BIR Ruling

June 5, 1969 4th Indorsement Returned to the Revenue Operations Head (Assessment) the within papers relative to the case of John Gotamco & Sons, Inc. involving a proposed assessment of P2,024.84 as deficiency contractor's tax and surcharge for the period covering 1963 to 1967. The only issue to be resolved here is whether or not receipts derived from contracts with tax exempt entities like the World Health Organization is subject to the 3% contractor's tax. The 3% tax under Section 191 of the Tax Code is in the nature of an excise tax imposed on the exercise of a privilege. It is directly imposed on and collectible from the person exercising the privilege. While the burden of the tax may be shifted to the person for whom the services are rendered by the contractor, the latter is not relieved from the payment of the tax. The fact that the contractee is exempt from internal revenue taxes is immaterial. Entities exempt from taxes like the World Health Organization are exempt only from taxes to which they are directly liable. In view of the foregoing, he is instructed to proceed with the proposed assessment. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue