Non-payment of the 3% Publisher's Tax on the Amount Received from Government

September 29, 1960 BIR RULING NO. 439-60 Mr. Crispin Llamado Atty. at Law 32 Kanlaon, Quezon City S i r : Reference is made to your letter dated July 29, 1960, requesting information as follows: cdtech "The Rizal Publishing Company is at present engaged in business as publisher being in possession of the corresponding privilege tax receipt as publisher on which it pays percentage tax equivalent to 3% of their gross receipts. This company enters into agreements with authors of textbooks on a royalty of 5% payable to the authors based on the total of the textbooks by the company. "At present the above arrangement relating to the printing, publication and sale of the textbooks is changed, because the Government has of late decided to publish the textbooks used in the public schools. Under this new arrangement, my client, the Rizal Publishing Co., would transfer to the Government the right to print, publish and sell the copyright they have with authors in consideration of the payment to my client by the Government of the sum of P0.50 per copy of the textbooks printed by the Government. The Government will undertake for its account the printing, binding, publication and sale of the textbooks. "Information is requested on whether my client should continue paying the tax of 3% as publisher on the amount it would received from the Government at 50 a copy, or whether my client should pay income tax on the said amount after deducting the royalty it would pay to the authors and other deductible expenses." In answer thereto, I have the honor to inform you that, based on the aforequoted circumstances, your client need not pay the 3% publisher's tax on the amount it will receive from the government as consideration for transferring to the latter its right to publish and sell the textbooks covered by the right transferred. Neither is said amount subject to any other business tax. The amount in question is, however, subject to the income tax, minus of course the deductions allowed by law. It is also subject, in a proper sense, to the additional residence tax without the benefit of deduction. lexlib Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue