Publishing Opinion No. 8; s. 1973 dated January 11, 1973 and Opinion No. 130-A, s. 1972 dated September 21, 1972 of the Honorable Secretary of Justice

September 18, 1974 REVENUE MEMORANDUM CIRCULAR NO. 55-74 SUBJECT : Publishing Opinion No. 8; s. 1973 dated January 11, 1973 and Opinion No. 130-A, s. 1972 dated September 21, 1972 of the Honorable Secretary of Justice TO : All Internal Revenue Officers and others concerned For the information and guidance of all concerned, there are quoted hereunder Opinion No. 8; s. 1973 dated January 11, 1973 and Opinion No. 130-A, s. 1972 of the Honorable, the Secretary of Justice, clarifying Opinion No. 130, s. 1972 dated September 4, 1972 regarding the tax exemption of certain cottage industries engaged in embroidery, dressmaking and tailoring under Section 16 of Republic Act No. 3470, as amended by Republic Act No. 5326 otherwise known as the NACIDA law, to wit: "OPINION NO. 8; s. 1973 "Republika ng Pilipinas KAGAWARAN NG KATARUNGAN Department of Justice Manila "January 11, 1973 "The Commissioner of Internal Revenue "Manila S i r: "This is with reference to your letter "requesting reconsideration" of this Office's Opinion No. 130, series 1972, (ruling that certain cottage industries commonly called "subcontractors", registered with the NACIDA and engaged in embroidery, dressmaking, or tailoring, are entitled to tax exemption under Section 16 of the NACIDA law) "insofar as it covers ordinary tailors or dressmakers". "You state that "a reading of the opinion will readily draw the conclusion that even ordinary tailors or dressmakers . . are entitled to tax exemption" and that if said "ruling . . . is not amended . . . all the ordinary tailors and dressmakers will register their shops with the NACIDA in order to claim [said] exemption". "In reply, I wish to refer to a supplemental opinion of this office on the same subject (No. 130-A, same series) a copy of which is herewith enclosed which should set aright any doubt on the matter and which I hereby reiterate. Needless to say, as it is clear that the said opinion applies only to the "sub-contractors" described in the NACIDA Administrator's query on which said opinion was rendered, a reconsideration of said opinion along the line you suggest is not necessary. "Please be guided accordingly. "Very truly yours, "(SGD.) VICENTE ABAD SANTOS "Secretary of Justice " OPINION NO . 130-A s . 1972 "September 21, 1972 "Fiscal Martin Paulate "Jolo, Sulu S i r: "In connection with your telegram asking for clarification regarding the exemption from taxes of tailorshops registered with the NACIDA, enclosed herewith is a copy of Opinion No. 130, s. 1972, which should resolve your doubts on the matter. "I wish to emphasize that the opinion is limited in application to "sub-contractors, registered as cottage industries with the NACIDA, who contract for the embroidery, dressmaking, or tailoring of materials furnished them by contractors who sell or export the finished products which was particularly the subject of the NACIDA Administrator's query on which 1 rendered the opinion. (See 2nd par. of Opinion.) "Very truly yours, "(SGD.) VICENTE ABAD SANTOS "Secretary of Justice In view of the abovequoted opinions of the Department of Justice, this Office reiterates its stand and hereby adheres to its ruling that an ordinary tailor or dress shop although registered with the NACIDA is subject to the payment of fixed and percentage taxes pursuant to BIR Ruling No. 72-001 dated January 19, 1972 on the question of whether or not a tailor shop registered with the NACIDA is exempt from the payment of fixed and percentage taxes under the provisions of Republic Act No. 3470, as amended by Republic Act No. 5326, which reads: "BIR RULING NO. 72-001 "Dated January 19, 1972 3rd Indorsement xxx xxx xxx "Although Section 11 of Republic Act No. 3470, as amended by Republic Act No. 5326 includes tailoring industries as among the cottage industries registrable with the NACIDA, however, a tailor shop although registered with the NACIDA, which merely receives orders from customers for the sewing of a suit, pants, barong tagalog, shirt or the like and charges fees only for the service or labor of sewing, is not a cottage industry within the purview of Republic Act No. 3470, as amended. Consequently, it is subject to the payment of the fixed tax of P50.00 and the 3% contractor's tax imposed in Sections 182(A)(1) and 191(13) both of the Tax Code, as amended by Republic Act No. 6110. "It should be noted that Republic Act No. 3470, as amended, includes within its purview only those engaged in the production, manufacture and sale of things and not of services. The tailor shop involved in this case is engaged in the sale of services. "In this connection attention is invited to the fact that pursuant to the Nacida Law (Republic Act No. 3470, as amended), one of the duties of the NACIDA is to promote the effective merchandising of cottage products in domestic and foreign market so that those engaged in such industries will be placed on a basis of economic security and towards this end the Board itself may, if necessary, market the cottage products for the producers. This particular provision in the law clearly proves that what the law intends to include within the purview of the tax exemption therein provided for are industries which are engaged in the production, manufacture and sale of things and not of services." ENFORCEMENT AND PUBLICITY All internal revenue officers and others concerned are enjoined to be guided accordingly and to give this circular as wide a publicity as possible. MISAEL P. VERA Commissioner of Internal Revenue