BIR Ruling

June 28, 1966 Mr. Paciano M. Benitez Certified Public Accountant 667 United Nations Avenue Manila S i r : This refers to your letter dated June 1, 1966, stating the following: "My client is a duly organized corporation (100% Filipino) and is about to open business in Manila within the month. I would like to secure an official ruling regarding its kind of business operation. cdtech "As provided in the articles of incorporation, the primary purposes of the corporation are as follows: 1. To act as interior designers and design consultants of home, stores, shops, hotels, restaurants, offices, plants and other types of buildings. 2. To engage in the construction and finish of all kinds of building interiors. 3. To supervise and supply labor and materials for the construction of interiors. 4. To own and operate such shops and plants for the manufacture of materials required for carrying out the above-mentioned purposes. "Of the above primary purposes, the corporation will be extensively engaged on the first purpose and for a professional fee, the services to be rendered are: selection of color schemes; design of furnitures pieces and supervision of execution; selection of drapery, upholstery, rugs and all accessories supervision of actual placing of furniture and accessories; consultation on any matter directly affecting said interiors. The contract do not include supply of labor and materials necessary in the execution of the interior designs. Needed materials are being referred to the corresponding suppliers who furnish the quantity and quality needed. For such patronage, the suppliers give the corporation a certain commission. Occasional sale of general merchandise connected with interior design would be made to the general public but not necessarily to clientele under contract. cdt "Based on the above facts, may I request for your ruling as to whether my client is subject to Section 191 of the National internal revenue falling under Other Independent Contractors thereby subjecting same to the annual fixed tax of P20.00 and 3 per cent tax on gross monthly receipts." In reply, I have the honor to inform you that based on the foregoing facts, your client is both a contractor and a manufacturer. As contractor, your client is subject to the fixed annual tax of P20.00 and the 3% contractor's tax prescribed in Sections 182(a)(1) and 191, respectively, of the Tax Code. As a manufacturer of materials used in interior decoration which is sells to others than its client, your client is subject to the P20.00 annual fixed tax and the 7% or 30% sales tax prescribed in Sections 182(a)(1), 185 and 186 of the same Code. The cost of materials of its own manufacture used in its contractual undertakings shall forms part of its gross receipts for purposes of the 3% contractor's tax. LexLib Your client is also subject to the income and additional residence taxes. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue