If you often confuse sales invoices with official receipts, you are not alone. Many business owners still conflate and confuse the two. As you know, these are two very different terminologies that are in no way interchangeable.
Often, sales invoices are mixed up with the official receipts. Noteworthy, sales invoices have supplementary receipts called delivery receipts and collection receipts. Meanwhile, for official receipts, the supplementary receipts are referred to as billing invoices. Keep in mind, billing invoices, delivery receipts, and collection receipts fall under supplementary receipts and are not essential for tax filing.
To differentiate, a sales invoice is used for the sale of goods or property, while official receipts are used to account for the sale of services and lease of property. Read on to know more about the differences between a sales invoice and an official receipt, as well as when to use them.
As previously mentioned, sales invoices are used as proof of transactions that include goods and property sold. You need to note them down for filing your claims with the BIR. Here are some situations where you may need to use this type of invoice:
1. Grocery Stores
If you own a grocery store, you are selling final goods. When a customer checks out, the receipt your customer will ask for will contain an itemized list of all the products purchased. This receipt is a sales invoice.
2. Purchases from Hardware Stores
When you buy items from a hardware store, receipts given are detailed and only consist of goods sold. If you are in the hardware business, the receipt you will be issuing is a Sales Invoice.
3. Online Shopping and Retail Outlets
Companies that operate online commerce shops that sell final goods as well as retail stores issue sales invoices. This is because the transaction only consists of products and does not include services rendered.
Meanwhile, you may end up issuing official receipts for the following types of businesses. Pay attention to this document and file them properly to avoid getting audited:
1. Dining at a restaurant
When you dine at a restaurant, the receipt issued may appear to be a sales invoice as it displays products and goods sold. However, restaurants also have service charge and offer the full experience, not just the food. If you are a restaurant business, the receipt you are issuing is considered an Official Receipt.
2. Construction Companies
If you operate a construction company, not only do you supply the goods needed to build the house, but you also factor in the labor of carpenters, thus, adding service and labor charges to the overall price of the home. As such, you will be issuing an official receipt as a large part of the expense in building the home is credited to labor wages.
3. Courier Companies
Courier companies do not sell products; rather, they sell their delivery services. Payments made to a courier company will be reflected in an official receipt as your payment will include shipping fees, labor fees of delivery person and staff, parcel fees, and tips.
Final Wrap Up
Though Sales Invoice and Official Receipt sound like two random, interchangeable words, they are different. And like all things that are different, they serve varied purposes and are used in distinct situations. As a business owner, it is important to understand the meaning behind each term as it will prevent you from erring on your financial statements, journals, and tax records.
Noteworthy, companies that interchange the two documents may be unable to claim input VAT. Apart from this, another effect is it makes that particular expense nondeductible since the company failed to comply with the substantiation requirements of BIR. Thus, you must be careful with invoicing and receipt requirements. Strict compliance is a must as it is the only way to substantiate the veracity of your tax claims.