Although Registered with NACIDA, a Tailor Shop Which Merely Renders Sewing Services to Customers is Subject to Payment of Fixed and Percentage Taxes

January 19, 1972 BIR RULING NO. 001-72 Although registered with NACIDA, a tailor shop which merely renders sewing services to customers is subject to payment of fixed and percentage taxes . 3rd Indorsement Returned to the Regional Director, Revenue Region No. 5, Valenzuela, Bulacan the within papers bearing on the query of the Revenue District officer of Talavera, Nueva Ecija as to whether or not tailor shop registered with the NACIDA is exempt from the payment of fixed and percentage taxes under the provisions of Republic Act No. 3470, as amended by Republic Act No. 5326. Although Section 11 of Republic Act No. 3470, as amended by Republic Act No. 5326 includes tailoring industries registrable with the NACIDA, however a tailor shop although registered with the NACIDA, which merely receives orders from customers for the sewing of a suit, pants, barong tagalog, shirt or the like and charge fees only for the service or labor of sewing is not a cottage industry within the purview of Republic Act No. 5470, as amended. Consequently, it is subject to the payment of the fixed tax of P50.00 and the 3% contractor's tax imposed in Sections 182(A)(1) and 191(13) both of the Tax Code, as amended by Republic Act No. 6110. It should be noted that Republic Act No. 3470, as amended, includes within its purview only those engaged in the production, manufacture and sale of cottage industry products. In other words, the law covers industries engaged in the production, manufacture and sale of things and not of services. The tailor shop involved in this case is engaged in the sale of services. In this connection attention is invited to the fact that pursuant to the Nacida Law (RA No. 3470, as amended), one of the duties of the NACIDA is to promote the effective merchandising of cottage products in domestic and foreign markets so that those engaged in such industries will be placed on a basis of economic security and towards this end the Board itself may, if necessary, market the cottage products for the producers. This particular provision in the law clearly proves that what the law intends to include within the purview of the tax exemption therein provided for are industries which are engaged in the production, manufacture and sale of things and not of services. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue NOTE: Subject to conditions set by Opinion No . 130, s . 1972, dated Sept . 4, 1972 by the Secretary of Justice .