Tax Liability of Manila Trading Center and Exchange

January 21, 1958 BIR RULING NO. 040-58 The Regional Director Regional District No. 3 Manila S i r : This refers to the query on whether or not the Manila Trading Center and Exchange is liable to the payment of the broker's fixed tax and the 6% tax on its gross compensation. The Manila Trading Center and Exchange is a government agency or instrumentality created under Act No. 4069. This agency was created to provide a place for the permanent exhibition of samples of commercial and industrial products of the Philippines, to hold or take part in national, provincial, municipal, floating or caravan exposition to serve as a retail sales agency for small producers and manufacturers in the Islands, to provide a ready meeting place or exchange center for sellers and buyers of major Philippine products, and in general to promote the commercial and industrial development of the country. Act No. 4069 under which the Manila Trading Center and Exchange was created, is silent as to the taxes to be paid by the said agency. However, under Republic Act No. 104 which is a subsequent legislation, all corporations, agencies, or instrumentalities owned or controlled by the Government are required to pay such duties, taxes, fees, and other charges upon their transactions, business, industry, sale or income as are imposed by law upon individuals, associations and corporations engaged in taxable business, industry, or activity. There is, therefore, no doubt that the said agency although owned and controlled by the Government is subject to tax just like any private individual, corporation or association. The only question left for us to decide is whether or not the said agency is a commercial broker subject to the fixed and percentage taxes imposed in Sections 182(s) and 195, both of the Tax Code. According to the report of Agent P. A. Cosare who made a preliminary investigation of this case a charge of 5% on the gross sales of any article sold in the Sales and Exhibition Hall is collected by the Manila Trading and Exchange Center. If the sales are made in the floating caravan and provincial expositions sponsored by the Government the commission charged by the agency is 10% instead of 5% only. As aforestated, one of the purposes for which this agency was created is "to serve as a retail sales agency for small producers and manufacturers in the Islands." By the nature of its transaction and by the purpose of its creation, the Manila Trading Center and Exchange is a commercial broker as defined in Section 194(5) of the Tax Code. In view of all the foregoing, this Office is of the opinion that the Manila Trading Center and Exchange is liable to the payment of the broker's fixed tax and the 6% tax on its gross compensation provided in Sections 182(s) and 195, both of the Tax Code. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue