Security Guards' Salaries Form Part of Taxable Gross Receipts of Security Agency for Purposes of the 4% Contractor's Tax

March 28, 1985 BIR RULING NO. 049-85 205 271-81 049-85 Gentlemen : This refers to your letter dated August 31, 1984 which was referred to this Office by Lieutenant General Fidel V. Ramos, AFP Chief of Constabulary and Director-General of the Integrated National Police, in his letter dated September 24, 1984, requesting, in effect, that the salaries of security guards should not form part of the gross receipts of the security agency which employed them for purposes of computing the 4% (formerly 3%) contractor's tax under Section 205 of the Tax Code, as amended by Presidential Decree No. 1959. In reply, please be informed that your request cannot be granted for lack of legal basis. This Office has consistently ruled that salaries of security guards form part of the taxable gross receipts of a security agency for purposes of the 4% contractor's tax under Section 205 of the Tax Code, as amended. The reason is that the salaries of the security guards are actually the liability of the agency and that the guards are considered their employees; hence, for percentage tax purposes, the salaries of the security guards are includible in its gross receipts. (BIR Ruling No. 271-81 citing BIR Ruling No. 69-002). The rulings cited in your letter which hold that amounts paid as salaries of security guards are not considered part of the gross receipts of the security agency for purposes of the percentage tax have been revoked by the above ruling which finds support in the case of Resty Arborn Singh vs. Commissioner, CTA Case No. 1901, December 5, 1970. aisadc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner