Online sellers must register with the BIR, the BIR commands.
What? Even the small-time sellers? Well, yes. Apparently, this is not a new rule. Everyone who is engaged in business, whether through online or through physical means, are required to register with the BIR. If small monthly salaries are subject to withholding tax, so are the income of those who are engaged in business.
Under our current income taxation, an individual online seller may be taxed in two ways.
First, the normal computation using the graduated (increasing) income tax rate. The tax rate is 20% to 35% imposed on a person’s taxable income (sales less cost of sales less business expenses). However, if an online seller’s taxable income for the year will not exceed P250,000, then he/she is exempt from income tax.
Second, a special tax rate of 8% may be availed by the online seller. The 8% is computed based on gross sales or receipts less P250,000, assuming he is not likewise an employee. Accordingly, the first P250,000 sales for the year is exempt from income tax.
There is another kind of tax imposed on small businesses: the percentage tax.
The percentage tax is imposed at 3% of a person’s gross sales/receipts. However, if a person is classified as a marginal income earner, then he is likewise not subject to this tax. A marginal income earner is a person whose sales/receipts do not exceed P100,000.
Further, if an online seller chooses to be taxed at 8% income tax instead (second option above), he is no longer subject to the 3% percentage tax.
Again, nothing new in RMC No. 60-2020, except for one thing.
Normally, businesses should have registered with the BIR on or before January 31 of every year or at least within 30 days from the date of first sale if it is a new business. Late registration is subject to a penalty of P1,000 for every year that the business is in operation. Failure to register is likewise the subject of fines (P5,000 to P20,000) and imprisonment (6 months to 2 years). In RMC No. 60-2020, the government is waiving the penalty as long as the online seller voluntarily registers before 31 July 2020.
If it is an individual online seller, to register, the individual:
- Must fill up BIR Form No. 1901 – Application for Registration. This is downloadable in the BIR website.
- Present any government-issued ID
- Provide a DTI Certificate, if with business name
- Pay the registration fee of P500, and pay documentary stamp of P30 for the Certificate of Registration.
- Secure BIR invoices/official receipts or apply for Authority to Print.
The hassle, of course, comes with the quarterly filing of income tax returns and percentage tax returns, the securing of BIR printed receipts or applying for an Authority to Print your invoices and ORs, the tediousness of recordkeeping, the annual registration, among others. I won’t even make a commentary about the unfortunate timing of the RMC or about the use of the taxes we are paying as Filipino citizens. Well, enforcement is another thing, considering most physical sari-sari stores are not BIR-registered but are granted unwritten cultural immunity. Add to that the fact that online businesses may be conducted privately and even anonymously.
But hey, this is our obligation as citizens, to register as a taxpayer and pay the corresponding taxes on our taxable activities.