Taxability of a Canteen Operated by a Bank for Its Employees Benefit

September 11, 1967 BIR RULING NO. 033-67 Messrs. Carlos J. Valdez & Co. Certified Public Accountants 1130 Perez St., Paco M a n i l a S i r : This refers to your letter dated June 26, 1967 stating the following: "Our client, a commercial bank, is opening a canteen under its direct supervision and control. cdtech "The Management of this bank has decided to operate the new canteen itself in order to maintain the quality of food served and to insure better service to its employees. The bank's former canteen was operated for several years previously by a concessionaire. "The nature of the operation of the new canteen will be similar to one managed by a civic or social organization where food is sold to members at cost. In the case of this bank, food will be served at subsidized prices (practically below actual cost) once overhead expenses will not be taken into consideration in establishing the selling price. Furthermore, since the new canteen will be operated primarily for the bank employees' benefit, only employees of the bank shall be served. "In this connection, we would like to request your opinion as to whether the receipts from this canteen by the bank will be subject to the 5% banker's tax on gross receipts under section 245 (Title VIII Miscellaneous Taxes Chapter I Tax on Banks) of the National Internal Revenue Code." In reply, I have the honor to inform you that a bank which operates a canteen where food is served at subsidized prices exclusively to the bank's employees is subject to the fixed and percentage taxes prescribed in Sections 182(A)(1) and 191 of the Tax Code, notwithstanding the fact that the canteen is operated on a non-profit basis. However, the gross receipts derived from the operation of the canteen will not be subject to the 5% banker's tax on gross receipts under Section 249 (not 245) of the Tax Code. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue