Es Eg I Ao Ge Nr Het < NN Eer EE En Gaeener Eet a Cae Oro a Ag Ts Ct Een Repuelic of the Fnilippoyes Court of Tax Appeals. Qurluk Citt ‘Hotel Mabuhay, Inc., ' vs. ~ C.7.A. Case No. 3279 Commissioner of Internal S<Evenue, | EE Ilis 7

DECISION

This case presents no dispute as to the rel- atively simple material fucts but the parties seem to get the better of each other over +y a quibble on the proper. import of the term "gross receipts" there upon directly tacked the percentage tax pre~ | scribed in Section 191 (now Sec. 205) of the Tax Code, It. appears that. on the basis of respondent's examiners report of. investigation petitioner corpo- ration, proprietor and operator of Hotel Mabuhay at A. Mabini St., Ermita, Manila was assessed on May 8, 1980 for a deficiency percentage/contractor's tax on its gross receipts for the year 1976 pursuant to Sections 183(a) and 191 as penalized under Sec- tion 209, all of the Tax Code (now Sections 193(a), 190 etree ena nea a ag I a re pe ee — Se - Se a —y~- > 4s a ~ i i a a RE RS et cae

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DECISION ~

CTA CASE NO. 3 279 -2- 205 and 221, respectively, Tax Code of 1977) in the amount of 222,655.42, subject to the adjust-_ ment. of interest up to the actual date of payment, computed as follows:

lst. gtr.

2nd qtr.

3rd gtr.

4th qtr.

Deficiency 3% tax per InveStigation ...cccecesee3,122.05 25% surcharge for late PayMent .eccccesccee 780.51 “~~ B? 902.56 14% int. fr. 4-21-76 to 5-30-80 @eeececereeseee 2,245.53 = Deficiency 3% tax per investigation .....eeeee 622,940.75 25% surcharge for.

late payment .ccccccccces ____ 135.19 B3,075,04 14% int. fr. 7~21~-76 fO 5-30-80! ....cwmecvens L, 906.47 Deficiency 3% tax per INVESTIGATION 1000000000082, 595.12 25% surcharge for late payment. ....sseeeees 648.78 B3, 243.90 14% int. fr. 10-21-76 TO 3-30-80 wteceecscesees 1,639.46 Deficiency 3% tax per investigation ..ccceeceeeH3, 243. 50 25% surcharge for Late ‘Payment. vevsevevsens 810.88 $4,054.38 143 int. fr. 1-21-77 to 5~30-80 eescececsseses 1,907.18 TOTAL AMOUNT "OL iw. .eekssaeseuees B22,655.2 2 6,148.09 ~ B 4,883.36 On July 14, 1980 petitioner protested the assessment for lack of legal basis but the Same was denied by the respondent Commissioner of Internal Revenue in a letter dated March 30, 1981.

this petition.

191

Hence

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DEC I SION -

CTA CASE NO. 3279 - 3 - Peti t ioner assails t he l egal sufficiency of the repo1rt of findings and avers tha t the 3% pc.r- centa ge tax liabi ity under Section 191 (now 205) o f t he Tax Code had been r ig,ht.ly based on the room rev enues which were separately billed the hotel g.uest:.s as i nd i c a ted i n t he g,uest folios (equival cr.t t o t he invoice} _and accor d i ngly remi !• iced to the re s pondent, as t hus - 1976 - First.

Second

Third

Four til rorAL

Room Revenue

£1 843,524.61 784,282.07 804,011.22 _]~~._!.~.?-.?..:.~!~ fi3,176 ,74S.J4 1'.ax ~~~mpt Il!,- cane - PD 535 p 429,587.00 402 , 380 . 66 477 ,127 .66 .•. ___ ;?.4__1 d02.3;?_ r~l ( 630 , 797.65

Taxable

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Net Incane

!.~ '113,937 . 61 381,901.41 326 ,883.53 -· 423.!. 226_.1]:.

i'"l, 545, 948 . 6.6.

3% 'l,ax pc.id SecU.oi }-'191 Pl2,418.12 11,457. 04 9,806.50 ..11:1.696. 7B t= •16. v373. -'.r.4 Ivloreove r , t he separate billin·J. ,_, the 3% sale s tax and s u b s (~ que n t exclusion of the amount. t!)ereof f rom the computation o ~ t he taxable gross r eceipts has been hewed close to the provisions of Revenue Regu l ation s No . 8-78, dated May 12, 1 978 (Sules Ta ;~ Reg,ulu t ions) '· which petitioner invokes a s equ;:1lly applicabl e to hotel keepers.

The provisions insofar as per t inent reads:

"Computation of sales when Tax is Billed as a Sepurate Item in the Tnvoico.- In the compuLc:ttion of the s:~l os tax im- posed ~nder Sec t i ons 194 , 196, 197 , 193 , 199 and 20 1 of the Tux Code (1977), in relation to General Circular No . 4il, if a manufactur£::. or producer, in fixing the gross selling price of an article sold by him, has included an amount in- tended to cover the sc:tles tax in the ..

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DECISION -

CTA CASE NO. 3279 - 4 - gross selling price of the article, the sales fax shall be based on the gross selling pr ice less the amount intended to cover the tax if 1r:he tax is billed to t he purchaser as a s eparate item in the invoice.

Ualess billed to the pur- chaser a s a separat:.e item in the invoice , t he amounts intended · O cover the sales tax shall be considered as part. of the gross sell ing price of the article sold, and deduction thereof will not be allowed." (Section 5-d) (Underscoring supplied ) .

Suffice it to state -hat the Tax Code to the extent applicable provides:

"A contractor's tax of three (3% ) .Pe r centum of the gross r •.::!ceipts is hereby imposed x x x on proprietors or oper~tors of hotels, molels .;1nd lo~kJing hou ses" and, "the term 'gross 1~ccipts' m~~ns all a~ounts received by the prime or principal contrac tor ~s to the total contract price und iminished by amount paid to the subcont;:act:or under a subcontract arrange- ment . "

(Section 191 (nm.,r Sec. 205) .of the 'I'ax Code) •. The same definition then obtained that the 'gross receipts' found in Section 191 of the Tax Code means the actual groGs proceeds received as appearing on the s ales or corn m~ rcial invoice s or receipts i ssued ft-om time to time by the taxpayer (BIH .l~ uling J.OS.02 dated December 26, 1956)". and, "t:.h.e fact tha t the amount corresponding to the tux due on the consi<..icr- at.ion of t he contract is billed against the custorners 19.3 !.• i I·· I i

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DECISION -

CTA ChSE NO. 3279 - 5 - does not reiieve the cont.r~.ctor from pa:;/ing the tax on the enti e amount r-eceived (BIR Ruling, May 4, 1953) •. "

We find nothing ambiguous nor obscure in the language of the provision insofar as the same is br ought to bear upon t he circumstances of the case at bar.

'rhe 3% contractor's tax lia:.)i.lity of the hotel keeper is assessed and collected o;1 lhc basis of t he "gross receipts" which refe-'rs to the "charges, prices or compensation paid by the guests for their l odging and meal s L:~nd fur f.i t.:ch other cervices and atb~nti un <..t • • c.~tc nt:cc::;: . . H"iJy incHl~nt to the usc of the hotel as a temporary a\)ode 1 ··' •• ; in the case of a restaurant, cafe or refreshment parlor, to the charges, prices or compensation paid for the meals, cooked foods , coffee, or refreshment served to In c:il.her case, the term doe?s not include sales of merchandise wbicll ar·c generolly made Ly merchants.

The cost ot supplies .tJurchased by t.he hotel or restaurant keeper is not deJuctibla from his gross rec ei ~~s for purposes of the 1~% (new 3 ~ ) tax."

(G.C . No. t130 uatcd ,July 26, l.9J9). !\!t • .l 1 affixed on hotel receipts, the "sales tax p~id bi 19t1 i I , )

DECISION -

CTA CASE NO. 3279 - 6 - the c ustomer still forms par t of the taxable gross receipts even if shifted by the contractor to the cu~tomer and billed as separate item. 11

(BIL Ruling

dated September 15, 19 G9) ~ As it appear s the petitioner would have the sprouting impression that only the room revenues exclusive of the other charges and p~yments which form part of the cost of l odging a nd boarding facil- ities be deemed the 11gross receipts" for purposes of the assessment: and collection of the percentage tax under Section 191 of the Tax Code. We do not reach tl c sa!:!, c o nclusi o ~ ' .

rt may be nccessory to and v1lwt s o pla inly apply to petitioner in the c ase at ba.t· that

11Section 191 of the National Internal Revenue Code

imposes a 3% tax on gross receipts of contractors . The said tax is in the natur e of an excise tax imposed on the exercise of a pr iv i lege. It is directly l:J-- posed on and collect i ble from the pe rson exerc i si ng the privilcac .

