Domestic Corporation Engaged in the Sale of Services is a Contractor Subject to 4% Contractor's Tax

November 19, 1987 BIR RULING NO. 368-87 170 000-00 368-87 M a d a m : This refers to your letter dated October 5, 1987 requesting for and in behalf of your client, Karina, Inc., confirmation of your opinion that it falls within the purview of an independent contractor subject to 4% tax on its fees derived from services to non-resident firms in the following manner: 1. Karina, Inc. which is a domestic corporation organized and existing under the Philippine laws informs its clients abroad of styles and fashions current prices and trends, material availability, shopping conditions and production availability; 2. Place orders in behalf of its clients solely upon receipt of written instructions from clients; upon request confirm receipt by vendors of the clients; collect samples and inspect the merchandise so ordered for compliance with the clients specifications; and arrange for shipment of the merchandise; 3. Exercise no control of the price of any such merchandise except to negotiate/obtain the lowest possible price for the benefits of the clients; 4. Not accept any remuneration for its services other than the service fees of 5% of the invoice cost F.O.B. Philippines. In reply, please be informed that your query is answered in the affirmative. Under the facts as represented, your client, Karina, Inc. is engaged in the sale of services, hence, it is a contractor subject to the 4% contractor's tax under Section 170 of the Tax Code, as amended. iatdc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner