BIR Ruling No. 087-65

August 12, 1965 BIR RULING NO. 087-65 Messrs. Sycip, Gorres, Velayo & Co. P. O. Box 589, Manila Attention : Tax Department Gentlemen : This has reference to your letter dated March 31, 1965 stating that your contractor client, the U.S. Industries Philippines Inc., in performing service orders usually requires its customers to sign a Service Order contract; that one of the conditions set forth in the contract is for the contractee to provide your client's personnel with adequate transportation to the place of destination and back to Manila, as well as adequate board and lodging in transit and while on the work; and that when the contract is signed and accepted by the contractee, your client first advances to its personnel assigned to do the job, transportation and living expenses or meal allowances which are subsequently re-imbursed by the contractee. You now request confirmation whether the aforesaid transportation and meal allowances advanced by your client for the account and benefit of the contractee do not constitute part of its taxable gross receipts for purposes of the 3% contractor's tax imposed by section 191 of the Tax Code. In answer thereto, I have the honor to inform you that this Office does not share your opinion that the said transportation and meal allowances allegedly advanced by your client, do not constitute part of its taxable gross receipts. The pertinent provision of your client's service contract provides as follows: "11. Under the terms of our latest union agreement, employees working out of town are entitled to a meal allowance of P7.00 per day in addition to transportation and lodging expenses. These charges are chargeable against your account and you are therefore under no obligation to provide same." It is clear from the foregoing quoted provision that the furnishing of the aforesaid expenses is the obligation of your client as employer. Your client, on the other hand, charges such expenses to the contractee. In effect, therefore, the total contract price to the contractee constitutes of the basic agreed price plus the aforesaid expenses which amount constitutes of the taxable gross receipts of your client. cdtech Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue