BIR Ruling No. 221-61

July 3, 1961 BIR RULING NO. 221-61 NEILS Enterprises 8 Basa St., San Francisco del Monte Quezon City Attention : Ma . Gloria Soriano, Accountant Gentlemen : This is with reference to your letter dated June 29, 1961, requesting information from this Office as to the tax liability of your firm under the facts substantially stated as follows: Neils Enterprises was registered with this Bureau on June 30, 1959, as alleged, the firm paid the C-14 privileged tax sometime in 1959, covered by O.R. No. 2390158. In the early part of 1959, the firm entered into a contract with the Bureau of Public Highways, with an agreement that the former will furnish the latter with 40,000 pieces of "Neils" Motorist Safety Guide", a manufactured traffic device of the firm. For the reason not stated in the query, the Commissioner of Public Highways, in the later part of 1959, suspended the implementation of the contract. In view of this development, the firm suspended its business operation from the 3rd quarter of 1959 up to the present. As alleged, however, the firm is expected to reopen and continue its business operation sometime this month (July). Under the foregoing facts as presented, you now request for information as to whether or not the firm will have to pay any internal revenue tax during the period of suspension of the contract with the Bureau of Public Highways and during the time when the firm's business operation was closed or suspended. In reply to said query, I have the honor to inform you that during the period of suspension of the contract with the Bureau of Public Highways and during the entire period when your business was closed or suspended you are not required to pay any internal revenue taxes provided this bureau was duly notified of the closure or suspension of the business. Otherwise, the firm will have to pay its privilege tax during the period of suspension of operation. cdtech As manufacturer of a traffic device, known as Neils Motorist Road Safety Guide, upon previous order from the Government, you are required to pay the 3% contractor's tax on your gross receipts in accordance with Section 191 of the Tax Code, as amended. This is so in view of the pertinent provision of Section 191 of the Tax Code which provides as follows: ". . .; shops for the construction . . . of mechanical devices, instruments, apparatus, or furniture of any kind, . . ., shall pay a tax equivalent to three per centum of their gross receipts." The firm is, likewise, required to pay the sum of P20.00, representing the contractor's fixed annual tax, pursuant to Section 182(A)(1), in relation to Sections 178 and 180, of the Tax Code, as amended. It is understood that your firm is further subject to the income and residence taxes prescribed by law. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue