Computed Tomography Center, Inc. Not Liable for Contractor's Tax

January 3, 1985 BIR RULING NO. 001-85 205 044-83 001-85 S i r : This refers to your letter dated December 18, 1984, requesting a ruling as to the liability of the Computed Tomography Center, Inc. (Center for short) to the contractor's tax imposed by Section 205 of the Tax Code. You have represented that the Center is a domestic corporation duly registered with the Securities & Exchange Commission, that it deals in all kinds of hospital equipment, scientific apparatus, appliances and instruments; that it owns an equipment known as the "computed tomography scanner" a combination of computer and x-rays which help doctors locate tumors, identify cancers and blood clots, analyze lesions in the critical organs/parts of the body; that said equipment is actually being operated by the Makati Medical Hospital, another duly registered corporation engaged in the Hospital business at Makati; that said hospital supplies the manpower which actually operates the equipment, accepts the patients undergoing medical tests and bills said patients for services rendered; that all payments received by the Hospital for said services are turned over to the Center, the owner of the testing equipment; that the major stockholders of the Hospital are also the stockholders of the Center; hence, the installation of the equipment primarily serves the interests of the Hospital of being able to cater to its patients with the latest and modern equipment in detecting ailments. In reply, I have the honor to inform you that, under the foregoing facts, the Makati Medical Center, and not the Computed Tomography Center, Inc., is the party rendering the service resulting from the operation of the equipment/apparatus. In other words, the latter did not sell any service or labor; hence, it cannot be held liable for the payment of the fixed annual tax of P100.00 imposed by Section 192(1) of the Tax Code, and to the 4% contractor's tax imposed by Section 205 of the same Code on the income derived from said operation. The theory of the contractor's tax is that, it is a tax on the sale of service or labor. (BIR Ruling No. 044-83) cdtech Neither can the Center be held liable for the payment of the 4% tax as lessor of personal property, in accordance with Section 205 of the Tax Code, as amended by P.D. No. 1959, for the reason that the Hospital does not pay rental to the Center. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner