Firm Engaged in the Business of Rendering Services to Small NACIDA-Registered Enterprises

November 5, 1985 BIR RULING NO. 196-85 205 10-85 196-85 Gentlemen : This refers to your letter dated August 20, 1984 stating that you are engaged in the business of rendering services to the different small NACIDA registered enterprises who are makers of artware items, jars, ballusters, porcelain insulators, dinnerware, etc.; that these NACIDA enterprises hire your services in crushing, milling, and filter pressing their raw materials consisting of ball clay, silica, feldspar, kaolin, talc, lime and others upon their specifications and formulation before they use these in making their products; that your customers furnish their own raw materials but most of the time you are the one supplying the raw materials and labor; and that you use your technical know how and special equipment like crushers, ball mills and filter presses in performing these services. You now request information on the following questions: "1. In performing the aforesaid services as per our customers' job and instructions what kind of license do we have to obtain and what kinds of taxes do we have to pay? "2. By selling raw materials to our customers in accordance with their particular requirements, what kind of tax do we have to pay? In reply, please be informed that for rendering services to your aforementioned customers by crushing, milling, and filter pressing their raw materials consisting of ball clay, silica, feldspar, kaolin, talc, lime and others upon their specifications and formulation, you come within the purview of a contractor subject to the P100.00 annual fixed tax and your gross receipt, i.e. , the whole amount representing the cost of labor and materials supplied by you and paid by your customers is subject to the 4% contractor's tax imposed by Section 205 of the Tax Code, as amended. However, if your customers supply the raw materials, only the cost of the labor shall be considered as your gross receipts subject to the percentage tax. cdtech With respect to the raw materials sold to your customers which materials were previously purchased from different sellers/dealers in the available market, if said materials were not utilized in the services performed by you, you are a dealer subject to the graduated annual fixed tax prescribed in Section 192(2) of the Tax Code. However, if the said materials were utilized in the services performed by you, the cost thereof forms part of the gross receipts subject to the 4% contractor's tax. Very truly yours, (SGD.) TOMAS C. TOLEDO Acting Commissioner