Tax Imposed on Services Rendered as Brokers

June 25, 1958 BIR RULING NO. 338-58 Compania General de Tabacos de Filipinas P. O. Box 143, Manila Gentlemen : This is with reference to your letter to the City Treasurer of Manila which was indorsed to this Office for comment. You claimed that the 6% broker's tax prescribed in Section 195 of the National Internal Revenue Code should not be collected on the amount of P19,404.32 because this amount represents the compensation paid during the month of February, 1957 by Central Azucarera de Bais and Central Azucarera de Tarlac to you as general managers, and not as commercial brokers. Your contention, however, is not supported by the terms of your agreement with the Central Azucarera de Tarlac dated December 28, 1955, which reads as follows: "(a) SALES A net commission of two per centum (2%) on the gross proceeds of all sales of sugar, molasses and other products produced or manufactured and owned or controlled by the PRINCIPAL, whether so produced or manufactured by the PRINCIPAL from sugar remelted or from sugar cane raised or purchased by it from sugar cane supplied under milling contracts made or to be made between the PRINCIPAL and planters or purchased or otherwise acquired or controlled for sale by said PRINCIPAL, said commission to be in addition to any necessary or proper commission or expense actually paid or to be paid by the GENERAL MANAGERS according to the custom of the trade, to any broker, factor or agent residing within or without the Philippine Islands, and in addition to the actual and necessary or proper cost of handling and marketing said sugar, molasses and other products." "(b) Purchases . . . All importations especially made for the PRINCIPAL shall be charged up to the PRINCIPAL at cost, including actual expenses connected with the delivery of the same plus two per centum (2%) commission to be charged to the PRINCIPAL by the GENERAL MANAGERS. . ." "(c) Minimum Commission It is understood and agreed that the GENERAL MANAGERS are entitled to receive from the PRINCIPAL a minimum commission under (a) and (b) above of Fifty Thousand Pesos (P50,000.00) during every fiscal year during which the GENERAL MANAGER act as such for the PRINCIPAL." The abovequoted provisions of your agreement with Central Azucarera de Tarlac clearly show that the amount of P19,404.32 was received by you in consideration of your services as brokers and not as managers of the corporation. Such being the case, the 6% broker's tax paid thereon was collected in accordance with Section 195 of the Tax Code. prcd Very truly yours, (SGD.) JOSE P. TRINIDAD Acting Commissioner of Internal Revenue