BIR Ruling

November 19, 1970 City Service Corporation 1901 Leveriza Street Pasay City Attention: Mr . E . S . Encarnacion Vice-President, Finance Gentlemen : This refers to your letter dated April 3, 1970 requesting opinion as to the basis of the percentage taxes on your business operation which you described as follows: "1. Cleaning Services . where we clean a specific area, space or thing for a stated fee and where we provide for the necessary labor, equipment and materials for the job. "2. Janitorial Services . where we provide offices and business establishments with the services of a specified number of janitors per month. In this case, we recruit laborers for assignment to the particular client's premises only. He may not work elsewhere. However, we supervise the work of the janitors and provide them with the necessary cleaning equipment and materials for their job, which use of cleaning equipment and materials are included and form part of our fees. The monthly fees are collected by us from the client and that portion of the salaries of the janitors are paid by us to the janitors concerned. "3. Manpower Services . where we provide offices and business establishments with the services of messengers, elevator operators, clerks and laborers who we recruit to work for the particular client. In this case, the messengers, elevator operators, telephone operators, clerks and laborers perform their respective duties under the direct instructions, supervision and control of the client concerned. Our fees in this regard are reckoned on a fixed per-man per-month basis and upon collection thereof, that portion applicable to the salaries of the laborers are paid by us to them." As submitted in your letter, with respect to the "cleaning services" the entire amount derived therefrom constitute your gross receipts upon which the 3% tax should be based, without any deduction. With regard to the janitorial and manpower services, it is your position that the 3% tax should only be based on such amounts after that portion held in trust and payable to the workers as their salaries shall have been deducted. After studying the operations of your corporations with respect to these services, this Office believes also that your claims is meritorious. Accordingly, amounts corresponding to the salaries of the workers supplied to your clients do not form part of the gross receipts subject to the percentage tax imposed by Section 191 of the Tax Code, as amended. aisadc Very truly yours, CONRADO P. DIAZ Acting Commissioner of Internal Revenue