Independent Contractor Within the Purview of Sec. 191 of the NIRC

October 6, 1960 BIR RULING NO. 446-60 Jose L. Torres & Co. Room 715 Roman Santos Bldg. M a n i l a Gentlemen : Reference is made to your letter dated September 9, 1960 wherein you request opinion on the internal revenue taxes to which your client may be liable to, mentioning therein the following: "1. The company will deal in the furniture business. 2. The company will not have any store or display room. 3. The company will only construct the furniture upon receipt of orders from customers. 4. The orders of the customers shall contain specifications as to the actual form, design and materials to be used. 5. The customers will be composed of the following: a Parties engaged in retailing of furniture sets. b Parties who are the end-users of furniture sets." In reply, I have the honor to inform you that under the above facts your client is an independent contractor within the purview of section 191 of the National Internal Revenue Code which in part provides; ". . .; shops for the construction or repair of furniture of any kind, . . . shall pay a tax equivalent to three per centum of their gross receipts." Accordingly, your client is subject to the 3% tax on its gross receipts. However, persons who make orders with the intention to re-sell the same are to be considered manufacturers subject to the 7% sales tax prescribed under Section 186 of the said Code. Regarding the question of whether the Bureau of Internal Revenue has special requirements in the designing of the accounting system of this particular business, you are informed that any system of this particular business, you are hereby informed that any system which will correctly reflect the transactions of the business may be adoptee provided it complies with the provisions of Sections 334-337 of the said Code and to the provisions of Chapter II; Section 11 of Chapter III; Chapter IV on invoices and receipts; Section 14 of the latter Chapter; and Sections 18 and 19 of Chapter V; all Revenue Regulations No. V-1 otherwise known as "The Bookkeeping Regulations". Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue