BIR Ruling

February 27, 1969 Mr. Luis de Santos Treasurer Audio-Visual Specialists, Inc. P. O. Box 55, Quezon City S i r : This refers to your letter dated February 18, 1969, stating that the Audio-Visual Specialists, Inc., is in the process of incorporation; that its primary purpose is to produce sound recordings on tapes and discs and motion pictures for educational, industrial and commercial purposes; and that its mode of operation is substantially as follows: "(1) A customer orders a film commercial from us after a discussion of all details, we present our quotation for approval. Once approved, we start to produce the subject matter. We prepare the settings; the props, we hire the models and/or actors, we hire musicians, or perhaps dub-in recorded music or sound effects. We use our own equipment if we have them or if not, we rent equipment from others. Then the films are processed, viewed, edited, reviewed, etc. Upon delivery of the finished product (film commercial) the client pays us the agreed amount. "(2) A client orders voicing or sound recordings on tapes and/or discs. After discussing and agreeing on terms and conditions, we start production and as in example No. 1 we go thru similar procedures with the exception of the use of film. Whenever and whenever the client wants to air or exhibit the commercial is none of our concern. "(3) Production of slides for projection will also be by contract with customers. This will be similar in nature as Nos. 1 and 2. "(4) Production of motion pictures for educational, industrial and commercial purposes. We produce a film feature for instance about a certain surgery, upon completion, we present the film to a medical school to be shown to students within the school premises. We provide the projector, screen & technician. For the use of our film and facilities, we charge them rental." Under the foregoing facts and circumstances, you would like to be informed as to the taxes the business will be subject to as well as their corresponding deadlines for payment. In reply, I have the honor to inform you that for producing commercial films which the Corporation sells to its customers, Audio-Visual Specialists, Inc., is considered a cinematographic film producer. As cinematographic film producer, it is liable for the specific tax due on the commercial films it produces pursuant to Section 146 of the Tax Code and to the privilege tax of P200.00 annually pursuant to Section 182(A)(3)(v) of the same Code. For undertaking the business of voicing or sound recordings on tapes and/or discs, the Audio-Visual Specialists, Inc. is considered a manufacturer of phonograph records. As such manufacturer, it is subject to the annual fixed tax of P20.00 under Station 182(A)(1) and to the 30% sales tax prescribed by Sections 185(g) and 185-A(g), all of the Tax Code. For producing slides for projection, Audio-Visual Specialists, Inc. is considered a manufacturer of slides subject to the aforesaid annual fixed tax of P20.00 under Section 182(A)(1) and to the 7% sales tax prescribed by Section 186, both of the Tax Code. With respect to the facts represented under No. 4 Audio-Visual Specialists, Inc. is considered and independent contractor subject to 3% tax on its gross receipts pursuant to Section 191 of the Tax Code and to the annual fixed tax of P20.00 prescribed under Section 182(A)(1) of the same Code. The specific tax must be paid immediately before the removal of the films from the place of production pursuant to Section 124 of the Tax Code. All fixed taxes shall be payable annually, on or before the 20th of January, or semi-annually, on or before the 20th of January or July. Under Section 183(a) of the Tax Code, percentage taxes are payable monthly, the same to be made within 20 days after the end of each calendar month. cdll Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue