CONSUMPTION TAX FUNDAMENTALS

LECTURER:

REX B. BANGGAWAN, CPA, MBA

1.) Which is correct regarding consumption tax?

A. It may help in the redistribution of wealth to society.
B. It is entirely based upon the consumers’ ability to pay.
C. It applies to both domestic and foreign consumption.

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D. It applies only when the seller is non-resident.

2.) Which is an incorrect statement regarding consumption taxes?

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A. They are always indirect in nature.
B. They effectively tax everyone in the state.

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C. They apply only when the goods or services are destined for consumption within the Philippines.
D. Consumption taxes may encourage savings formation.

3. Which form of consumption is tax-free?

A. Sales to a resident
B. Sales to a non-resident
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C. Importation by an importer engaged in business
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D. Importation by an importer not engaged in business

4.) Which will never be subjected to Philippine consumption tax?

Seller Buyer
C

A. resident Resident
EO

B. resident Non-resident

C. Non-resident Resident

D. Non-resident Non-resident
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5.) Which of the following will require payment of business tax?

Seller Buyer
 A. resident Resident

B. resident Non-resident

C. Non-resident Resident

D. Non-resident Non-resident

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6.) The consumption tax imposed upon resident sellers applies where
A. The seller is engaged in business

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B. The buyer is engaged in business.
C. Both buyer and seller are in business.
D. Either buyer or seller is in business.

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7.) Which is subject to business tax?
A. Foreign consumption from resident sellers
B. Foreign consumption from foreign sellers
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C. Domestic consumption from resident sellers
D. Domestic consumption from foreign sellers
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8.) Jeremy Corporation, a resident business, purchased P 100,000 goods from Wyndel Company, a non-
resident business.

Identify the statutory taxpayer and the type of consumption tax.

A. Jeremy Company – Business tax
C

B. Wyndel Company – business tax

C. Jeremy Company – VAT on importation
D. Wyndel Company – VAT on importation
EO

9.) REO Company, a resident business, renders services to Mr. Erlwin, a resident person who is not
engaged in business.

Identify the statutory taxpayer and the type of consumption tax.

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A. REO Company – Business tax

B. Mr. Erlwin – VAT on importation
C. Mr. Erlwin – Business tax
D. REO Company – VAT on importation

10.) Ms. Bernadette, an employee, imported a pair of shoes from Hongkong. Which consumption tax is
he liable to pay?
A. Business tax C. Both
B. VAT on importation D. None
10.) Ms. Bernadette, an employee, imported a pair of shoes from Hongkong. Which consumption tax is
he liable to pay?
A. Business tax C. Both
B. VAT on importation D. None

11.) Ms. Bernadette, an employee, sold her residential lot to Ms. Andy, a real property dealer. Who is
subject to consumption tax with respect to this transaction?
A. Ms. Bernadette C. A and B
B. Ms. Andy D. Neither A nor B

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11.) Ms. Bernadette, an employee, sold her residential lot to Ms. Andy, a real property dealer. Who is
subject to consumption tax with respect to this transaction?

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A. Ms. Bernadette C. A and B
B. Ms. Andy D. Neither A nor B

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12.) Which seedling is vatable?
A. Grafted mango seedlings C. Narra seedlings
B. Pomelo seedlings D. Guava seedlings

A. Charcoal C. Lumber
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13.) Which agricultural product is VAT-exempt on importation?
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B. Wood D. Corn

14.) Which is a vatable agricultural input?

A. Fertilizers C. Seeds
B. Pesticides D. Seedlings
C

15.) Which is not considered as simple processing?

A. Freezing C. Broiling
B. Stripping D. Marinating
EO

16.) The following advanced technological means of packaging are deemed not to alter the nature of
agricultural marine food products thereby retaining their original state. Which is the exception?
A. Canning C. Plastic shrink wrapping
B. Vacuum-packing D. Tetra-packing
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17.) Which importation is not VAT-exempt?

A. Importation of personal and household effects of residents coming to resettle in the
Philippines
B. Importation of personal and household effects of foreigners coming to settle
permanently in the Philippines
C. Importation of personal and household effects which are subject to customs duties
D. All of these
18.) The importation of fuels, goods and supplies for domestic shipping or air transport operations is
A. vatable.
B. always VAT exempt.
C. vatable if the importer is a domestic carrier.
D. VAT-exempt if the importer is a domestic carrier.

