Non-taxability of the Sales Representatives

October 21, 1959 BIR RULING NO. 545-59 Ozaeta, Gibbs & Ozaeta Attorneys-at-Law Magsaysay Building 520 San Luis St., Manila Attention : Benjamin M . de Leon Gentlemen : In reply to your letter dated August 6, 1959, I have the honor to inform you that a sales representative who enters into an agreement with the Company to sell the latter's products on a commission basis, under the terms and conditions set forth in the attached "Agreement Form", is a commercial broker within the contemplation of section 195 of the Tax Code. The provision in the contract that the work should be done in accordance with the rules, regulations and instructions of the Company, does not operate to create the relation of employer and employee between the Company and the sales representative. Such provision is frequently contained in brokerage contracts, for a Company is expected to provide for measure for the protection of its business as well as its products. Moreover, the provision in the contract that not employer-employee relationship should exist between them, makes our view all the more apparent that the sales representative should be considered a commercial broker and not an employee of the Company. Accordingly, so-called sales representatives are not employees within the purview of the Withholding Tax Law, and, therefore, no tax may be withheld from the compensation paid them by the Company. However, as a commercial broker, he and other sales representatives working under the same circumstances, are subject to the fixed and percentage taxes prescribed in section 182(A)(3)(s) and 195 of the Tax Code. cdll Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue