CTA Case No. 3279 (Decision)

IU! V'URtlC 01' Till! r mt.frp p.,.~~!i .AX A;.t.rm ' ' r~;,-~ s�~,~......~.. ...~-4:r 0~1 'T1: ' ... ~ ~ � � ~ ~ ... .,_.;..~ ... ftr.r '!.~., crtv I I l I l' / HOTEL MABUH~Y , INC., I � Pet.i t .ioner, �� versus - C.~.A. CASE NO. 3279 I CO~.tr-1ISSION ER OF IN'rERNAL d �1{r () I'EVENUE, I, Responclen t:..� I l X - - .- - --X DE C I S I 0 N ! Thi s case presents no di s pute as to t he r:el- I I I�� at:.ively ~impl e m~te ri al l~ cts b ut the pa r ties seem I I I '. i on the pr.ope r. import. of the t.erm "gross :~: eceipts" l there upon d ir.ec.t1y tack ed the per.c.en t.age. tax. pr:e- scribed in Sec t ion 191 (now Sec. 205) of the Ta x Code. It appears tha~ on the basis of iespondcnt's examiners r:eporl of investigation petitioner c orpo- ration, proprietor and operato r of Hotel Ma buh a y at A. M~bini St . , Ermita, Manila was asscs sc ; o n Hay 8 1 198 0 for a d e � icie ncy J?C:rcen ti..VJe /con tr ac t ot 's tt.ax un its gross receipts for th e ye;u 1976, pursuunt to Sec t ions 183 (a) .and 191 as penalized undc Sec- tion 209, all of ~h e Tax Code (now Sections 193{ ~) ~ 1 80

.. ;� I l-- 1 DECISION - CTA CASE NO. 327 9 - 2- . 205 and 221, respective ly, Tax Code of 1977) in of the amoun t Il22,655.42, subject to the adjust- ment. of interest. up to the actual date. of. payment, computed as f.ollov.Js: lst qtr. Deficiency 3% tax per investig,::1tion ���������� �P3,122.05 25% surchaJrg;8 for late pa2'111en tt; ������������ ~0..:.;~ih ... P3 ;902 .56. 14% int:. fr.. 4-21-76 to 5-30-80 ��������������_l�~!5 . 5~- ~ 6,148.09 2nd qttr. Deficiency 3% tax per inveskig,ation ����������� E<2,940. 75 25.~5 surcharge for late payrt\C'nt � � � � � � � � � � � � 735.19 !i3-;"G~i~. 9i 14'6 int. fr. 7~21�-76 t:o 5-30 80 . . ���.�.� � �� �. 1,986.47- P 5 ,6.6.2.41 3rcl qt:.L � De:ficlency 3 ~& investig~tion 25% surcharge f or late paymr::nt � � � � � � � � � � � � 64B. 78 P3,2.4S:9o 14 ~6 int. fr. 10-21-76 to Sr-30-80 �������� � ����� 1,639.46 - P 4,883.30. 4th qtr. Deficiency 3% tax per invc:st:ig.o.tion ����������� ?3,243.50 25% surc:harge for . late payn~nt ������������ 810.88 r~:cos.4 3s 14'6 int. fr. l-21-77 to 5-30-�80 �������������� _l! 907 .1;Q - �.2~6l. 56 'lUL'!\L /"JvKJUNT r >!JE �� , � � � � . � � � � � . � � � !:(~2 , CS."i. 42 On July 14, 1980 petitioner protested the assessment for lack of legal basis but the sa me was denied by the respondent Commissioner of Interndl Revenue in a letter dated March 30, 1981. Hence thi"s petition. 181

;. ~ . .._.. '"' ' I l� DEC I SI ON - 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- I centa ge tax liabi ity under Section 19 1 (now 205) o f t h e Tax Code had been r ig,ht.ly based on the room I rev enues which were separately billed the hotel I g.ues t:.s as i nd i c a ted i n t he g,uest folios (e quiva l cr.t t o t h e invoice} _a nd ac co r d i ngly rem i !� iced to the re s pondent, as t hus - -1976 Room Revenue --�--- 1'.ax ~~~mpt Il!,- Taxable 3% 'l,ax pc.id SecU.oi }-'191 cane - PD 535 Net I ncane First. �1 843,524 .61 p 429, 587.00 !.~ '113, 937 . 61 Pl2, 418. 12 Second 784,282 .07 402 , 380 . 66 381,901. 41 11,457. 04 Third 804, 011.22 477 , 127 . 66 326 ,883.53 9, 806.50 Four til _]~~._!.~.?-.?..:.~!~ .�.___;?.4__1 d02.3;?_ - � 423.!.226_.1]:. ..11:1.696. 7B \ rorAL fi3,176 , 74S.J4 r~l ( 630 , 797.65 i'"l , 545 , 948 . 6.6. t= �16. v373. -'.r.4 1 Ivloreove r , t he se p arate billin�J. ,_, the 3% sa le s I tax an d s u b s (~ que n t exclusion of the amo unt. t!)ereof f rom the c omputation o ~ t he taxable gros s r eceipts has been hewed close to the provisions of Revenue Regu l ati on s No . 8-78, dated May 12, 1 9 78 (Sules Ta;~ Re g,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 o ns 194 , 196, 197 , 193 , 199 and 20 1 of the Tux Code (1977), in relation to General Circular No . 4il, if a manu factur�::. or produ c er, 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

.. - DECISION - CTA CAS E 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 amou nts 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 hotel s, molels .;1nd lo~kJing hou ses" a nd, "the term 'gro ss 1~ccipts' m~~ns a l l a~ounts received \. by the prime or principal contra c tor ~s to the \ total contract price und imin ished by amount paid I to the subcont;:act:or under a subcontract arrange- ) I ment . " (Section 191 (nm.,r Sec. 205) .of the 'I'ax Code) �. l The same definition then obtained that the 'gross receipts' found in Section 191 of the Tax Code means the actual groGs proce eds received as appearing on the s ales or corn m~ rcial invoice s or receipts i ssued i ft-om time to time by the taxpayer (BIH .l~ uling J.OS.02 l date d December 26, 1956)". and, "t:.h.e fact th a t the t I ' 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 DECISION - CTA ChSE NO. 3279 I - 5- II I does not reiieve the cont.r~.ctor from pa:;/ing the j tax on the enti e amount r-eceived (BIR Ruling, I l Ma y 4, 1953) �." We find nothing ambiguo us nor obscure in the \ language of the provision insofar as the same is I br ought to bear upon t he circumstances of the case j at bar. 'rhe 3% contractor's tax lia:.)i.lity of the I I ho tel keeper is assessed and collected o;1 lhc basis I I of t he "gross receipts" which refe-'rs to the "charges, prices or compe nsation paid by the guests for their I 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 \ o f 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 1 9t1

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 sep a rate item. 11 (BIL Ru ling dated September 15, 19 G9) ~ As it appear s the petitioner would have the sprout ing impression that only the room revenues exclu sive of the other char ges and p~yments whi ch form part of the cost of l odging a nd boarding facil- ities be deemed the 11 gross receip ts" 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 v1l wt s o pla inly apply to petitioner in the c as e at ba.t� that 11 Section 191 of the National Internal Reven ue 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 leg e. It is directly l:J-- posed on and collect i ble from the pe rson exerc i si ng the pri vilcac . While the burd en of the t ax may L0 shift e d to t he person fot whom th~ se r vices a rc rcn- dered by the contractor , t he latter is not reli eved 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

.= :, .. I l ' I I DECISION CTA CASE NO. 3279 - .7 - Con nec�ted with the ques tion j ust dicu ssed , pet itioner as_ starvel ing agita t i on f or t he appli- c a bility of Re ve~u e Regulations No . 8- 78 , supra , i n respec t t o the exc lusion f r om the t axable gr oss r ece i pts of t he sales t ax separately billed and shifte d to t he c us tomer , can hardly be a reas su ring prospect that can easily �be reconci l eo wi th the statutor y in tendment. The r egu lation is explic it that the "tax sha ll be pa i d by the ma nufac tu rer or producer (Se c . 5-d.) ". and , petitioner is neither in t he particular s phere of ac t ivity of a manufacturer or a producer . It is hardly necessary to p oi nt out that on aspe c ts similar i n man y or r - wi th the case at ba r , the rule is that the 3% t .a x i mposed on the gross rece i pts of contractors i n Sect ion 191 i s a tax on the s a le o f se r vic es or labor rathe r th an on t he sale of a r t i cles . The contracto r ' 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 pe rce ntage sales tax imposed in Sec tions 184 , 185, and 186 o f the same Code wh i ch i s a tax on t he orig inal s a le of articles by the manufacturer , p rod ucer o r i mporter (Celestino Co . & Co . v. Col - ec t or o f I nter nal Reve nue, GR No. L-8 506 August 31 , 19~ 6 ) o. All we need to state as ber c t-oLore ndc d � tt; 1 9ti

- ...' ' I' . DECISION CTA CASE NO . 3279 8 lI lI t:hat. the separate billing of the 3% tax. to the hotel � I guests is a business decision competently l eft to I i res t upon petitioner 9 ~ o wn i ndulgence but in no I I wis.e les sens nor. rnuffle:s its tax obligation on the gross r e ceipts c:onte:mp l 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 oversimpli fic- 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: th at should normally be ac- c orded . " (Oro Enterprise s v . Commissioner of In- t:.e rn a l Revenue , CTA Case No ~ 300 4, Ap'r il 15, 1983.) �. And., pe.t .i tioner "points to n o f ac t u al e r ror:s and supe rfl u iti es which need be cured or abridged . And , not. that. the examiners credentials are impeccable j but to their f avor mus t. be concede:d t he presumption I. . of regularity i n the performance of official duty ' (Sec . m-5 , R l e 1 31 . Re vi sed Ru l e s of Court; US v. Escalante 36 Phil 7 43 ~ 31 GJS 7 99) which h as. not 19 '(

~ -.:::....:1 '; �./ . I. Ii �"' I .' i DECIS I 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 a ff irm the import- a nd force of the report of f indings wh i ch may no t . be suffe r ed t o petrify in futil i t y ." (Pr i ma Bus i nes s Mac h i n e~ Inc . v. Commiss i oner of nternal Revenue, CTA Case No . 299 0, August 31, 198 1 ~ Petition er'~ ni bble in faulting t he repor t of investigation c ou ld be a ki nd of an unwarranted persiflage . I ACCORDINGLY1 finding. the pe t.i t:..ion t o be \vi th- out merit, t he same is he r eby dismissed and the � I payment of the amounts sough t ordered with costs i against peti tioner. I SO ORDERED. \ Quezon City , Metro Manila , July 15, 1983 t�.� � v ~a�~/_~/./ _) E . I ;:\:P.EY 1 I Assoc i ate' J ud::r \ WE CONCUR : 1 I I I ). ' ,r-�- � ROAQUIN e Judg.e 19 d