BIR Ruling

October 2, 1973 Mr. Narciso Maturgo N. C. Maturgo & Associates Certified Public Accountants 819 Ilaya Street, Manila S i r : This refers to your letters dated August 22 and September 26, 1973 stating that your client, Mr. X is dealing on a wholesale business of ready made dresses which he is purchasing from a manufacturer, ABC Company; that this company meets financial difficulties resulting in slow production that they cannot meet the various orders of their customers, in which Mr. X is one; that ABC Company in order not to lose their valuable customers, have made a proposal to Mr. X to supply them the necessary raw materials for every order to be made by Mr. X. The situation is that ABC Company will just furnish the labor and raw materials will be supplied by Mr. X; that ABC Company will act as contractor to Mr. X. Under the foregoing circumstances, you would like to be informed whether Mr. X is subject to any business tax. In reply, I have the honor to inform you that under the foregoing facts, Mr. X will be considered the manufacturer of ready made dresses. As such manufacturer, he is subject to the P50.00 annual fixed tax prescribed in Section 182(A)(1) of the Tax Code and his sales of the ready made dresses shall be subject to the 7% sales tax prescribed in Section 186 of the same Code. This is for the reason that the term "manufacturer" applies not only to one who actually makes the manufactured articles, but also to one who causes the manufactured articles to be made, (Hancock vs. State, 144 Ga. 439, 441, 40 S.E. 317). On the other hand, ABC Company will be considered a contractor, subject to the contractor's fixed and percentage taxes prescribed in Sections 182 (a)(1) and 191 of the Tax Code. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5