BIR Ruling No. 115-84

July 6, 1984 BIR RULING NO. 115-84 205-16-000-00-115-84 Gentlemen : This refers to your letter dated May 11, 1984 requesting confirmation of your opinion that the tips voluntarily given by travelers to your porters and turned over to the company, are not subject to the 3% contractor's tax. It is represented that the Philippines Portman, Inc. is the exclusive contractor for the porterage service at the Manila International Airport (MIA) and is authorized by the MIA to collect porterage fee from travelers on a per luggage basis; that the company pays the contractor's tax based on its gross receipts derived from rendering said porterage service; that on account of said porterage service, tips are invariably given by travelers only to the other porters who carry their luggage; that employees including supervisors of the company do not receive tips which however are in addition to their regular salary and other remuneration required by law; that in order to equitably distribute the tips among the porters, employees and supervisors, the company has intervened by monitoring the tips received by the porters; that under the arrangement which is based on honesty system the porters report the individual amount of tips received by them to the company; and that the amount of tips collected are pooled and recorded daily and are allocated as follows: a. 80% is returned to the porters at the end of the same day or shift. The amount returned to a particular porter is based on tips reported by him. b. 20% is retained by the company for distribution to supervisors and for other expenses for the direct benefit of the employees, such as expenses incurred in connection with employees parties, outings, etc. In reply, I have the honor to inform you that since the abovementioned tips are merely collected from the porters and held by the company only for distribution among the porters, employees and supervisors, and since no part of the amount goes into the funds of the company, said tips should not form part of the gross receipts of the company for purposes of the 3% contractor's tax imposed under Section 205 of the Tax Code. "Gross receipts, for purposes of the contractor's tax should not include any money that did not go into the funds of the recipient as its property or that has been earmarked for some other person." (Visayan Cebu Terminal Co. vs. Commissioner, CTA Case No. 719, December 8, 1961). Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner