Gross Payments to the Contract Hauler are Subject to 1% Expanded Withholding Tax

September 1, 1987 BIR RULING NO. 257-87 51 (f) 000-00 257-87 Gentlemen : This refers to your letter dated June 9, 1986 requesting a ruling as to whether contract haulers are subject to the 1% expanded withholding tax. It is represented that on January 23, 1985 an agreement was entered into by Gorones Development Corporation (Gorones) and Paper Industries Corporation of the Philippines (PICOP) whereby Gorones has agreed to move "Danipas chips and SMP chips" of PICOP compound initially; that later the area of operations may be expanded to include moving veneer blocks and other log handling jobs which are currently being done by PICOP's WDD Log Distribution Section; that the equipment rate will be at PICOP current hauling rate of P7.00/cubic meter +15% mark-up and current loading rate of P6.50/cubic meter +15% mark-up subject to review after six (6) months; that the volume measurement shall be on the basis of per truck load basis; that Gorones shall furnish on their account drivers and helpers of all units; and that PICOP shall supply Gorones with fuel and oil subject to availability, at a price similar to what is being charged to other contractors. In reply thereto, I have the honor to inform you that under Section 1 (e)(2)(e) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 8-85, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations, gross payments to Gorones as transportation contractor (contract hauler) are subject to the expanded withholding tax of 1%. The aforementioned agreement entered into by Gorones and PICOP is not a lease of equipment, the rentals of which are not subject to the expanded withholding tax. Such being the case, PICOP is correct in withholding the 1% expanded withholding tax on gross payments to Gorones. adc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner