Tax Liability of Commercial Broker

May 7, 1980 BIR RULING NO. 042-80 A. M. Sison, Jr. & Associates 6th Floor, Rufino Building 6784 Ayala Avenue, Makati Metro Manila Attention: Mr . A . Gutierrez, Jr . Gentlemen : This refers to your letter dated January 18, 1980 requesting for a ruling as to whether or not your client, The Auction House is considered an independent contractor subject to the 3% tax for engaging in the following activities: 1. Publicity for collection of items to be included in an auction, such as carpets, paintings, porcelain, prints, silver, antiques, etc.; 2. Attend to calls and visit the owners to examine their items; 3. Make pricing for the items by finding out market prices; 4. Make a thorough description of the items to be included in the auction. Prepare a catalogue with description of the items, estimated prices and rules of the auction; 5. Take photographs of the item and put advertisements in newspapers; 6. Mail out catalogues to prospective buyers; 7. Put up an exhibit and display of the items; and 8. Hold an auction on a given date. That on every sale made at the auction, your client receives 15% of the selling price as fee for services rendered from the inception of the activity to the auction sale. It appears also that one of the conditions of the sale is that "The Auction House acts as agent only and neither the House nor the seller are responsible for any statement as to the authorship, origin, date, age, attribution, genuineness, provenance, weight or condition of any lot." In reply, I have the honor to inform you that under the foregoing facts, it is the opinion of this Office that your client, "for compensation or profits, sells or brings about sales or purchases of merchandise for other persons;" hence, it is a commercial broker within the purview of Section 187(t) of the Tax Code of 1977, as amended. Accordingly, your client is subject to the fixed tax of P1,000.00 prescribed in Section 192(3)(bb) of the Tax Code of 1977, as amended, and to the 6% broker's tax based on its gross compensation consisting of 15% of the selling price, pursuant to Section 208 of the same Code. Very truly yours, RUBEN B. ANCHETA Deputy Commissioner