BIR Ruling No. 072-64

December 21, 1964 BIR RULING NO. 072-64 3rd Indorsement Respectfully returned to the General Manager, Government Service Insurance System, (Attention: Manager, Legal Department), the attached papers relative to the cases of Rieco Enterprises, Amon Trading Corporation and Steelwood Sales Enterprises, suppliers of construction materials to that System. Opinion is requested on the question of whether or not the above-named entities are subject to the 3% contractor's tax prescribed by Section 191 of the Tax Code, by virtue of their contracts to supply construction materials to the GSIS. LLpr It appears that the said entities were the highest bidders who supplied construction materials to be used by the GSIS for its housing projects. The GSIS, after payment of the total amount for the purchase of construction materials from each of the aforementioned entities, deducted the corresponding 3% contractor's tax believing that, pursuant to the contracts entered into by and between the said entities and the GSIS, they are contractors within the purview of Section 191 of the Tax Code. The suppliers of construction materials are either importers, dealers, or manufacturers. The sales by importers and dealers are not subject to any other tax. The sale by manufacturers are subject to the sales tax but this tax cannot possibly be computed by the System at the time of payment because from the selling price there is yet to be deducted the cost of the raw materials used in the manufacture. Since no tax is due on the sale by importers or dealers of construction materials and since in the case of a supplier-manufacturer, the tax cannot be determined and computed at the time of payment, the System is not under obligation to withhold any amount under the provisions of Republic Act No. 1051. For internal revenue purposes, only those enumerated in Section 191 of the Tax Code are considered contractors, subject to the 3% tax prescribed therein. prll (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue