BIR Form 2307 for Construction Materials and Office Supplies Dealers: The 1% Goods Rate

A business that has been specifically designated a BIR Top Withholding Agent (TWA) withholds 1% creditable tax when buying construction materials or office supplies from a regular supplier, under RR No. 7-2019 as further amended by RR No. 24-2025 — but a business that has not received that designation generally withholds nothing at all on the same purchase. This TWA-only trigger is one of the more commonly misunderstood rules in this series, since it applies to the buyer’s own BIR status rather than to the type of goods being purchased.

This guide is part of the BIR Form 2307 series. It covers when a purchase of construction materials or office supplies is actually withheld, the applicable ATC codes, and a worked hardware-supplier purchase example.

Who actually withholds on a purchase of construction materials or office supplies? #

Unlike most of the service-payment scenarios elsewhere in this series, an ordinary purchase of goods is not withheld just because the buyer is a corporation or a business-connected individual. The general rule for who counts as a withholding agent at all still starts from the same base definition this series applies throughout:

“(A) In general, any juridical person, whether or not engaged in trade or business; (B) An individual, with respect to payments made in connection with his trade or business…”

— RR No. 2-98, Section 2.57.3(A)–(B)

For most service payments, meeting this definition is enough to trigger withholding. A straight purchase of goods is narrower: it also requires the buyer to have been specifically designated a BIR Top Withholding Agent — see The ‘Regular Supplier’ Rule for BIR Form 2307 for the full mechanics of how a business gets that designation and what triggers withholding once it has one. A general contractor, retailer, or office that meets the Section 2.57.3 definition but has never received a TWA designation letter from the BIR still generally buys construction materials or office supplies from a hardware store or supplies dealer with no withholding at all, regardless of order size.

What rate and ATC code apply once a business is a designated TWA? #

A designated Top Withholding Agent withholds 1% on its qualifying purchases of goods from a regular supplier, the same rate already covered generally in BIR Form 2307 for Purchases of Goods, applied here specifically to construction materials and office supplies dealers as payees.

This rate is separate from the flat 2% rate that applies to a contractor’s combined labor-and-materials job order, covered in BIR Form 2307 for Contractors and Subcontractors — a straight materials purchase with no accompanying labor stays in the 1% goods bracket instead.

Worked example: a TWA-designated contractor’s supplies purchase #

BuildRight Construction Corp., which received a BIR Top Withholding Agent designation letter earlier in the year, places a ₱300,000 order for cement, rebar, and hardware from Matigas Hardware and Construction Supply, a regular supplier it has purchased from more than six times this year.

Because BuildRight is a designated TWA and Matigas is a regular supplier under the six-transaction threshold, BuildRight withholds ₱3,000, remits it through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, and issues Matigas a BIR Form 2307 for the period. If a different, non-TWA-designated contractor placed the identical ₱300,000 order with the same supplier, no withholding would apply at all, and Matigas would receive no BIR Form 2307 for that sale.

Frequently asked questions #

Does every business have to withhold tax when buying construction materials or office supplies? #

No. Withholding on a purchase of goods applies only when the buyer has been specifically designated a BIR Top Withholding Agent (TWA) under RR No. 7-2019 and RR No. 24-2025. A business that has not received a TWA designation letter from the BIR generally does not withhold on ordinary purchases of construction materials or office supplies, no matter how large the order.

What withholding rate and ATC code apply once a business is a designated Top Withholding Agent? #

A designated Top Withholding Agent withholds 1% creditable tax on its purchases of goods, including construction materials and office supplies, from a regular supplier — ATC WC158 if the supplier is a corporation, WI158 if the supplier is an individual — under RR No. 7-2019, as further amended by RR No. 24-2025.

Does the 1% goods rate apply to every purchase, or only to a regular supplier? #

The regular-supplier threshold still applies. A Top Withholding Agent generally withholds once it has made at least six transactions with the same supplier, or a single purchase exceeding ₱10,000, in accordance with the same regular-supplier trigger covered in the Top Withholding Agent rules for purchases of goods.

How does a construction or office supplies dealer know if a customer should be withholding from them? #

A supplier generally cannot tell from the outside whether a specific customer has been designated a Top Withholding Agent — that status comes from a BIR notification letter the customer itself receives. If a regular customer starts issuing BIR Form 2307 on purchases where none was issued before, that is usually a sign the customer was recently added to the BIR’s TWA list.

Is a construction contractor’s own labor-and-materials job order withheld the same way as a straight materials purchase from a supplies dealer? #

No, these are different transactions. A contractor performing installation or construction work under a labor-and-materials job order is withheld under the services/contractor bracket instead, generally at 2%. This guide covers the narrower case of a straight purchase of goods — buying materials or supplies from a dealer with no accompanying labor or installation service.

Summary #

A construction materials or office supplies dealer is withheld 1% creditable tax (ATC WC158/WI158) under RR No. 7-2019 as amended by RR No. 24-2025 — but only when the buyer has been specifically designated a BIR Top Withholding Agent and the supplier meets the regular-supplier threshold. A non-TWA business buying the identical goods from the identical supplier generally withholds nothing at all. See BIR Form 2307 for Purchases of Goods for the general TWA goods rule this rate draws from and The ‘Regular Supplier’ Rule for BIR Form 2307 for the six-transaction/₱10,000 trigger in full.