buy-
and-sell of securities) are subject to business tax.
6. Mr. Masipag had annual gross receipts not exceeding P100,000. During the month, he made the
following sales:
Sale of car rugs 2,000
Sale of cigarettes 3,000
Sale of candies 3,000
Total 8,000

Compute the total amount subject to business tax.

a. P0
b. P2,000
c. P5,000
d. P8,000
Note: Mr. Masipag is a marginal income earner who is exempt from business tax.

7. Mr. Kim Jong, a security dealer, sold the following during the month:
Sale of securities for own account 400,000
Commission income on sale of securities of clients 36,0000
Sale of vacant lot held as investment 1,000,000

What is the amount subject to business tax?

a. P0
b. P36,000
c. P436,000
d. P1,436,000
Note: The sale of lot held as investment (a capital asset) is not a business sale.

8. A non-stock charitable organization realized the following during the month:

Membership contributions 300,000
Donation from various donors 400,000
Sale of souvenirs 200,000

Compute the amount subject to business tax.

a. P0
b. P200,000
c. P500,000
d. P900,000
Note: The sale of souvenir is commercial in nature, hence subject to business tax.
9. JDC Corporation, a merchandiser, had the following sales during the month.
Sale of merchandise 200,000
Commission income from consignors 50,000
Sales of stocks investments 180,000
Compute the amount subject to business tax.
a. P200,000
b. P250,000
c. P380,000
d. P430,000
Note: The sale of investment (a capital asset) is not subject to business tax.

10. Mang Indio has a sari-sari store with P500,000 annual sales. He had the following sales during the
month:
Sale of various merchandise 30,000
Cash donated by his brother 200,000
Cash from proceeds of bank loan 300,000

Compute the amount subject to business tax.

a. P0
b. P30,000
c. P230,000
d. P530,000

11. Mr. McCullot is a consultant. During the month, he had only one client from which he derived the
following receipt:
Professional fees 150,000
Less: Withholding tax 7,500
Net amount received 142,500

What is the amount subject to business tax?

a. P0
b. P7,500
c. P142,500
d. P150,000
Note: The creditable income tax is not deductible against gross receipts.

12. Mang Pandong is a farmer. He sold his agricultural land costing P200,000 for P1,000,000 to start a
palay trading business. What is the amount subject to business tax?
a. P0
b. P200,000
c. P800,000
d. P1,000,000
Note: Mang Pandong is not engaged in the realty business.
13. Ms. Cumacaliua is concurrently employed at Cumanan Corporation and Paatras Company. She
received the following during the month:
Cumanan Paatras
Professional fees 50,000 40,000
Less:
Creditable withholding tax 7,000 6,000
Loan repayment - 12,000
SSS, PhilHealth, HDMF 3,000 -
Net pay 40,000 22,000

Compute the amount subject to business tax.

a. P0
b. P62,000
c. P77,000
d. P90,000
Note: Fees received under an employer-employee relationship is compensation income, not business
income. Hence, exempt from business tax)

14. Effective 2019, Kanlaon Corporation, a VAT-taxpayer, changed its accounting period to a fiscal year
ending every August 30. What is the deadline for the first quarter VAT return under the new
accounting period?
a. September 25, 2019
b. January 25, 2020
c. November 25, 2019
d. December 25, 2019
Note: The first quarter now ends every November 30, 2019; hence, the deadline of the quarterly VAT
return is December 25, 2019.

15. In the immediately preceding problem, the third quarterly VAT return shall be filed on or before
a. May 20, 2020
b. May 25, 2020
c. June 20, 2020
d. June 25, 2020
Note: The third quarter ends May 31, 2020; hence, the deadline of the quarterly VAT return shall be
June 25, 2020.
Multiple Choice – Problems 2
1. Jackpruit, a seller of goods, had the following transactions in January 2020:
Cash sales 200,000
Credit/Installment sales (40% collected) 300,000
Sales returns and allowances 40,000
Freight-out charged to customers 20,000

What is the amount subject to business tax?

a. P0
b. P460,000
c. P480,000
d. 500,000
Note: (200,000 + 300,000 – 40,000 + 20,0000)

2. Atty. Saturday Sabado and Atty. Sunday Domingo formed a general professional partnership for the
exercise of their legal profession. Their partnership Sabado-Domingo Law Office started operation on
July 1, 2002 as a VAT taxpayer. The partnership adopted the calendar year basis.

The professional partnership shall file its first monthly VAT return on
a. July 20, 2020
b. July 10, 2020
c. August 20, 2020
d. August 30, 2020
Note: 20th day from the end of the month

3. In the immediately preceding problem, what is the deadline of the first quarterly VAT return?
a. July 30, 2020
b. August 30, 2020
c. August 25, 2020
d. October 25, 2020
Note: The calendar quarter ends September 30, 2020, the deadline of the quarterly VAT return is
October 25, 2020.
4. A service provider had the following income during the month:
Fees, paid in cash and checks 80,000
Fees, paid in notes 150,000
Advances by clients for future services 20,000
Reimbursement for out-of-pocket expenses 40,000
Reimbursement for client expenses 20,000
Total 330,000

Compute the amount subject to business tax.

a. P350,000
b. P250,000
c. P160,000
d. P140,000
Note: (80,000 + 20,000 + 40,000)

5. A taxpayer had the following sales or receipts in the past twelve months:
Exempt sales 1,500,000
Services subject to percentage tax 400,000
Other sales 800,000
Total 2,700,000

Which is correct?
a. The taxpayer is subject to VAT on all sales.
b. The taxpayer is subject to VAT on taxable sales other than exempt sales.
c. The taxpayer is subject to percentage tax on taxable sales other than exempt sales.
d. The taxpayer is subject to percentage tax on all sales.

6. Kudarat Company had the following sales and receipts data in the past twelve months:
Exempt sales 200,000
Services subject to percentage tax 400,000
Other sales 2,000,000
Total 2,600,000

Which is correct?
a. The taxpayer is subject to VAT on other sales.
b. The taxpayer is subject t VAT on taxable sales other than exempt sales.
c. The taxpayer is subject to percentage tax on taxable sales other than exempt sales.
d. The taxpayer is subject to percentage tax on all sales.
7. The following data pertain to a business taxpayer during a quarter:
January February March
Revenue (Sales) 200,000 240,000 230,000
Cash collections 180,000 240,000 220,000

Which of these properly reflect the reporting of a non-VAT service provider?

January February March
a. P170,000 P240,000 P640,000
b. P0 P0 P640,000
c. P180,000 P240,000 P220,000
d. P0 P0 P670,000
Note: Service providers are subject to tax on receipts. Non-VAT taxpayers are not subject to quarterly
filing.

8. Which of these properly reflect the reporting of a non-VAT seller of goods?

January February March
a. P0 P0 P670,000
b. P200,000 P250,000 P220,000
c. P170,000 P240,000 P640,000
d. P200,000 P240,000 P230,000
Note: Sellers of goods are subject to tax on sales.

9. Which of these properly reflect the reporting of a VAT service provider?

January February March
a. P180,000 P240,000 P640,000
b. P200,000 P250,000 P220,000
c. P170,000 P240,000 P640,000
d. P200,000 P250,000 P670,000
Note: VAT taxpayers are subject to quarterly filing.

10. Which of these properly reflect the reporting of a VAT seller of goods?
January February March
a. P170,000 P240,000 P230,000
b. P200,000 P240,000 P670,000
c. P170,000 P250,000 P640,000
d. P200,000 P250,000 P230,000
11. Mrs. Bote sells cakes to jeepney drivers who patronize her hot and sweet cakes. During the month,
Mrs. Bote sold P300,000 worth of cakes and collect P280,000. What is the amount to be reported for
business tax purposes?
a. None
b. P280,000
c. P300,000
d. Indeterminable
Note: The sale of cakes is a sale of goods; hence, subject to tax on sales.

12. The No-Taste is a restaurant offering local cuisine. Which is correct?

a. No-Taste is engaged in the sale of service.
b. No-Taste is engaged in the sale of goods.
c. No-Taste is engaged both in the sale of goods and service.
d. No-Taste is not engaged in business.

13. Marilyn is a beautician operating a beauty parlor. She is indebted to Zeus for P30,000. Unable to pay
her debt, Marilyn agreed to render services to Zeus. In return, Zeus cancelled Marilyn’s
indebtedness. Which is correct?
a. The cancellation of the P30,000 indebtedness is a gratuity subject to donor’s tax.
b. The cancellation of the P30,000 indebtedness is exempt from income tax.
c. The cancellation of the P30,000 indebtedness is a constructive receipt of Marilyn subject to
business tax.
d. The cancellation of the P30,000 indebtedness is a constructive receipt of Zeus subject to
business tax.

14. A is a VAT-registered seller with annual sales of P1M. During the month, he recorded only P10,000 in
sales and sustained an operating loss of P40,000.
Which is correct?
a. The taxpayer is exempt from business tax during the month since then is an operating loss.
b. The taxpayer shall pay VAT.
c. The taxpayer shall pay percentage tax.
d. The taxpayer shall pay VAT if his/her annual sales exceeds P3,000,000 during the year.
Otherwise, he shall pay percentage tax.
15. Chemrex Company, a non-VAT taxpayer paying 3% percentage tax exceeded the VAT threshold on
September 2019. Chemrex generated P300,000 and P400,000 sales in October and November and
paid respectively P12,000 and P28,000 input VAT in these months. CHemrex immediately registered
to the VAT system at the start of November 2019.

Compute the business tax payable in October, assuming no claim for tax credit was filed.
a. P9,000
b. P24,000
c. P27,000
d. P36,000
Note: (36,000 – 9,000 – 0 input VAT = 27,000)

16. Compute the business tax payable in October, assuming Chemrex claimed for tax credit and was
approved by the BIR.
a. P9,000
b. P24,000
c. P27,000
d. P36,000

17. Compute the business tax payable in October, assuming Chemrex filed a claim for tax refund.
a. P9,000
b. P24,000
c. P27,000
d. P36,000

18. Compute the business tax payable in November.

a. P12,000
b. P20,000
c. P36,000
d. P48,000

19. A non-VAT taxpayer paying 3% percentage tax received P104,000 cash and P6,000 CWT from the sale
of services. Compute the percentage tax.
a. P3,000
b. P3,120
c. P3,204
d. P3,300
20. A VAT-taxpayer received a P52,000 plus P4,000 creditable withholding tax certificate. What is the
output VAT?
a. P5,571
b. P5,760
c. P5,820
d. P6,000