3% of Quarterly Gross Receipts Imposed on Direct Hire Contractor

March 30, 1989 BIR RULING NO. 050-89 115, 238 000-00 050-89 Gentlemen : This refers to your letter dated February 6, 1989 stating that that Office has indulged in hiring Asian Utility Vehicles (AUV) directly from owners of said vehicles referred to as Direct Hire Contractor (DHC). The hiring shall be covered by individual contracts pursuant to Board Resolution No. 203 dated December 14, 1988. You are requesting clarification on the following: cdtech 1. Kind and percent of tax to be imposed against the Direct Hire Contractor; 2. Whether the Direct Hire Contractor is required to register with the Bureau of Domestic Trade; and 3. Whether the Direct Hire Contractor is required to issue an official receipt. In reply thereto, please be informed that 1. The Direct Hire Contractor shall be considered as a person who transports passenger or freight for hire, shall pay a tax equivalent to 3% of his quarterly gross receipts pursuant to Section 115 of the Tax Code, as amended. Your money payment to the Direct Hire Contractor shall be subject to 1% expanded withholding tax pursuant to Revenue Regulations No. 6-85 as amended by Revenue Regulations No. 13-86 if the same amounts to at least P2,000.00 per month regardless of the number of shipments during the month. Moreover, as a government-owned or controlled corporation, you should deduct and withhold the 3% common carrier's tax before making money payment to the Direct Hire Contractor pursuant to Revenue Regulations No. 20-86 as amended by Revenue Regulations No. 4-88. 2. It is not within the province of this Office to answer the question as to whether or not the Direct Hire Contractor shall register with Bureau of Domestic Trade. Please direct it to the said Office which has jurisdiction on the matter. 3. Pursuant to Section 238 of the Tax Code, as amended, the Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the requirements regarding the issuance of receipts or sales or commercial invoices. Obviously, the rationale thereof is that for such group of people conducting marginal economic activity, public interest is served but when such group is allowed to take advantage of modest opportunities without being hampered with government requirements that they cannot comprehend or comply anyway. (BIR Ruling NO. 311-87) Since you will be requiring the Direct Hire Contractor to affix his signature thru a payroll to evidence his receipt of your rental payment, this Office hereby exempts him from issuing a receipt to you. Very truly yours, (SGD.) JOSE U. ONG Commissioner