Commissions Received by Barbers and Beauticians are Subject to Income Tax

April 5, 1991 BIR RULING NO. 060-91 72 (a) & 50 (b) 000-00 060-91 Gentlemen : This refers to your letter dated October 12, 1990 stating that you are a stock corporation duly registered with the Securities and Exchange Commission; that the primary purpose for which you were organized is to establish, maintain and promote social, cultural, recreational and athletic activities on a non-profit basis among your stockholders/members only; that presently, you are handling the operations of the barber shop and beauty parlor and have contracted barbers/beauticians as independent contractors; that the contracts entered into indicates that there is no employer-employee relationship between you and the barbers/beauticians; and that the barbers/beauticians are paid on commission basis. Based on the foregoing representations, you now request in effect a ruling as to whether or not the commissions being received by your said barbers/beauticians are subject to withholding tax. In reply, please be informed that under Section 72 (a) of the Tax Code, as amended, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with regulations to be prepared by the Secretary of Finance. The term "wages" means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash. (Sec. 71 (a), Tax Code) On the other hand, under Section 1 of Revenue Regulations No. 6-85, as amended, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations, implementing Section 50(b) of the Tax Code, as amended, only those persons enumerated therein shall be subject thereto on specified income payment they received. Such being the case, and since no employer-employee relationship exist between you and your barbers and beauticians and since barbers and beauticians are likewise not included among those enumerated in Revenue Regulations No. 6-85, as amended, your said barbers and beauticians are not therefore, subject to the withholding tax on compensation imposed under Section 72(a) of the Tax Code, as amended, and to the expanded withholding tax prescribed under Section 50(b) of the same Code. It is however, understood, that said barbers and beauticians are subject to income tax on said commission which should be declared and paid upon filing their Individual Income Tax Return. Very truly yours, (SGD.) JOSE U. ONG Commissioner