[UPDATE: September 16, 2013]: Clarified definition of Invoice in the Article.
A lot of business owners are still confused with the difference between an invoice and an official receipt (OR). The primary reason for this is that (wrong) information just gets passed around from one person to another. There are also a lot of people who pass along wrong information. In addition, Filipinos often do not place a high importance to terminologies very well. With the Bureau of Internal Revenue (BIR) implementing a new ruling on the receipts, it signals that they are becoming strict with their collection and taxation.
Sales Invoice vs Official Receipt
So, what is the difference between an invoice and an official receipt? Invoices, more specifically, Sales Invoices, are used for sales of goods while OR’s are used for sales of services. Sounds easy enough, right?
Before entering Full Suite, I was working at a construction company. My notion for a sales invoice back then was it was used as a billing statement. Common practice was to send an invoice to client to tell them that they have to pay up. Then, upon payment, that is when we give them an OR. That is, technically speaking, wrong.
Only when I asked our tax specialist did I finally understand the difference between them. Here are some examples to show the difference.
Example 1: Food
• When you buy food at a restaurant. They will give you an OR, because they sell the whole experience.It is not the food that you are paying for. Official Receipts are for services.
• When you buy your groceries and you ask for a receipt, they will give you a sales invoice.
Example 2: Construction
• When you buy at your local hardware. They will give you a sales invoice.
• But, if you have your house built by a construction firm, upon payment, you will receive an OR.
In both examples, there are different scenarios given but you receive different kinds of receipts. To reiterate, ORs are for sales of services, while Sales Invoices are for sales of goods.
The misconception I had before was due to a lack of understanding of the receipts and the law. There are other types of receipts, called supplementary receipts as what the Tax Law says. Examples of these supplementary receipts are billing invoices, delivery receipts, etc. These are what we were accustomed to referring as “invoice”. So when we want our clients to pay us, we ought to give them billing invoice or service invoice – not an invoice or a sales invoice.
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