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G.R.No.66416.March21,1990.

* private respondent do not form part of its gross receipts


COMMISSIONER OF INTERNAL REVENUE, within the definition of the Tax Code. The said receipts
petitioner,vs.TOURSSPECIALISTS,INC.,andTHE never belonged to the private respondent. The private
COURTOFTAXAPPEALS,respondents. respondentneverbenefitedfromtheirpaymenttothelocal
hotels. As stated earlier, this arrangement was only to
Taxation;Court of Tax Appeals;Rule that factual accommodatetheforeigntravelagencies.
findingsoftheCourtofTaxAppeals(CTA)arebindingon Same;Same;P.D. 31;Contractors Tax;P.D. 31
theSupremeCourtandcanonlybedisturbedonappealif determines whether or not hotel room charges of foreign
not supported by substantial evidence.The wellsettled touristsinlocalhotelsaresubjecttothe3%contractorstax.
doctrine is that the findings of facts of the Court of Tax Accordingly, the significance of P.D. 31 is clearly
Appeals are binding on this Court and absent strong established in determining whether or not hotel room
reasonsforthisCourttodelveintofacts,onlyquestionsof chargesofforeigntouristsinlocalhotelsaresubjecttothe
lawareopenfordetermination.(Nilsenv.Commissionerof 3%contractorstax.Astherespondentcourtaptlystated:x
Customs,89SCRA43[1979];Balbasv.Domingo,21SCRA xxIfthehotelroomchargesentrustedtopetitionerwillbe
444[1967];Raymundov.DeJoya,101SCRA495[1980]).In subjectedto3%contractorstaxaswhatrespondentwould
therecentcaseofSyPov.CourtofAppeals,(164SCRA524 wanttodointhiscase,thatwouldineffectdoindirectly
[1988]),weruledthatthefactualfindingsoftheCourtof whatP.D.31wouldnotlikehotelroomchargesofforeign
TaxAppealsarebindinguponthiscourtandcanonlybe tourists to be subjected to hotel room tax. Although,
disturbed on appeal if not supported by substantial respondent may claim that the 3% contractors tax is
evidence. imposeduponadifferentincidence,i.e.thegrossreceiptsof
Same;Gross receipts;The room charges entrusted by petitioner tourist agency which he asserts includes the
theforeigntravelagenciestoprivaterespondentdonotform hotelroomchargesentrustedtoit,theeffectwouldbeto
imposeatax,andthoughdifferent,itnonethelessimposesa
part of its gross receipts under the Tax Code.As
tax actually on room charges. One way or the other, it
demonstratedintheabovementionedcase, gross receipts
would not have the effect of promoting tourism in the
subjecttotaxundertheTaxCodedonotincludemoniesor
Philippinesasthatwouldincreasethecostsorexpensesby
receiptsentrustedtothetaxpayerwhichdonotbelongto
theadditionofahotelroomtaxintheoverallexpensesof
themanddonotredoundtothetaxpayersbenefit;anditis
saidtourists.(Rollo,pp.5152)
notnecessarythattheremustbealaworregulationwhich
wouldexemptsuchmoniesorreceiptswithinthemeaning PETITIONforcertioraritoreviewthedecisionofthe
ofgrossreceiptsundertheTaxCode.Parenthetically,the
CourtofTaxAppeals.
roomchargesentrustedbytheforeigntravelagenciestothe
ThefactsarestatedintheopinionoftheCourt. touristagenciesabroadhaveagreedtoofferapackagefee
GadiomaLawOfficesforprivaterespondent. forthetourists.Althoughthefeetobepaidbysaidtourists
isquotedbythepetitioner,thepaymentsofthehotelroom
GUTIERREZ,JR.,J.: accommodations,foodandotherpersonalexpensesofsaid
tourists, as a rule, are paid directly either by tourists
Thisisapetitiontoreviewoncertiorarithedecisionof themselves,orbytheirforeigntravelagenciestothelocal
theCourtofTaxAppealswhichruledthatthemoney hotels(Pp.77,t.s.n.,Feb.2,1981;Exhs.O&O1,p.29,
CTArec.;pp.2425,t.s.n.,ibid)andrestaurantsorshops,as
entrustedtoprivaterespondentToursSpecialists,Inc.,
thecasemaybe.
