BIR Ruling

August 20, 1976 3% Contractor's Tax This refers to your letter dated November 6, 1975 requesting opinion on the issue of whether a contractor who undertakes a project for and in behalf of the government and without making any profit should be assessed and made to pay a 3% contractor's tax. It is represented that Mr. XY, the general manager of the Z Builders Corporation solicited your assistance in connection with the payment by the corporation of 3% contractor's tax on the amount of collected from the government by reason of the project undertaken by the corporation in the renovation, expansion and completion of the VIP Kiosk of the Manila International Airport some time in 1971, wherein the corporation was reimbursed actual expenses incurred for labor and materials, without it realizing any profit whatsoever. In your aforesaid letter you stated that the contract was on the basis of "quantum meruit" which presupposes that your client realized a reasonable amount of profit from the transaction and not just reimbursement of the actual expenses incurred for labor and materials. At any rate, irrespective of whether or not the contractor realized profit from the contract, the 3% contractor's tax, being an excise tax imposed on the exercise of a privilege is collectible from the person exercising such privilege. The fact that the government is the contractee and no profit is realized from the contract does not relieve the contractor from the duty of paying the 3% tax imposed by Section 191 of the Tax Code, said tax being the direct and personal liability of the contractor. Hence, Sikatuna Builders Corporation should pay the 3% contractor's tax on the basis of the gross receipts derived from the transaction, which in this particular case is the amount received by the corporation from the government as reimbursement for the actual expenses that they incurred for labor and materials. cdtech