45 01 dated which provided that pawnshop operators

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45-01 dated October 12, 2001, which provided that pawnshop operators are liable to the 10% VAT based on gross receipts beginning January 1, 1996, while pawnshops whose gross annual receipts do not exceed P 550,000.00 are liable for percentage tax, pursuant to Section 109(z) of the Tax Code of 1997. CTA decisions affirmed the BIR's position that pawnshops are subject to VAT. In H. Tambunting Pawnshop, Inc. v. Commissioner of Internal Revenue, 15 the CTA ruled that the petitioner therein was subject to 10% VAT under Section 108 of the Tax Code of 1997. Antam Pawnshop Corporation v. Commissioner of Internal Revenue 16 reiterates said ruling. It was the CTA's view that the services rendered by pawnshops fall under the general definition of "sale or exchange of services" under Section 108(A) of the Tax Code of 1997. On July 15, 2003, the Court rendered Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc. 17 in which it was categorically ruled that while pawnshops are engaged in the business of lending money, they are not considered "lending investors" for the purpose of imposing percentage taxes. 18 The Court gave the following reasons: first, under the 1997 Tax Code, pawnshops and lending investors were subjected to different tax treatments; second, Congress never intended pawnshops to be treated in the same way as lending investors; third, Section 116 of the NIRC of 1977 subjects to percentage tax dealers in securities and lending investors only; and lastly, the BIR had ruled several times prior to the issuance of RMO No. 15- 91 and RMC 43-91 that pawnshops were not subject to the 5% percentage tax on lending investors imposed by Section 116 of the NIRC of 1977, as amended by Executive Order No. 273. In view of said ruling, the BIR issued Revenue Memorandum Circular No. 36-2004 dated June 16, 2004, canceling the previous lending investor's tax assessments on pawnshops. Said Circular stated, inter alia : In view of the said Supreme Court decision, all assessments on pawnshops for percentage taxes as lending investors are hereby cancelled. This Circular is being issued for the sole purpose of resolving the tax liability of pawnshops to the 5% lending investors tax provided under the then Section 116 of the NIRC of 1977, as amended, and shall not cover issues relating to their other tax liabilities. All internal revenue officials are enjoined from issuing assessments on pawnshops for percentage taxes on lending investors, under the then Section 116 of the NIRC of 1977, as amended. For purposes of the gross receipt tax provided for under Republic Act No. 9294, the pawnshops are now subject thereof. This shall however, be covered by another issuance. 19 Revenue Memorandum Circular No. 37-2004 was issued on the same date whereby pawnshop businesses were allowed to settle their VAT liabilities for the tax years 1996-2002 pursuant to a memorandum of agreement entered into by the Commissioner of Internal Revenue and the Chambers of Pawnbrokers of the Philippines, Inc. The Circular likewise instructed all revenue officers to ensure that "all VAT due from pawnshops beginning January 1, 2003, including increments thereto, if any, are assessed and collected from pawnshops under its jurisdiction."
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