BIR Ruling No. 188-83

November 4, 1983 BIR RULING NO. 188-83 Gentlemen : This refers to your letter dated August 22, 1983 requesting confirmation of your opinion that the gross sales derived by your client, ABSOLUTE SOUND, INC. from the sale of blocked television time (TV airtime) is not subject to the 3% contractor's tax under Section 205 of the Tax Code, or to the 6% commercial broker's tax under Section 208 of the same Code. It is represented that your client, a domestic corporation, is primarily engaged in all forms of marketing activities like, buying and selling at retail or wholesale, goods, wares and merchandise including audio-visual recordings and productions of all kinds of anything of value, tangible or intangible which is or may become an article of commerce; that your client is also engaged in the business of buying blocked TV time and reselling the same to third parties such as advertising agents and advertiser's that in pursuance of the aforesaid objectives, your client enters into a contract with media establishments such as TV stations, whereby for a specified sum, the latter sells to your client TV airtime and/or facilities with the right to telecast any program such as canned films, tape of live programs, and your client in turn sells commercial spots within the airtime to third parties like advertising agencies or advertisers; that under the rules of the Broadcast Media Council, your client as buyer and seller of TV airtime, is prohibited from acting as an advertising agency or from conducting any advertising; and that under the Code of Ethics Rules and Regulations for Advertising and Sales Promotion promulgated by the Philippine Board of Advertising, advertising agencies are prohibited from engaging in the whole-selling of media by outright purchase of block of space or time from the made establishments to be resold to advertisers or other space/time users. cdta In reply, please be informed that under the foregoing facts and circumstances, your client is not subject to the fixed annual tax of P100.00 imposed by Section 192(1) of the Tax Code, and to the 3% contractor's tax imposed by Section 205 of the same Code. This is so because, by buying and selling TV airtime, your client is not rendering any service. The theory of the 3% contractor's tax is that, it is a tax on the sale of services or labor. Furthermore, your client is not subject to the 6% broker's tax imposed under Section 208 of the Tax Code since it does not sell or bring about sales or purchases of merchandise for other persons. However, your client is subject to income tax on income derived from said sale of TV airtime. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue