BIR Ruling No. 048-62

February 15, 1962 BIR RULING NO. 048-62 Messrs. Ablaza, Mangahas & Associates Certified Public Accountants 507-508 Garcia Building Rizal Avenue, Manila Attention : Mr . Angel G . Ablaza Gentlemen : This is with reference to your query as to the business tax liability of a corporation under the following facts: "1. The primary purpose of this corporation is to engage in the issuance of membership cards exclusively to students who, upon admission as bona-fide members, shall pay the corporation an annual fee of P12.00 each member: cdtech "2. The corporation shall, be previous arrangements without any compensation, enlist various business establishments, and these establishment so accredited with the corporation shall extend 10% discount to all members of the corporation. The members, who enjoy the 10% discount, shall be allowed to make only cash purchases and required to pay direct to the accredited establishments. By this arrangement, the corporation derives no benefit except that of attracting more members: "3. All bona-fide members shall be covered by a certain kind of insurance, and the corporation shall undertake the payment of the insurance premiums out of the P12.00 membership annual fee. The corporation received no commission. The only monetary benefit it gets is whatever be the excess of the P12.00 annual fee over the costs of insurance premiums and other expenses incidental to its operation." In an investigation conducted by this Office, it was found that the corporation, named Students' Club, Inc. is engaged in the occupation of insurance agent; that the arrangement it has with different business establishments, whereby the latter extend a 10% discount on purchases made by its members, does not benefit the corporation except by way of attracting more students to become members thereof; that each member is insured with the First Quezon City Insurance Company; and that it was Mr. Luis I. Ablaza, Jr., the President and general manager of the corporation, who negotiates with the insurance company for the insurance of the members and receives the corresponding commissions. Such being the case, this Office is of the opinion and so holds that the corporation is not subject to any business tax. However, the officers and employees composing it who solicit or negotiate the insurance of its members are each subject to the occupation tax of P75.00 per annum for insurance agents, pursuant to section 182(B)(1) of the Tax Code. cdt Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue