BIR Ruling

August 23, 1971 The Highway District Engineer First Pangasinan Highway Engineering District Lingayen, Pangasinan S i r : This refers to your letter dated July 27, 1971 requesting information as to what taxes that Office could legally withhold for this Bureau under Republic Act No. 1051, as implemented by Revenue Regulations No. 21-67 (which superseded Revenue Regulations No. V-40) from payments made by that Office on the following: cdta 1. Payment of contract for labor and materials for the construction and improvement of roads and bridges. 2. Payment of supplies and materials to dealers. 3. Payment of labor under the "Paquiao Labor." 4. Payment of contract labor to a contractor for whom other laborers worked. In reply, I have the honor to inform you that payments made by that Office to the contractors under Nos. 1, 3, and 4 above are subject to the 3% contractor's tax prescribed in Section 191 of the Tax Code. Accordingly, you are required, before making such payments to the aforesaid contractors, to deduct and withhold the 3% tax on such payments pursuant to the provisions of Republic Act No. 1051, as implemented by Revenue Regulations No. 21-67. However, as sales of supplies and materials effected by dealers is not subject to any percentage tax, payment on account of such sales is not subject to the withholding tax. aisa dc Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue