Love Baking Cookies? You Won't Have to Pay Taxes for Selling Online

Online sellers operating on an intermittent or irregular basis and those selling handmade items as a hobby are not required to register their business activities, the Department of Trade and Industry (DTI) said on June 19.

This comes after the Bureau of Internal Revenue (BIR) told online sellers to register their businesses and pay taxes by July 31.

According to DTI Secretary Ramon Lopez, “the rule basically applies to those in business regularly selling even if such activity is in small size, it must be registered. Anyway, the annual income below P250,000 is exempted from the income tax according to the BIR ruling.”

“If one is just selling intermittently or on an irregular basis or selling homemade stuff as a hobby, it is understood that they are not yet in business thus they are not required to register,” he clarified in the online hearing of the House committee on ways and means.

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However, Lopez did not explain what counts as on an “irregular basis.”

He did reiterate the purpose and importance of registering businesses with the government, as it is needed to protect consumers and online transactions, and build trust between buyers and sellers.

“There is greater traceability if online sellers are registered and this increases the trust factor and confidence of online buyers in making the transaction online,” Lopez said.

Lopez also mentioned that having online businesses register with the government could help the e-commerce industry, especially if the country wants to see growth in the sector.

Smaller businesses may not feel the need to register now, but he said that business registration would be good as businesses eventually grow.

“These unregistered businesses will register as they grow in size sooner or later, they would have to borrow from formal lending institutions that will require registered audited financial statements, or if they get to serve larger establishments, official receipts for their sales will be required, thus they would have to be registered,” he said.

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BIR’s Memorandum Circular 60-2020 states that “all persons doing business and earning income in any manner or form, specifically those who are into digital transactions through the use of any electronic platforms and media, and other digital means” and that they must “ensure that their businesses are registered pursuant to the provisions of Section 236 of the Tax Code, as amended, and that they are tax compliant.”

 BIR later clarified that the said Memorandum Circular 60-2020 was not for small-time online sellers and clarified that it would not be collecting taxes from those who make P250,000 or less a year from online selling.

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