Collection of Percentage Tax on Service Charge paid by Customers to keepers of Hotels and Restaurants

November 12, 1968 REVENUE MEMORANDUM ORDER NO. 03-69 SUBJECT : Collection of Percentage Tax on Service Charge paid by Customers to keepers of Hotels and Restaurants TO : All Regional Directors and Revenue District Officers It has become standard operating procedure for some hotels and restaurants, especially those of the higher class, to collect service charge which is usually 10% of the amount of all bills payable by customers. It has been reported, however, that the service charge is not included by the keepers as part of their gross receipts when paying the percentage tax under Section 191 of the National Internal Revenue Code, presumably on the ground that the service charge is intended to be paid to the employees. Whether the service charge is ultimately paid to the employees or not, the fact remains that it forms part of the gross receipts of the hotel or restaurant and, therefore, subject to the 3% percentage tax provided for by Section 191 of the National Internal Revenue Code. In view of the foregoing, verification should be caused to be made of the business tax returns of hotels and restaurants for the purpose of collecting the percentage tax on service charges being collected by them. To avoid frequent or multiple examinations of business tax returns, however, the verification or investigation should be timed with the regular examination being made for business tax returns. Needless to say, examination should be done with utmost courtesy. MISAEL P. VERA Commissioner of Internal Revenue REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE MANILA December 26, 1968 MEMORANDUM for- The Commissioner Pursuant to Revenue Special Order No. 39-68, the Committee respectfully submits proposed Revenue Memorandum Order No. __ implementing Memorandum Circular No. 210 of the President of the Philippines entitled "Promulgating Rules Governing the Controversion of Compensation Cases Involving the Government as an Employer." Respectfully submitted, RESTITUTO F. BACAREZA (Chairman) SIMEON B. PRUDENCIO (Member) RICARDO MATEO (Member) VICENTE SANCHEZ (Member)