BIR Ruling No. 350-61

August 14, 1961 BIR RULING NO. 350-61 Mrs. Pedro Tanguilig Masinloc, Zambales M a d a m : Reference is made to your letter dated August 9, 1961, requesting information as to what constitutes your taxable receipts under your contract with the Benguet Consolidated Mining Company. From your letter, the following facts appear: "That TANGUILIG, if during the leading of a ship with chrome bearing iron ore at the Company pier which is located approximately four thousand five hundred north thirty-five degrees west of the Masinloc church tower, is requested by the Master of said ship to supply men to trim ore in the holds or to stow ore between deck, or to do any other work at ship's expense, Tanguilig, acting as an independent contractor, shall employ men necessary for the said work and shall obtain from the Master of the ship a statement accepting the charge for such work; it being understood that the amount charged shall be that of the minimum wage except for caputaz in charge of each group, plus twenty percent (20%) over that amount , the twenty percent to be equally divided between TANGUILIG and BENGUET to cover risk and expense for the employment of the men and to cover cost of collection of account for BENGUET, and is further understood that agreement must first be reached between TANGUILIG, BENGUET and the Master of the ship before any work is undertaken." (Rider No. 2 to your contract registered as Doc. No. 1, series of 1952, Notary Public Atilano Ediller) You explained further the scope of your work under the contract as follows: "a. Upon request of the Master of the Ship, I recruit the necessary men who are placed at the disposal of the BCNG Wharf Dept. Head who thereafter turns these men over to the ship's Master who assigns the work to be done and who exercises complete control and supervision over them while performing the job on board the vessel; "b. Next, I accomplish the daily labor reports and prepare the payroll on forms furnished to me by the BCMC; "c. Finally, at the end of every payroll period I receive the money corresponding to the earned wages of the laborers plus an amount equivalent to 10% thereof as my compensation. Disbursements of the BCMC for the laborers' wages plus my compensation on of 10% are evidenced by one and the same company voucher, a fact which has complicated matters for me." Your participation under the contract appears to consist solely of the recruiting of casual laborers. You do not seem to have the laborers under your employ. You only look for them and deliver them to the master of the ship who thereafter assumes control over them and assign them the work to do. You do not yourself participate in the work nor do you have any control or supervision over them. To our mind, the services you render to the Company include only recruitment of the laborers, preparation of the payroll and the payment to them of their wages. Even their wages are determined by the Company, not by you. Since your participation does not include actually the performance of the work but only to the extent stated in the preceding sentences, and for which you are paid a compensation equivalent to 10% of the total payroll, your actual receipts for the services rendered consist only of this 10% of the total payroll. As labor recruiter, you are an independent contractor within the purview of Section 191 of the Tax Code. Accordingly, your receipts which are subject to the 3% tax prescribed in said section of the Tax Code consist only of the 10% of the total payroll which is paid you by the company. Very truly yours , (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue