BIR Ruling

September 30, 1975 NCR Corporation (Philippines) 8735 Paseo de Roxas Makati, Rizal Attention: Mr . D . B . Sahagun Manager, Administrative Division Gentlemen : This refers to your letter dated September 11, 1975 requesting our opinion regarding the 3% contractor's tax prescribed in Section 191 of the Tax Code. aisa dc It is stated in your letter that as specified in your rental contracts, the 3% tax is paid by your customers and in one of such contracts involving a major customer, there is a further provision that the contractee shall pay for all taxes, no matter how designated or levied, except personal property taxes based on net income; that you would like to receive full payment for the contract price and the contractee to pay the correct tax thereon, but up to the present, you have not been getting full payment for the contract price as shown in the following: Contract Price (assumed) P100,00.00 Add: 3% tax 3,000.00 Total Bill P103,000.00 that your bills have been rendered in the above manner and the customer would take off and withhold 3% based on P103,000.00 or P3,090.00 and remit to NCR the balance of (P103,000 P3,090) P99,910.00; that you would like to receive full payment for the contract price and the customer to pay the correct tax thereon in accordance with your agreement; and to achieve this, you have thought of presenting your bill in the following manner, viz: Contract Price (assumed) P100,000.00 Dividend by 97% P103,092.79 Total Bill ========= In reply, I have the honor to inform you that the 3% tax prescribed by Section 191 of the Tax Code is directly collectible from, and is based on the gross receipts derived by the contractor. The contractor may legally pass on the tax to his customer. However, in such case, the gross receipts subject to 3% tax consists of the total amount paid by the customer which includes the tax passed to him. (BIR Ruling No. 73-023, August 20, 1973). Accordingly, this Office offers no objection if you present your bill to your customer in the manner stated in the foregoing. However, in such case, the 3% tax payable by you should be based on the total amount billed which includes the tax. casia Very truly yours, (SGD.) EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3