B.

As to Burden
1. Direct Taxes – taxes wherein the “incidence” as well as the “impact” or burden of the tax
faces on one person. examples: income tax, community tax, donor’s tax, estate tax

2. Indirect Taxes – taxes wherein the incidence of or the liability for the payment of the tax falls
on one person, but the burden thereof can be shifted or passed to another person.
examples: VAT, percentage taxes, customs duties excise taxes on certain specific goods

Important Points to Consider regarding Indirect Taxes:

1. When the consumer or end-user of a manufacturer product is tax-exempt, such exemption
covers only those taxes for which such consumer or end-user is directly liable. Indirect taxes are
not included. Hence, the manufacturer cannot claim exemption from the payment of sales tax,
neither can the consumer or buyer of the product demand the refund of the tax that the
manufacturer might have passed on to him. (Phil. Acetylene Co. inc. vs Commissioner of
Internal Revenue et. al., L-19707, Aug.17, 1987)

2. When the transaction itself is the one that is tax-exempt but through error the seller pays
the tax and shifts the same to the buyer, the seller gets the refund, but must hold it in trust for
buyer. (American Rubber Co. case, L-10963, April 30, 1963)

3. Where the exemption from indirect tax is given to the contractee, but the evident intention is
to exempt the contractor so that such contractor may no longer shift or pass on any tax to the
contractee, the contractor may claim tax exemption on the transaction (Commissioner of
Internal Revenue vs John Gotamco and Sons, Inc., et.al., L-31092, Feb. 27, 1987)

4. When the law granting tax exemption specifically includes indirect taxes or when it is clearly
manifest therein that legislative intention to exempt embraces indirect taxes, then the buyer of
the product or service sold has a right to be reimbursed the amount of the taxes that the sellers
passed on to him. (Maceda vs Macaraig,supra)