earmarkedandpaidforhotelroomchargesoftourists,
It is also the case that some tour agencies abroad
travelersand/orforeigntravelagenciesdoesnotform
requestthelocaltouragencies,suchasthepetitionerinthe
partofitsgrossreceiptssubjecttothe3%independent case,thatthehotelroomcharges,insomespecificcases,be
contractorstaxundertheNationalInternalRevenue paid through them. (Exh. Q, Q1, p. 29 CTA rec., p. 25,
Codeof1977. T.s.n.,ibid.,pp.56,1718,t.s.n.,Aug.20,1981.;Seealso
We adopt the findings of facts of the Court of Tax Exh.U,pp.2223,t.s.n.,Oct.9,1981,pp.34,11.,t.s.n.,
Appealsasfollows: Aug. 10, 1982). By this arrangement, the foreign tour
Fortheyears1974to1976,petitioner(ToursSpecialists, agencyentruststothepetitionerToursSpecialists,Inc.,the
Inc.) had derived income from its activities as a travel fundforhotelroomaccommodation,whichinturnispaid
agency by servicing the needs of foreign tourists and bypetitionertouragencytothelocalhotelwhenbilled.The
travelers and Filipino Balikbayans during their stay in procedureobservedisthatthebillinghotelsendsthebillto
thiscountry.Someoftheservicesextendedtothetourists the petitioner. The local hotel identifies the individual
consistofbookingsaidtouristsandtravelersinlocalhotels tourist,ortheparticulargroupsoftouristsbycodenameor
for their lodging and board needs; transporting these group designation and also the duration of their stay for
foreigntouristsfromtheairporttotheirrespectivehotels, purposesofpayment.Uponreceiptofthebill,thepetitioner
andfromthelattertotheairportupontheirdeparturefrom thenpaysthelocalhotelwiththefundsentrustedtoitby
the Philippines, transporting them from their hotels to theforeigntourcorrespondentagency.
various embarkation points for local tours, visits and Despite this arrangement, respondent Commissioner of Internal
excursions; securing permits for them to visit places of Revenue assessed petitioner for deficiency 3% contractors tax as
interest; and arranging their cultural entertainment, independent contractor by including the entrusted hotel room
shoppingandrecreationalactivities. charges in its gross receipts from services for the years 1974 to
In order to ably supply these services to the foreign 1976. Consequently, on December 6, 1979, petitioner received from
tourists, petitioner and its correspondent counterpart respondent the 3% deficiency independent contractors tax
assessment in the amount of P122,946.93 for the years 1974 to 14% interest computed by
1976, inclusive, computed as follows: quarters
1974 deficiency percentage up to 12-28-
tax 79 . . . . . . . . . . . . . . . . . . 28,910.97 P96,756.50
per investigation . . . . . . . . . Total amount due P122,946.93
...... P3,995.63 In addition to the deficiency contractors tax of
P122,946.93,petitionerwasassessedtopayacompromise
15% surcharge for late 998.91
penaltyofP500.00.
payment . . . . . . . . .
Subsequently, on December 11, 1979, petitioner
P4,994.54 formallyprotestedtheassessmentmadebyrespondenton
14% interest computed by thegroundthatthemoneyreceivedandentrustedtoitby
quarters thetourists,earmarkedtopayhotelroomcharges,werenot
up to 12-28- 3,953.18 . . consideredandhaveneverbeenconsideredbyitaspartof
79 . . . . . . . . . . . . . . . . . . . . P8,847.72 its taxable gross receipts for purposes of computing and
1975 deficiency percentage payingitscontractorstax.
tax During one of the hearings in this case, a witness,
per investigation . . . . . . . . . SerafinaSazon,CertifiedPublicAccountantandincharge
....... P8,427.39 oftheAccountingDepartmentofpetitioner,hadtestified,
her credibility not having been destroyed on cross
25% surcharge for late 2,106.85
examination, categorically stated that the amounts
payment . . . . . . . .
entrustedtoitbytheforeigntouristagenciesintendedfor
P10,534.24 payment ofhotelroomcharges,werepaidentirely tothe
14% interest computed by hotelconcerned,withoutanyportionthereofbeingdiverted
quarters up to 12-28- toitsownfunds.(t.s.n.,Feb.2,1981,pp.7,25;t.s.n.,Aug.
79 . . . . . . . . . . . . . 6,808.47 P17,342.71 20,1981,pp.59,1718).ThetestimonyofSerafinaSazon
1976 deficiency percentage was corroborated by Gerardo Isada, General Manager of
tax per investigation . . . . . . petitioner, declaring to the effect that payments of hotel
...... P54,276.42 accommodation are made through petitioner without any
25% surcharge for late 13,569.11 increaseintheroomcharged(t.s.n.,Oct.9,1981,pp.2125)
andthatthereasonwhytouristspaytheirroomcharge,or
payment . . . . . . . .
throughtheirforeigntouristsagencies,isthefactthatthe
P67,845.53 roomchargeisexemptfromhotelroomtaxunderP.D.31.
(t.s.n., Ibid., pp. 2529.) Witness Isada stated, on cross receivedaspartofthepackagefeeand,therefore,formpart
examination, that if their payment is made, thru ofgrossreceiptsasdefinedbylaw.
petitionerstouragency,thehotelcostorchargesisonlyan Secondly,thereisnoshowingandisnotestablishedby
actofaccommodationonour(its)partorthattheagent the evidence, that the amounts received and earmarked
abroad instead of sending several telexes and saving on areactuallywhathadbeenpaidoutashotelroomcharges.
bankchargestheytaketheoptiontosendmoneytoustobe Themerepossibilitythattheamountsactuallypaidcould
heldintrusttobeendorsedtothehotel.(pp.34,t.s.n.Aug. belessthantheamountsreceivedissufficienttodestroy
10,1982.) thevalidityoftheruling.(Rollo,pp.2627)

Nevertheless, on June 2, 1980, respondent, without Ineffect,thepetitionersloneissueisbasedonalleged


deciding the petitioners written protest, caused the errorinthefindingsoffactsoftherespondentcourt.
issuanceofawarrantofdistraintandlevy.(p.51,BIRRec.) Thewellsettleddoctrineisthatthefindingsoffacts
And later, respondent had petitioners bank deposits oftheCourtofTaxAppealsarebindingonthisCourt
garnished.(pp.4950,BIRRec.)
andabsentstrongreasonsforthisCourttodelveinto
Taking this action of respondent as the adverse and
facts,onlyquestionsoflawareopenfordetermination.
final decision on the disputed assessment, petitioner
appealedtothisCourt.(Rollo,pp.4045) (Nilsen v. Commissioner of Customs,89 SCRA
43[1979];Balbas v. Domingo,21 SCRA
Thepetitionerraisestheloneissueinthispetitionas 444[1967];Raymundo v. De Joya,101 SCRA
follows: 495[1980]). In the recent case ofSy Po v. Court of
WHETHER AMOUNTS RECEIVED BY A LOCAL Appeals, (164 SCRA 524[1988]), we ruled that the
TOURIST AND TRAVEL AGENCY INCLUDED IN A factual findings of the Court of Tax Appeals are
PACKAGE FEEFROMTOURISTSORFOREIGNTOUR
bindinguponthiscourtandcanonlybedisturbedon
AGENCIES,INTENDEDOREARMARKEDFORHOTEL
appealifnotsupportedbysubstantialevidence.
ACCOMMODATIONS FORM PART OF GROSS
RECEIPTS SUBJECT TO 3% CONTRACTORS TAX.
Intheinstantcase,wefindnoreasontodisregard
(Rollo,p.23) anddeviatefromthefindingsoffactsoftheCourtof
TaxAppeals.
The petitioner premises the issue raised on the As quoted earlier, the Court of Tax Appeals
followingassumptions: sufficiently explained the services of a local travel
Firstly, the ruling overlooks the fact that the amounts agency,likethehereinprivaterespondent,renderedto
received, intended for hotel room accommodations, were
foreign customers. The respondent differentiated
between the package feeoffered by both the local
travel agency and its correspondent counterpart effect that the amounts entrusted to the private
tourist agencies abroad and the requests made by respondentwereexclusivelyforpaymentofhotelroom
some tour agencies abroad to local tour agencies charges of foreign tourists entrusted to it by foreign
whereinthehotelroomchargesinsomespecificcases, travelagencies.
wouldbepaidtothelocalhotelsthroughthem.Inthe Asregardsthepetitionerssecondassumption,the
lattercase,thecorrespondentcourtfoundasafactxx respondentcourtstated:
x that the foreign tour agency entrusts to the x x x [C]ontrary to the contention of respondent, the records show,
petitioner Tours Specialists, Inc. the fund for hotel firstly, in the Examiners Worksheet (Exh. T, p. 22, BIR Rec.), that
room accommodation, which in turn is paid by from July to December 1976 alone, the following sums made up the
hotel room accommodations:
petitionertouragencytothelocalhotelwhenbilled.
(Rollo,p.42)Thefollowingprocedureisfollowed:The July 1976 P102,702.97
billinghotelsendsthebilltotherespondent;thelocal Aug. 1976 121,167.19
hotel then identifies the individual tourist, or the Sept. 1976 53,209.61
particular group of tourists by code name or group P282,079.77
designation plus the duration of their stay for Oct. 1976 P 71,134.80
purposes of payment; upon receipt of the bill the Nov. 1976 409,019.17
privaterespondentpaysthelocalhotelwiththefunds Dec. 1976 142,761.55
entrusted to it by the foreign tour correspondent 622,915.51
agency. Grand Total P904,995.29
Itisnottrue,therefore,asstatedbyrespondent,that
Moreover, evidence presented by the private
there is no evidence proving the amounts earmarked for
respondentshowsthattheamountsentrustedtoitby
hotelroomcharges.SincetheBIRexaminerscouldnothave
theforeigntouristagenciestopaytheroomchargesof manufacturedtheabovefiguresrepresentingadvancesfor
foreigntouristsinlocalhotelswerenotdivertedtoits hotel room accommodations, these payments must have
funds; this arrangement was only an act of certainlybeentakenfromtherecordsofpetitioner,suchas
accommodationonthepartoftheprivaterespondent. theinvoices,hotelbills,officialreceiptsandotherpertinent
Thisevidencewasnotrefuted. documents.(Rollo,pp.4849)
Inessence,thepetitionersassertionthatthehotel
The factual findings of the respondent court are
roomchargesentrustedtotheprivaterespondentwere
supportedbysubstantialevidence,hencebindingupon
partofthepackagefeepaidbyforeigntouriststothe
thisCourt.
respondentisnotcorrect.Theevidenceiscleartothe
Withtheseclarifications,theissuetobethreshed roomchargesareincludedintheprivaterespondents
outisasstatedbytherespondentcourt,towit: grossreceiptsforpurposesofthe3%contractorstax.
xxx[W]hetherornotthehotelroomchargesheldintrust InthecaseofCommissionerofInternalRevenuev.
for foreign tourists and travelers and/or correspondent
Manila JockeyClub,Inc.(supra ), theCommissioner
foreigntravelagenciesandpaidtolocalhost hotels form
part of the taxable gross receipts for purposes of the 3%
appealed two decisions of the Court of Tax Appeals
contractorstax.(Rollo,p.45) disapproving his levy of amusement taxes upon the
Manila Jockey Club, a duly constituted corporation
Thepetitioneropinesthatthegrossreceiptswhichare authorizedtoholdhorseracesinManila.Thefactsof
subjecttothe3%contractorstaxpursuanttoSection the case show that the monies sought to be taxed
191 (Section 205 of the National Internal Revenue neverreallybelongedtotheclub.Thedecisionshows
Codeof1977)oftheTaxCodeincludetheentiregross that during the period November 1946 to 1950, the
receipts ofa taxpayer undiminishedby any amount. Manila Jockey Club paid amusement tax on its
According to the petitioner, this interpretation is in commission but without including the 51/2% which
consonance with B.I.R. Ruling No. 68027, dated 23 pursuanttoExecutiveOrder320andRepublicAct309
October, 1968 (implementing Section 191 of the Tax wenttotheBoardofRaces,theownerofhorsesand
Code) which states that the 3% contractors tax jockeys. Section 260 of the Internal Revenue Code
prescribedbySection191oftheTaxCodeisimposed providesthattheamusementtaxwaspayablebythe
onthegrossreceiptsofthecontractor,nodeduction operator on its gross receipts. The Manila Jockey
whatever being allowed by said law. The petitioner Club,however, did not consideras partofits gross
contendsthattheonlyexceptiontothisruleiswhen receiptssubjecttoamusementtaxtheamountswhich
thereisalaworregulationwhichwouldexemptsuch it had to deliver to the Board on Races, the horse
gross receipts from being subjected to the 3% ownersandthejockeys.Thisviewwasfullysustained
contractors tax citing the case ofCommissioner of bythreeopinionsoftheSecretaryofJustice,towit:
InternalRevenuev.ManilaJockeyClub,Inc.(108Phil. There is no question that the Manila Jockey, Inc., owns
821[1960]). Thus, the petitioner argues that since only71/2%ofthetotalbetsregisteredbytheTotalizer.
there is no law or regulation that money entrusted, Thisportionrepresentsitsshareorcommissioninthetotal
amountofmoneyithandlesandgoestothefundsthereof
earmarkedandpaidforhotelroomchargesshouldnot
as its own property which it may legally disburse for its
form part of the gross receipts, then the said hotel
own purposes. The 5% does not belong to the club. It is
merelyheldintrustfordistributionasprizestotheowners
ofwinninghorses.Itisdestinedfornootherobjectthanthe admittedly5%.Itistruethatthelawsaysthatoutofthe
payment of prizes and the club cannot otherwise total wager funds 121/2% shall be set aside as the
appropriate this portion without incurring liabilityto the commission of the race track owner, but the law itself
owners of winning horses. It cannot be considered as an takes official notice, and actually approves or directs
itemofexpensebecausethesumusedforthepaymentof payment of the portion that goes to owners of horses as
prizesisnottakenfromthefundsoftheclubbutfroma prizesandbonusesofjockeys,whichportionisadmittedly
certain portion of the total bets especially earmarked for 5%outofthat121/2%commission.Asitdidnotatthat
thatpurpose. timecontemplatetheapplicationofgrossreceiptsrevenue
Inviewofalltheforegoing,Iamoftheopinionthatin principle, the law in making a distribution of the total
thesubmissionofthereturnsfortheamusementtaxof10% wagerfunds,tooknotroubleofseparatingoneitemfrom
(nowitis20%ofthegrossreceipts,providedforinSection theother;andforconvenience,groupedthreeitemsunder
260oftheNationalInternalRevenueCode),the5%ofthe onecommondenomination.
totalbetsthatissetasideforprizestoownersofwinning
Needlesstosay,grossreceiptsoftheproprietorofthe
horsesshouldnotbeincludedbytheManilaJockeyClub,
amusement place should not include any money which
Inc.
although delivered to the amusement place has been
TheCollectoroftheInternalRevenue,howeverhada especiallyearmarkedbylaworregulationforsomeperson
different opinion on the matter and demanded otherthantheproprietor.(Thesituationthusdiffersfrom
payment of amusement taxes. The Court of Tax one in which the owner of the amusement place, by a
AppealsreversedtheCollector. privatecontract,withitsemployeesorpartners,agreesto
reserve for them a portion of the proceeds of the
We affirmed the decision of the Court of Tax
establishment.(SeeWong&Leev.Coll.104Phil.469;55
Appealsandstated:
Off.Gaz.[51]10539;SyChuicov.Coll.,107Phil.,428;59
The Secretarys opinion was correct. The Government
Off.Gaz.,[6]896).
couldnothavemeanttotaxasgrossreceiptoftheManila
JockeyClubthe1/2%whichitdirectssameClubtoturn Inthesecondcase,thefactsofthecaseare:
overtotheBoardonRaces.ThelatterbeingaGovernment The Manila Jockey Club holds once a year a so called
institution,therewouldbedoubletaxation,whichshouldbe special Novato race, wherein only novato horses, (i.e.
avoided unless the statute admits of no other horseswhicharerunningforthefirsttimeinanofficial[of
interpretation.Inthesamemanner,theGovernmentcould theclub]race),maytakepart.Ownersofthesehorsesmust
nothaveintendedtoconsiderasgrossreceipttheportionof pay to the Club an inscription fee of P1.00, and a
thefundswhichitdirectedtheClubtogive,orknewthe declarationfeeofP1.00perhorse.Inaddition,eachofthem
Club would give, to winning horses and jockeys mustcontributetoacommonfund(P10.00perhorse).The
Club contributes an equal amount (P10.00 per horse) to horseownersastaxablereceiptoftheClub,sincethelatter,
suchcommonfund,thetotalamountofwhichisaddedto atthesamemomentitreceivedthecontributionnecessarily
the 5% participation of horse owners already described losttenpesostoo.
hereinaboveinthefirstcase.
Sincetheinstitutionofthisyearlyspecialnovatorace As demonstrated in the abovementioned case, gross
in1950,theManilaJockeyClubneverpaidamusementtax receipts subject to tax under the Tax Code do not
on the moneys thus contributed by horse owners (P10.00 include monies orreceipts entrusted tothetaxpayer
each)becauseitentertainedthebeliefthatinaccordance whichdonotbelongtothemanddonotredoundtothe
withthethreeopinionsoftheSecretaryofJusticeherein taxpayersbenefit;anditisnotnecessarythatthere
abovedescribed,suchcontributionsneverformedpartofits mustbealaworregulationwhichwouldexemptsuch
grossreceipts.OntheinscriptionfeeoftheP1.00perhorse, monies and receipts within the meaning of gross
itpaidthetax.ItdidnotonthedeclarationfeeofP1.00 receiptsundertheTaxCode.
because it was imposed by the Municipal Ordinance of Parenthetically,theroomchargesentrustedbythe
ManilaandwasturnedovertotheCityofficers.
foreign travel agencies to the private respondent do
TheCollectorofInternalRevenuerequiredtheManila
notformpartofitsgrossreceiptswithinthedefinition
Jockey Club to pay amusement tax on such contributed
fundP10.00perhorseinthespecialnovatorace,holding oftheTaxCode.Thesaidreceiptsneverbelongedto
theywerepartofitsgrossreceipts.TheManilaJockeyClub theprivaterespondent.Theprivaterespondentnever
protestedandresortedtotheCourtofTaxAppeals,where benefited from their payment to the local hotels. As
it obtained favorable judgment on the same grounds stated earlier, this arrangement was only to
sustainedbysaidCourtinconnectionwiththe5%ofthe accommodatetheforeigntravelagencies.
totalwagerfundsinthehereinmentionedfirstcase;they Anotherobjectionraisedbythepetitioneristothe
werenotreceiptsoftheClub. respondent courts application of Presidential Decree
Weresolvedtheissueinthefollowingmanner: 31 which exempts foreign tourists from payment of
We think the reasons for upholding the Tax Courts hotelroomtax.Section1thereofprovides:
decision in the first case apply to this one. The tenpeso Sec. 1.Foreign tourists and travelers shall be exempt
contributionneverbelongedtotheClub.Itwasheldbyitas frompaymentofanyandallhotelroomtaxfortheentire
atrustfund.Andthen,afterall,whenitreceivedtheten periodoftheirstayinthecountry.
pesocontribution,itatthesametimecontributedtenpesos The petitioner now alleges that P.D. 31 has no
out of its own pocket, and thereafter distributed both
relevancetothecase.Hecontendsthatthetaxunder
amounts as prizes to horse owners. It would seem
Section 191 of the Tax Code is in the nature of an
unreasonable to regard the tenpeso contribution of the
excise tax; that it is a tax on the exercise of the analysisitistheWHOthatwillpaythetaxindirectlythrough
privilege to engage in business as a contractor and thecontractoranditcertainlycannotbesaidthatthistaxhasno
bearingupontheWorldHealthOrganization.
