If you started your own business, you must know how to process it in the Bureau of Internal Revenue and what basic requirements are needed in the registration. You might be interested to know what exact tax type you should register your business for. If you haven’t started your sari-sari store business and you’re planning to, this is the right article for you.
In this article, you will learn seven (7) practical tips on starting a sari-sari store in the Philippines. Indeed, you will benefit from knowing what tax you should be paying to save money, how much it costs to start a sari-sari store, and how to process your registration. For more details, read this to know how to reduce your tax legally.
Sari-sari store Meaning
These are the small businesses explicitly established by a single owner. Usually, it sells essential commodities necessary for daily needs like noodles, sugar, coffee, rice, junk foods, shampoo, vinegar, etc.
Many Filipinos are engaged because it is easy to open and less capital. You can buy a small item in the sari-sari store compared to the mall or grocery store. If you need anything, you can walk to your neighbor or the nearest sari-sari store.
Benefits or Advantages
Why many Filipinos open sari-sari stores despite the numbers of sari-sari in their community of place. Fortunate, the sari-sari store is easy to open; it requires less capital than other business enterprises. However, the sari-sari store is not only advantageous, but it also has disadvantaged. One of the disadvantages of the sari-sari store is that it quickly close as fast as they open.
Capital Needed to Startup
If you don’t have significant capital and want to start right away, open a sari-sari store. Why is the sari-sari store easy to open? Well, in the amount of 3,000 pesos or more, you can have your sari-sari store. By having that small amount, you now have your budget for the sari-sari store.
You can start your store with a small amount of capital and space. As your customer grows and your worth, you can expand your store by having a bigger space and adding more items to sell. Make sure that your capital is rolling over. Once your store is stable or growing, ensure that your invested money must be kept or separated from the total income. Why is it important? It will help you to know how much you earn from your investments.
Assuming you already know where you can put the sari-sari store and capital, the next thing to do is open now. But wait, how can you open the sari-sari store?
Procedures to Start a small business in the Philippines
I know it’s easy to open a sari-sari in the Philippines, but you have to know these tips. These will help you to start your business with a higher percentage of success. Here are Top seven (7) suggestions for a sari-sari store to help you manage your business. It also includes the requirements for sari-sari store business permits and processes.
Tip # 1: Get a Business Permit.
As your business is growing, make sure to register your store in your municipality or city. If you register, your business will avoid you in the future during the tax mapping. You might be asking as to how many business permits for the sari-sari store in the Philippines? Well, it depends on your business location. The processing fee might be 200 pesos for Barangay, 500 pesos for City and Municipality, 1,000 for Regional, and 2,000 pesos for National.
Aside from the processing fee, you will also pay for documentary stamps and other processing fees. How can you register your sari-sari store in the Department of Trade and Industry (DTI)?
- Make sure your business name processed has no conflict. Check your business name on the DTI home page.
- Submit the online application form. Submit at least three (3) business names to have other choices if your first business name is invalid.
- Submit the application form and other necessary documents.
- Pay the processing fees.
- After the evaluation, you will be informed by the DTI personnel if your Certificate of Business Names Registration is approved.
Once you received the DTI Business Name Certificate and Barangay Permit, you can start to get the Mayor’s Permit. Here are the procedures for obtaining the Mayor’s Permit:
- Submit your application to the Business Permits and Licensing Office (BPLO) in your location.
- Get approval from the Electrical Department for your building.
- Make your business approved by the Bureau of Fire Protection.
- Secure a Health and sanitation Permit at the Sanitary Office.
- Claim your Fire Safety Permit
- Claim the business plate and Mayor’s Permit.
Tip # 2: Make Good Records
In every business, success is keeping good records. Keeping records will help to monitor the flow of business income. Make sure to separate the personal expenses from business expenses. What does it mean? You need to make sure that your family members will not get items from your business without paying the cost of items taken. It will help you to know if your business is earning income or losing.
Have an inventory list of all items. This inventory system will help you monitor the date of expiration and the sales of each item.
Tip # 3: Buy Your Items in Wholesaler Store.
Sari-sari store will continue to exist because of the profits. To maximize your earnings is to buy items from the wholesaler or retailer. Purchasing from the wholesalers gives a chance to have a more significant amount of mark-up.
Also, buying from the authorized distributors will give more significant volume discounts. A bigger volume discount and less mark-up will provide higher returns.
Tip # 4: Unique Products to Sell
If your neighbor is selling beauty products, don’t sell the same items. Having unique items from other competitors will give you a more significant income or profits. If your things are different, you will have more customers and higher profits.
