Improvement Systems, Inc. is an Independent Contractor Subject to 4% Contractor's Tax

September 30, 1986 BIR RULING NO. 202-86 170 000-00 202-86 Gentlemen : This refers to your letter dated April 25, 1986 inquiring in behalf of your client, Improvement System, Inc. as to the rate of taxes it should pay for the following: 1. Program fees received from clients. 2. Activity fee received from clients. 3. Sale of tickets to the shows. It is represented that your client, Improvement Systems Inc., is a duly registered domestic corporation which is operating as a franchisee of John Robert Powers (Asia) Ltd.; that its primary purpose is "to disseminate, provide or otherwise make available to all persons of all ages, advise or information or guidance on self-improvement such as, but not limited to personality development, personal growth, personal grooming, hygiene, poise, bearing, figure management, control and maintenance, physical fitness, diet and nutrition, charm, social grace/behavior, hair-styling, make-up, wardrobe selection including choice, application and use of cosmetics, beauty aids, fabrics, clothing, accessories, shoes and other items of personal use, fashion trends, fashion design, art orientation/consciousness, skills improvement, home beautification, vocal expression, effective communication, business psychology, and public relations, salesmanship, . . .", that the company derives the following fees from its clients: fees from the programs offered, an activity fee for the kits, materials and various related activities, that the company sells tickets for the actual modelling shows to help defray the actual expenses in putting up the show. In reply, please be informed that Improvement Systems, Inc. is an independent contractor subject to the 4% contractor's tax based on its gross receipts consisting of the program fees and the activity fees collected from its clients, pursuant to Section 170 of the Tax Code, as amended. However, the income derived from the sale of the tickets to shows sponsored by you is not subject to any internal revenue business tax but only to income tax. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue