Reinvestigation and Reassessment of the Case of Mr. Arturo Aligada

December 9, 1958 BIR RULING NO. 731-58 The Regional Director BIR Regional District No. 3 Manila S i r : There is transmitted to you herewith the entire record of the case of Mr. Arturo Aligada, c/o Luzon Advertising, involving the amount of P38,137.66 as percentage (sales) tax, for reinvestigation and reassessment in the light of the ruling stated below. Neon tube signs manufactured and sold by the taxpayer are subject to 30% sales tax. However, if it is true as alleged by taxpayer that some signs are not sold but only leased, such signs cannot be subjected to the sales tax. The Advertising Associates case contemplated only the sale of such signs. It is stated in this connection, however, that the alleged lease is a misnomer. There is actually no lease because the taxpayer retains possession and control thereof. Moreover, the taxpayer takes care of the operation and maintenance of the same. Actually, the alleged rentals paid by taxpayer's customers are advertising fees. For undertaking the neon signs advertising, Luzon Advertising is constituted a business agent. As business agent, it is subject to 3% tax on its gross receipts. However, before August 24, 1956, its receipts from such advertising is not subject to either the sales or contractor's tax. It is only subject to the P60.00 business agent's fixed tax. In resume, Luzon Advertising is subject to the sales tax on neon tube signs sold and to the contractor's tax on neon signs allegedly leased. It is considered engaged in two lines of businesses, that is as manufacturer and business agent. However, it is subject to the 3% tax on its receipts from advertising fees only beginning August 24, 1956. For purposes of the business agent's fixed tax, you are advised to be guided the following rates: Before 1956 P60.00 p. a. In 1956 P20.00 p. a. From 1957 P75.00 p. a. Early report of the action hereon is desired. aisadc Very truly yours, (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue