Tax Liabilities of NCE Enterprises

September 16, 1981 BIR RULING NO. 178-81 205-15 000-00 178-81 Atty. Nelson D. Empalmado 8th Floor, Rufino Bldg. Ayala Avenue, Makati Metro Manila S i r : This refers to your letter dated July 22, 1981 requesting a ruling as to the tax liabilities of your client, NCE Enterprises. You represented that your client is engaged in the importation and distribution of "Reflective Sheets"; that it entered into a contract for the supply and delivery of the following: 1. White and yellow reflective sheets bonded to aluminum plates with sizes 390 mm. x 10585 mm. and 210 mm. x 960 mm. 2. Sticker with sizes 60 mm. x 100 mm. and 30 mm. and 50 mm. In No. 1, your client imports the reflective sheets, buys locally the aluminum plates on which the reflective sheets are bonded by a third party; that said party delivers the reflective sheets bonded to the aluminum plates to your client which, in turn, delivers the same to the customer. In No. 2, your client imports the reflective sheets and contracts a third party to fabricate the stickers. The third party prints the figures, letters and numbers on the reflective sheets as specified by the customer and cuts the same into specified sizes, which your client in turn delivers to the customers. With respect to the consideration for the stickers, the customers withhold 3% of 15% as expanded withholding tax on income payments to printers and 3% contractor's tax; and that no tax is withheld on the consideration for the reflective sheets bonded to aluminum plates. For the importation of the reflective sheets, your client pays advance sales tax, while the sales tax on the aluminum plates are billed separately to your client by the supplier. In reply, please be informed as follows: 1. The reflective sheets bonded to the aluminum plates when sold by your client are no longer subject to any internal revenue tax since the same were imported by your client which paid the advance sales tax thereon. 2. Under the contract for the supply and delivery of stickers, your client is a printer and, therefore, the consideration paid therefor constitutes its gross receipts subject to contractor's tax. If the stickers are supplied to a government agency, the contractor's tax shall be deducted and withheld from the income payment to your client and remitted by said agency to this Bureau in accordance with Republic Act No. 1051, as implemented by Revenue Regulations No. 16-77. The income payments are also subject to the expanded withholding tax of 3% of the 15% thereof, in accordance with Section 1(e)(2)(e) of Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79, implementing Section 53(f) of the Tax Code, as amended. cdtech Very truly yours, RUBEN B. ANCHETA Acting Commissioner