Tax Liability of a Contractor

October 6, 1960 BIR RULING NO. 448-60 Messrs. Jose L. Torres & Co. Certified Public Accountants Room 715 Roman R. Santos Building M a n i l a Gentlemen : Reference is made to your letter dated September 15, 1960, requesting opinion, whether or not, under the following circumstances, "B" is a manufacturer or a contractor and the contract between "A" and "B" violates any ruling of the Department of Finance and Bureau of Internal Revenue on tax-exempt industries. lexlib "1. A (a corporation) is a poultry feed manufacturer, tax-exempt under Republic Act 901 with a factory and office at Bulacan province. 2. B (a corporation) is also a poultry feed manufacturer, tax exempt under Republic Act 901 and also engages in buying and selling of general merchandise with an office in Rizal province. 3. A should only concentrate its business in Luzon and B is willing to accept the proposal of A provided B will manufacture A's brand of feed in the Visayas. 4. A will supply B with the following: a. Imported raw materials necessary to keep the high quality of A's feed. A will buy all other local raw materials and factory supplies. The title to these raw materials and supplies remains with A. b. Technical know-how and will supervise the process of manufacturing the feeds. 5. B will supply and under-take the following: 1. Land 2. Building 3. Machinery and Equipment 4. Hire and maintenance of personnel 5. May sell finished feeds. In reply thereto, I have the honor to inform you that "B" is a contractor subject to the 3% tax imposed on Section 191 of the National Internal Revenue Code. In this connection, please be further informed that the determination whether or not the contract between A and B violates any ruling of the Department of Finance or Bureau of Internal Revenue on tax-exempt industries, is not under the jurisdiction of this Office. It is suggested that your query regarding this matter be addressed to the Department of Finance. cdtech Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue