Don Bosco Technology Center, Inc.

March 7, 2008 BIR RULING [DA-145-08] BIR Ruling No. 017-2005 Don Bosco Technology Center, Inc. Pleasant Homes Subdivision, Punta Princesa P.O. Box 271, Cebu City 6000 Attention: Fr. Cesar Y. Manlosa, Jr. SDB Administrator Fr. Ronald G. Guiao, SDB Rector Gentlemen : This refers to your letter dated May 4, 2007 indorsed to this Office by Regional Director Jaime B. Santiago requesting for exemption from the payment of percentage tax on receipts from the school's operation of bus service. As represented, Don Bosco Technology Center, Inc. (DBTCI) is a domestic, non-stock, non-profit educational institution offering grade school, high school and college courses. It is registered with the Commission on Higher Education (CHED) in accordance with Government Recognition (G.R.) No. 311, Series 2000, G.R. No. 014, Series 2006, G.R. No. 014, Series 2007, G.R. No. 015, Series 2007 and the Department of Education (DepEd) in accordance with G.R. No. 05, Series 2004. It operates four (4) units of school buses. The buses are covered by franchises issued by the Land Transportation Franchising and Regulatory Board. These buses serve mainly the school's students and occasionally teachers, bringing them to school and then back to their homes after classes. The buses do not cater to the needs of the general public. In reply, please be informed that your case is similar to the case in BIR Ruling No. 017-2005 dated August 30, 2005. Thus, this Office ruled in the said case ". . . the percentage tax on domestic carriers being contemplated by Sec. 117 of the Tax Code of 1997 is imposed on cars for rent or hire driven by the lessee, transportation contractors, including persons who transport passengers for hire, and other domestic carriers by land, air or water, for the transport of passengers. Article 1732 of the New Civil Code, provides, to wit: 'Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.' Based on the foregoing definition of common carrier, a school bus service operated and owned by UIC exclusively for its students, and not to the general public, is not considered as a common carrier within the contemplation of Section 117 of the 1997 Tax Code, and thus not subject to percentage tax imposed therein. UIC is not engaged in the business of carrying goods or persons from one place to another for a fixed price, but instead caters only to its students. On the other hand, it is likewise provided in Art. XIV of the Philippine Constitution that '(3) All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. . . .' A non-stock, non-profit educational institution is exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly, and exclusively for educational purposes. The exemption herein contemplated refers to internal revenue taxes imposed by the National Government and in certain cases to local taxes imposed by local government units under the Local Tax Code on all revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes. They shall, however, be subject to internal revenue taxes on income from trade, business or other activity, the conduct of which is not related to the exercise or performance by such educational institutions of their educational purposes or functions. (Sec. 2, Finance Department Order No. 137-87, as amended by Finance Department Order No. 92-88). By transporting its students from their respective homes to the school and vice versa, UIC actually, directly, and exclusively used for educational purposes its buses, hence, it is exempt from taxes and duties. Accordingly, this Office is of the opinion that the gross receipts derived by UIC from its school bus service is not subject to the percentage tax being imposed by Sec. 117 of the Tax Code of 1997 on domestic and common carriers on the ground that their operation is not one of those contemplated in the said Section of the Tax Code. xxx xxx xxx" We do not see any reason to depart from the above opinion of the Commissioner. Accordingly, this Office hereby rules that DBTCI is not subject to percentage tax on its gross receipts from the operation of school bus service for the benefit of its students and teachers. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service