BIR Ruling No. 001-63

January 8, 1963 BIR RULING NO. 001-63 A. B. Aluquin & Associates Certified Public Accountants Rm. 201 Doa Salud Bldg. 417 Dasmarias St., Manila Gentlemen : This has reference to your letter dated September 6, 1962, requesting opinion on the following facts: LexLib "Our client 'A' has a franchise to conduct a messenger and a delivery express service of messages and of packages and parcels, at regular intervals, special and/or emergency cases, through all hours of the day and night. Under the provisions set forth in the grant, they are required to pay an annual tax of 1% on its net profit in addition to other taxes fixed and imposed by the Internal Revenue Code. "Under the nature of his business it would appear that my client above is on a contract basis that we are inclined to believe that he should be subject to the 3% percentage tax under Section 191 of the National Internal Revenue Code as a contractor. Our confusion arises in the fact that under Section 259 of the Code, Chapter III, Franchise Tax, a fixed amount equal to 5% of the gross receipt is specified to be payable as percentage tax. We request, therefore, your ruling in this matter for the reason that we believe another enterprises in the same line of business has been allowed to pay the 3% percentage tax. "In the 1% levied according to the franchise above stated separate and distinct from income tax due in accordance with Section 34 of the National Internal Revenue Code?" In answer thereto, I have the honor to inform you that, in addition to the annual tax of 1% on its net profit, your client is subject to the 5% franchise tax imposed in Section 259 of the Tax Code, which applies to all businesses operating under a franchise. It is further subject to the income and additional residence taxes. Section 3 of the Republic Act No. 3260, the law granting a franchise to your client, the JRS Business Corporation, seems to be clear that those taxes are payable by it in addition to said 1% annual tax. "Sec. 3. The grantee, in addition to the taxes fixed and imposed by the Internal Revenue Code , shall likewise pay an additional annual tax of one per cent on its net profit, the proceeds of which shall accrue to the National Government." (Emphasis supplied) Very truly yours, JOSE B. LINGAD Acting Commissioner of Internal Revenue This is to certify that the above ruling has been duly signed by the Commissioner of Internal Revenue on January 8, 1963. (SGD.) P. F. LANDAS Revenue Operations Head (Legal)