BIR Ruling

August 4, 1970 MEMORANDUM FOR: The Revenue Operations Head (Assessment) There is returned to you herewith the entire docket bearing on the internal revenue tax case of the Philippine Long Distance Telephone Company, 875 Magallanes Drive, Manila, covering the period from 1962 to 1966, inclusive, which was referred to the Law Division for appropriate action. The investigation conducted by Revenue Examiners Cesar P. Aguirre, Irineo Dingle and Egmidio Pascua, Jr., disclosed that the receipts derived by the Philippine Long Distance Telephone Company from the publication of its telephone directory, more particularly the additional listing and publication in the directory, were all returned for franchise tax purposes and the corresponding franchise taxes thereon duly paid. The Philippine Long Distance Telephone Company publishes a telephone directory for free distribution to subscribers. In addition to the regular listing of subscribers in the alphabetical order, the directory also contains a "buyer's guide" where subscribers are classified according to the business they are engaged in. From this additional listing and publication, the company derives extra charges. cd The issue in this case is whether the extra charges from the additional listing and publication are subject to franchise tax which has been paid by the company or to any business tax. The franchise of the Philippine Long Distance Telephone Company, Act No. 3436, provides that the grantee shall pay 1% tax on all gross receipts derived from the operation of its telephone or other electrical transmission business transacted under its franchise "and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof". In other words, any other tax on its franchise or earnings connected with the franchise are exempted from all taxes. In the instant case, the additional listing and publication in the directory is not distinct and separate from the franchise business of the Philippine Long Distance Telephone Company as authorized by said Act. The aforesaid additional listing and publication do not constitute an independent business of the franchise grantee because it has connection with its telephone business. (BIR Ruling No. 105-02 dated July 31, 1964; Manila Electric Company vs. Posadas, Jr., Collector of Internal Revenue and the City of Manila, 65 Phil. 454). Therefore, the extra charges derived from the company's additional listing and publication is not subject to any other tax, except the franchise tax as provided under Act No. 3436. In view of the foregoing, and it appearing that the Philippine Long Distance Telephone Company has already paid the franchise tax due from it for the years 1962 to 1966, this case may be considered closed and terminated. cdt MISAEL P. VERA Commissioner of Internal Revenue