While the burden of the t ax may L0 shift ed to t he person fot whom th~ se r vices arc rcn- dered by the contractor , t he latter is not relieved t rorn the payr;1cnl of the tax." (Gil\ 1'-ulin<J dated January 7, 1955).

Petit ioner has pl~ccd itself sharply at odds with Lhc st~tutory [noc;criLJti .. -t i _. . ! posit ing a narrmv al?pli c~tion e:f " cp or::· t"•r' c >· ,, 19b = :, ..

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DECISION

CTA CASE NO. 3279 - .7 - Connected with the question j ust dicussed , • petitioner as_ starvel ing agita t i on f or t he appli- c ability of Re ve~u e Regulations No . 8- 78 , supra , i n respec t t o the exclusion f r om the t axable gross r ece i pts of t he sales t ax separately billed and shifted to t he c ustomer , can hardly be a reassuring prospect that can easily ·be reconci l eo with the statutory intendment.

The r egulation is explicit that the "tax shall be pa i d by the manufac tu rer or producer (Sec . 5-d.) ". and , petitioner is neither in t he particular sphere of ac t ivity of a manufacturer or a producer .

It is hardly necessary to p oi nt out that on aspec ts similar i n many or r - wi th the case at bar , the rule is that the 3% t.ax i mposed on the gross rece i pts of contractors i n Sect ion 191 i s a tax on the s ale of ser vices or labor rathe r than on t he sale of ar t i cles .

The contractor ' s percentage t a x imposed i n Section 191 of the Tax Code is gen- erally a tax on sal es of ser vices in cont radiction with the percentage sales tax imposed in Sections 184 , 185, and 186 of the same Code wh i ch i s a tax on t he original s ale of articles by the manufacturer , producer or i mporter (Celestino Co. & Co . v. Col- ec t or of I nternal Revenue, GR No. L-8 506 August 31 , 19~ 6 ) o.

All we need to state as ber c t-oLore ndc d · tt; 19ti ' ' I' .

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DECISION

CTA CASE NO . 3279 8 t:hat. the separate billing of the 3% tax. to the hotel • guests is a business decision competently l eft to res t upon petitioner 9 ~ own i ndulgence but in no wis.e lessens nor. rnuffle:s its tax obligation on the gross r eceipts c:onte:mpl a te.d under: Section 191 (now Sec . 205) .of the Tax. Code .

To r equire less would sanc.tion s uch a luxuriance of an expedient unsus:tain- able either by operation of law or application of set1ded pr i nciples .

We deem i t:. unnece·ssary to re solv.e the as.ser. ted inadrnis.sibilit.y or nullit:.y of the exam i ners' report of investigation .

It may not. be a n oversimplific- ation to state the said findings "furnish the best means of its own exposition in terr~~~ of trac:table data openly laid and f ully disc.losed and as suc:h deserv.es the c.r:ede~nce: that should normally be ac- c orded . "

(Oro Enterprise s v . Commissioner of In- t:.e rna l Revenue , CTA Case No ~ 3004, Ap'r il 15, 1983.) •. And., pe.t .i tioner "points to no f ac t ual e r ror:s and superfl uiti es which need be cured or abridged . And , not. that. the examiners credentials are impeccable but to their f avor mus t. be concede:d t he presumption of regularity i n the performance of official duty (Sec. m-5 , R l e 1 31 . Revised Ru l e s of Court; US v. Escalante 36 Phil 7 43 ~ 31 GJS 799) which has. not 19'( ~ -.:::....:1 ' ;

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DECISI ON -

CTA CASE NO . 3279 ,9 - been disproved by any affirmative evidence of • irregularity or ~nlawful conduct. We f eel c orn- pelled t o aff irm the import- and force of the report of f indings wh i ch may not . be suffer ed t o petrify in futil i t y."

(Pr i ma Bus i ness Mac h i n e~ Inc . v. Commissi oner of nternal Revenue, CTA Case No . 299 0, August 31, 1981 ~ Petition er'~ nibble in faulting t he repor t of investigation could be a ki nd of an unwarranted persiflage .

ACCORDINGLY 1 finding. the pet.i t:..ion t o be \vi th- out merit, t he same is he r eby dismissed and the · payment of the amounts sought ordered with costs against peti tioner.

WE CONCUR:

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• ROAQUIN

e Judg.e 19d a£/_/./_) ·v ~~~ ;:\:P.EYE.

Assoc i ate' J ud::r