thatitisimposedon,andcollectiblefromtheperson
exercising the privilege. He sums his arguments by Petitioner claims that under the authority of the
statingthatwhiletheburdenmaybeshiftedtothe Philippine Acetylene Company versus Commissioner of
person for whom the services are rendered by the InternalRevenue,etal.,(127Phil.461)the3%contractors
contractor,thelatterisnotrelievedfrompaymentof taxfallsdirectlyonGotamcoandcannotbeshiftedtothe
WHO. The Court of Tax Appeals, however, heldthat the
thetax.(Rollo,p.28)
said case is not controlling in this case, since the Host
The same arguments were submitted by the
Agreement specifically exempts the WHO from indirect
Commissioner of Internal Revenue in the case taxes.Weagree.ThePhilippineAcetylenecaseinvolveda
ofCommissionerofInternalRevenuev.JohnGotamco taxonsalesofgoodswhichunderthelawhadtobepaidby
& Son., Inc.(148 SCRA 36[1987]), to justify his the manufacturer or producer; the fact that the
impositionofthe3%contractorstaxunderSection191 manufacturerorproducermighthaveaddedtheamountof
of the National Internal Revenue Code on the gross thetaxtothepriceofthegoodsdidnotmakethesalestax
receiptsJohnGotamco&Sons,Inc.,realizedfromthe ataxonthepurchaser.TheCourtheldthatthesalestax
constructionoftheWorldHealthOrganization(WHO) mustbepaidbythemanufacturerorproducerevenifthe
officebuildinginManila.Werejectedthepetitioners saleismadetotaxexemptentitiesliketheNationalPower
argumentsandruled: Corporation,anagencyofthePhilippineGovernment,and
WeagreewiththeCourtofTaxAppealsinrejectingthis to the Voice of America, an agency of the United States
contentionofthepetitioner.Saidtherespondentcourt: Government.
Incontext,directtaxesarethosethataredemandedfromthe The Host Agreement, in specifically exempting the
verypersonwho,itisintendedordesired,shouldpaythem;while
WHO from indirect taxes, contemplates taxes which,
indirecttaxesarethosethataredemandedinthefirstinstance
although not imposed upon or paid by the Organization
fromonepersonintheexpectationandintentionthathecanshift
theburdentosomeoneelse.(Pollockv.Farmers,L&TCo.,1957
directly,formpartofthepricepaidortobepaidbyit.
US429,15S.Ct.673,39Law.ed.759).Thecontractorstaxisof
Accordingly, the significance of P.D. 31 is clearly
coursepayablebythecontractorbutinthelastanalysisitisthe
owner of the building that shoulders the burden of the tax
establishedindeterminingwhetherornothotelroom
becausethesameisshiftedbythecontractortotheownerasa chargesofforeigntouristsinlocalhotelsaresubjectto
matterofselfpreservation.Thus,itisanindirecttax.Anditisan the3%contractorstax.Astherespondentcourtaptly
indirecttaxontheWHObecause,althoughitispayablebythe stated:
petitioner,thelattercanshiftitsburdenontheWHO.Inthelast
xxxIfthehotelroomchargesentrustedtopetitionerwill
be subjected to 3% contractors tax as what respondent
would want to do in this case, that would in effect do
indirectlywhatP.D.31wouldnotlikehotelroomchargesof
foreigntouriststobesubjectedtohotelroomtax.Although,
respondent may claim that the 3% contractors tax is
imposeduponadifferentincidence,i.e.thegrossreceiptsof
petitioner tourist agency which he asserts includes the
hotelroomchargesentrustedtoit,theeffectwouldbeto
imposeatax,andthoughdifferent,itnonethelessimposesa
tax actually on room charges. One way or the other, it
would not have the effect of promoting tourism in the
Philippinesasthatwouldincreasethecostsorexpensesby
theadditionofahotelroomtaxintheoverallexpensesof
saidtourists.(Rollo,pp.5152)

WHEREFORE,the instant petition is DENIED. The


decisionof the Court ofTaxAppeals is AFFIRMED.
Nopronouncementastocosts.
SOORDERED.

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