19.) Importation is not subject to VAT when

A. made by a VAT-registered business.
B. made by a non-VAT-registered business.
C. it involves exempt goods.

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D. coursed through an exempt importer.

20.) A business taxpayer had the following purchases and receipts:

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Import of goods or services P 190,000

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Domestic purchase of goods or services 100,000
Domestic sales of goods and services 150,000
Export sales of goods or services 50,000
Compute the total amount subject to consumption tax to the business.
A. P500,000
B. P400,000
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C. P350,000
D. P340,000
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21.) Which agricultural produce is exempt from VAT?
A. Rubber C. Copra
B. Abaca hemp D. Firewood

22.) Samantha Furnitures, a percentage taxpayer, imported the following household equipment:
C

Landed cost
Machineries, for business use P 1,150,000
Heating system, for home use 250,000
Total P 1,400,000
EO

Compute the VAT on importation.

A. P 0 C. P 150,000
B. P 27,000 D. P 168,000

23.) Mrs. Smile, a professional practitioner, imported the following:

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Calculators and computers for his firm P 900,000

Books 600,000
Total P 1,500,000

Compute the VAT on importation.

A. P 0 C. P 108,000
B. P 72,000 D. P 180,000
24.) The following data relates to the importation of cigarettes by Mr. Bong:
Total invoice value P 1,000,000
BOC charges 300,000
Customs duties 200,000
Excise taxes 300,000
Compute the VAT on importation.
A. P 120,000 C. P 180,000
B. P 156,000 D. P 216,000
25.) Ms. Hermione imported various merchandise from abroad. The importation was invoiced at $

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5,000. Ms. Hermione also incurred the following costs of importation:

Insurance P 4,000 Arrastre charge P 7,000

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Freight 15,000 Brokerage fee 8,000
Wharfage fee 4,000 Facilitation fee 5,000

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Ms. Hermione was also assessed P 24,000 and P 18,000, respectively, for customs duties and excise tax.
The applicable exchange rate was P42.50:$1. What is the VAT on importation?
A. P 25,500 C. P 35,100
B. P 30,540 D. P 35,700
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26.) Which of the following sale is not subject to business tax?
A. Sale of a car by a dealer
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B. Casual sale of a car by a non-dealer
C. Sale of real property by a dealer
D. Sale of office equipment by a business
27.) Which is exempt from business tax?
A. Bakery
C

B. Manufacturer of canned fruits

C. Manufacturer of noodles
D. Meat vendor
EO

28.) Which is exempt from business tax?

A. Sale of boiled peanuts C. Sale of coco lumber
B. Sale of peanut brittle D. Sale of flowers

29.) Which of the following establishments may qualify for exemption from business tax?
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A. Hotel C. Boarding house

B. Inn D. Resort

30.) Which is subject to business tax?

A. A private school
B. A non-profit hospital
C. A private hospital
D. None of these
31.) All of these pay business tax, except
A. Stock broker C. Consultant
B. Insurance agent D. Employee

32.) A VAT-taxpayer made the following sales during the month:

Domestic sales P 2,100,000

Export sales 1,000,000

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What is the amount subject to business tax?
A. P 0 C. P 2,100,000
B. P 1,000,000 D. P 3,100,000

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33.) A seller had the following details of sales and collection during the month:

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Receivables, beginning P 200,000
Gross sales 400,000
Less: Collection 500,000
Receivables, end P 100,000
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Determine the amount subject to business tax if the seller is a seller of goods and a seller of services,
respectively.
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A. P500,000; P300,000 C. P400,000; P500,000
B. P400,000; 500,000 D. P200,000; 300,000

34.) Atom, a non-VAT registered senior citizen and owner of St. Matthew Drugstore, had the following
sales during the first quarter of 2021:
C

Sales to senior citizens Sales to regular customers

Medicine sold
Sale of medicines for diabetes P 10,000 P 70,000
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Sale of medicine for hypertension 20,000 30,000

Sale of other medicines 90,000 120,000
Total sales P 120,000 P 220,000
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Compute the exempt sales.

A. P 0 C. P 130,000
B. P 120,000 D. P 220,000

35.) A non-VAT recreational center has a senior citizen member. The normal rate for non-senior citizen
members is P2,000 per month.
How much shall be billed to the senior citizen?
A. P 1,792 C. P 1,600
B. P 1,786 D. P 1,429