Tip # 5: Have a Complete Package
To attract more customers, make sure you have completed items that you’re customers need. If a customer wanted to cook spaghetti, make sure that you have all the ingredients in cooking spaghetti. In that way, you will avoid them not buying from your competitors.
Tip # 6: Make Sure to Have Enough Stocks Always
In the business world, readiness is always vital. Make sure to have enough supply of your inventories. If your business has out of stock, it will affect your business reputations. Running out of stores will lose numbers of customers. So next time, make sure you always check your inventory if you still have enough items to sell to your community.
Tip # 7: Say No to Credits
Many small businesses in the Philippines survive because of borrowing money from lending companies or any other financial institutions. If you want your business to stay in the long run or more extended period, make sure you must say no to credits when somebody approaches you.
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Registration of Small Business in the BIR
A person is required to register the business when the annual gross sales exceed 100,000 pesos. If your sari-sari store has gross sales of more than 100,000 but less than the vat threshold of 3,000,000 is required to register as a non-vat business. A non-vat company is subject to a percentage tax of three percent (3%) on the gross sales.
If you have a sari-sari store or small business, here are the steps on how to register in the BIR.
Sari-sari store is Exempted from Tax.
If you have a sari-sari store, are you wondering if what tax should you pay? In the Philippines, there are different taxes, and it might confuse the taxpayer as to what tax they are required to pay.
All small businesses, including the sari-sari store, are not subject to tax provided that the income does not exceed 250,000 pesos per year. If the revenue from the sari-sari store exceeded the said amount, the business would be subject to percentage tax or value-added tax. If your sari-sari store is not a value-added registered, then you have to pay percentage tax.
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Is Sari-sari Store Considered as Small Medium-size Business (SMB)?
What is a small and medium-sized business? Any business with 100 or fewer employees while with 100-999 employees is considered the medium size. Does it mean that the sari-sari store owner belongs to small companies with less than 100 employees? The answer is No.
A small sari-sari store is not for gaining profits but only for subsistence or livelihood. Therefore, a sari-sari store is not considered a small business in the Philippines.
Tax Rate for sari-sari store 2021
Under the new tax system, the train tax law will exempt those who are earning less than 250, 000 pesos. This train law will exempt the owner of the sari-sari store business as long as the income is less than the exempted amount of profits. Therefore, the new income tax under train law will exempt the sari-sari store in the Philippines.
Sari-sari stores could be subject to a percentage tax rate (3%) on total gross sales or subject to value-added tax. To reduce taxes or exempt from paying individual income, you can register as Barangay Micro-Business Enterprises (BMBE).
Sari-store store is not exempted from Business Tax.
Are all sari-sari stores subject to business tax? The answer is No. If no, what is the business tax for the sari-sari store? Income generated from a sari-sari store is a Marginal Income Earner or Compensation (MIC). Marginal Income Compensation is an individual whose gross sales do not exceed 100 000 annual income. (RMC No. 7-2014)
Your sari is also subject to percentage tax or value-added tax depending on your Certificate of Registration (COR). There are things that you can do to minimize tax from your small business. You can register it as BMBE or 8% tax, or could it be better to pay a percentage tax of 1% under the CREATE Law.
Besides, the activities of Marginal Income Earner should focus principally on subsistence or livelihood. These earners shall include but not limited to the following:
- Agricultural growers or producers
- Direct seller to the ultimate consumers
- Small sari-sari store
- Small carinderias or turo-turo
- Drivers or operators of a single unit tricycle
MIC is also not subject to value-added tax (VAT) and other percentage tax in the Philippines.
Person Engaged in Sari-sari Subject to Individual Tax?
All persons who earn an income are subject to tax. How about a person engaged in a small sari-sari store is still exempted from individual income tax? Yes, if the total income does not exceed the 250 000 as the thresholds. To learn more, you can read things you should know more about de minimis benefits under TRAIN law 2018. It has an illustration of how to compute tax after the individual thresholds.
How about those earning income as an individual at the same time with a sari-sari store? Do I need to file a mixed-income? The answer is NO. An employed person should file individual tax if the other income is taxable. Since income from small sari-sari is not subject to any tax, therefore, profit from your sari-sari store is not included in your tariff.
Therefore, any person who has a small sari-sari store in the Philippines is not subject to any business tax. It is not also subject to an individual tax provided only for subsistence or livelihood only. To the question as to sari-sari store exemptions, 2018 and 2019 are still the same. Any small sari-sari store will be exempted provided that the total sales should not exceed 250,000.