VAT Ruling No. 108-92

September 23, 1992 VAT RULING NO. 108-92 NIRC Sec. 102 (a) Precedent Ruling 000-00 L. Cruz Enterprises Earthmoving Contractor Mangatarem, Pangasinan Attention: Mr. Carlos C. Cruz General Manager S i r s : This has reference to your letter dated June 29, 1992 which has referred to this office by the Revenue District Officer, Revenue District No. 7, Calasiao, Pangasinan, requesting for a ruling that under your waste moving contract with Benguet Corporation, you are subject to the 10% value-added tax, not the common carriers tax. It appears that under your Waste Moving Contract with Benguet Corporation executed February 3, 1992 you will undertake the following activities: 1. Handling the waste materials incident to the mining activities in the mine site. 2. Breaking of in-place waste by dozer: Whenever necessary, as determined and approved by the COMPANY's Engineering Manager and Pit Operations Manager in coordination with the CONTRACTOR, the breaking of unblasted waste from established pit benches shall be done using bulldozers. Prior to dozing activity, however, the amount of waste to be dozed shall be agreed upon between the COMPANY and the CONTRACTOR. 3. Loading: Loading of blasted and/or broken waste by CONTRACTOR shall be done by front-end loaders and/or shovels, the sizes of which shall be appropriate for the existing working conditions at the 440 Open Pit. 4. Hauling: Hauling of loaded waste to designated dump sites shall be done using 10-wheeler dumptrucks (Isuzu V-10 or equivalent). The specific waste dump locations shall be determined by the COMPANY which the CONTRACTOR shall strictly follow. 5. Pit Maintenance and Other Miscellaneous Works: Construction of all access roads within the CONTRACTOR's area, as defined, and maintenance of these through water spraying, compacting, grading, etc., including bench maintenance like leveling and grading to the desired elevations. In coordination with the Pit Operations Staff, miscellaneous activities related to pit maintenance work shall also be undertake. It is also advised that prior to the implementation of the value-added tax law, you have paid contractor's tax on your gross receipts from the same activity. In reply please be informed that, in general, all sales of service by a contractor are subject to the 10% value-added tax under Section 102(a) of the Tax Code, as amended. The exceptions are the sales of service which are subject to other percentage taxes under Title V of the Tax Code, pursuant to Section 103(J) of the same Code. In other words, transportation contractor is exempt from VAT under Section 103(J) of the Tax Code because it is subject to the common carriers tax of 3% under Section 115, Title V, of the Tax Code. As a common carrier, its activities and those described under articles 1732 and 1733 of the Civil Code involving carrying or transporting of passengers or goods, or both, by land, water or air, for compensation, offering its services to the public. From the nature of its business and for reasons of public policy, it is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of its passengers, according to all the circumstances of each case. Based on the foregoing considerations, it cannot be said that by undertaking the above-stated tasks, i.e., handling of waste materials, breaking of in-place waste by dozing, loading, hauling, pit maintenance, etc., and not being involved in the carriage of goods of a kind that requires extraordinary diligence, you are engaged in business as a common carrier. HEcTAI Moreover, you have been paying the contractor's tax before the implementation of the VAT; thus, indicating that your business is indeed that of a VAT-taxable contractor. Accordingly, this office believed and so holds, that your present tax status as an earthmoving contractor subject to 10% VAT based on gross receipts pursuant to Section 102(a) of the Tax Code shall not be disturbed. Very truly yours , (SGD.) JOSE U. ONG Commissioner of Internal Revenue