Small store owners work hard for thin margins. Every peso saved in tax matters.
This topic is important because the wrong tax rate can eat your profit. Many sari-sari store owners are unsure which option is better. Let’s explain it clearly so you can choose with confidence.
What Is the 8% or 3% Tax Rate?
The 8% or 3% tax rate refers to two different tax options.
8% Income Tax Rate:
- Applied to gross sales.
- In lieu of income tax and percentage tax.
3% Percentage Tax:
- Applied to gross sales.
- Paid on top of income tax under graduated rates.
Both options have rules.
Why This Matters to Business Owners
Choosing the wrong rate can result in:
- Higher taxes.
- More filings.
- Cash flow problems.
The right choice depends on your income and expenses. Understanding this protects your small business.
How to Choose Between 8% or 3% Tax Rate
Follow these steps:
- Compute your average monthly sales.
- Check if your annual gross sales exceed ₱3,000,000.
- Review your operating expenses.
- Compare total tax under both options.
- Choose the option with lower overall tax.
Your choice affects your entire year.
8% or 3% Tax Rate for Sari-Sari Store Owners
Here is the simple comparison:
Choose 8% if:
- Sales are modest.
- Expenses are low.
- You want fewer tax filings.
Choose 3% if:
- Expenses are high.
- You want to deduct costs.
- Your profit margin is small.
Each store is different.
Who and When Can Choose These Tax Rates?
You may choose if you are:
- A non-VAT sari-sari store owner.
- Earning below ₱3,000,000 annually.
Timing:
- Selection is done at the start of the taxable year.
- Changes are not automatic mid-year.
Practical Tips for Store Owners
- Track daily sales consistently.
- Keep receipts for all expenses.
- Review your tax type yearly.
- Do not assume 8% is always better.
- Ask for help before choosing.
The 8% or 3% tax rate choice affects your profit. There is no one-size-fits-all answer.
Sari-sari store owners who choose wisely keep more income. Knowledge leads to better business decisions.
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