BIR Form 2307 for Laundry and Dry-Cleaning Services: Recurring Contract Withholding

A hotel, hospital, or restaurant that pays a commercial laundry or dry-cleaning company under a recurring linen, towel, or uniform service contract generally withholds 2% expanded withholding tax (EWT) under RR No. 2-98, Section 2.57.2(E), and issues BIR Form 2307. An individual customer dropping off a load of personal clothes at a neighborhood laundromat is a different story — without a trade or business behind the payment, that customer generally has no withholding obligation at all.

This guide is part of the BIR Form 2307 series. It covers who withholds on a laundry or dry-cleaning payment, the applicable ATC codes, how a recurring linen contract gets withheld and certificated month by month, and a worked boutique-hotel linen contract example.

Who withholds on a laundry or dry-cleaning payment? #

The obligation follows the same payor-status test this series applies to every business-service supplier: a corporation or business-connected individual withholds, a private walk-in customer generally does not. RR No. 2-98 sets the test this way:

“(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)

A boutique hotel paying a commercial laundry company for its bedsheets, towels, and staff uniforms, or a hospital paying a linen service for surgical gowns and bedding, is a withholding agent under clause (A) or (B). A neighborhood resident dropping off a personal load of laundry at a corner laundromat falls outside the rule entirely — there is no trade or business connecting that payment to withholding.

What EWT rate and ATC code apply? #

Laundry and dry-cleaning services are not named as their own separate line item in RR No. 2-98 — they fall under the same flat 2% general contractor/business-services catch-all covered in BIR Form 2307 for Contractors and Subcontractors, the same bracket this series already applies to pest control, waste hauling, security, and janitorial-type recurring business-service suppliers in BIR Form 2307 for Pest Control and Waste Hauling Services.

A genuine pass-through cost stays outside this base. If a laundry service pays a third-party specialty treatment or courier cost on the client’s behalf and re-bills it at cost, separately itemized from its own service fee, that reimbursed amount is not the laundry business’s income — the same principle covered in Do You Withhold Tax on Reimbursement of Out-of-Pocket Expenses Billed Separately From a Service Fee? A flat contract fee that already bundles pickup and delivery, by contrast, is withheld on in full.

Business contract vs. individual walk-in customer #

The same laundry or dry-cleaning shop can sit on both sides of the withholding line depending entirely on who is paying, not on what service was performed. A hotel, hospital, restaurant group, or property manager paying a commercial laundry company under a standing contract — whether billed monthly, biweekly, or per pickup — is a withholding agent under RR No. 2-98, Section 2.57.3(A)-(B), and must withhold 2% and issue BIR Form 2307. An individual paying out of pocket for personal wash-and-fold, dry cleaning of a suit, or a one-off comforter cleaning at the same shop is not a withholding agent under Section 2.57.3(B), because there is no trade or business behind that payment. The same shop, the same service, but a different payor status changes the outcome entirely.

How is a recurring linen contract withheld and certificated? #

A hotel or hospital’s linen contract is typically a fixed monthly fee for ongoing service, which raises a timing question this series addresses directly. Under RR No. 2-98, Section 2.57.4, as amended by RR No. 4-2024, the withholding obligation is triggered by whichever comes first — actual payment, the payor’s own books recording or accruing the expense, or the supplier’s invoice. Applied to a recurring linen contract, this generally means each month’s service fee is withheld as that month’s invoice is paid, accrued, or booked, not accumulated across the year and withheld once. See When Must You Withhold Tax for BIR Form 2307: At Payment or When the Expense Accrues? for the full mechanics of this timing rule.

Issuing the actual BIR Form 2307 certificate is a separate clock. The BIR’s regulatory minimum under RR No. 2-98, Section 2.58(B), as amended by RR No. 11-2018, is a consolidated certificate furnished no later than the 20th day after each calendar quarter closes — or within three days if the laundry company specifically requests one earlier, commonly to support its own quarterly income tax filing. Many hotels and hospitals issue a certificate every month anyway, matching the linen contract’s own billing rhythm, but nothing in the regulation requires that cadence. See Is BIR Form 2307 Issued Per Transaction, Monthly, or Quarterly? for the full issuance-timing rule and worked comparison.

Worked example: a boutique hotel’s monthly linen contract #

Bahay Kubo Boutique Hotel Corp. contracts CleanPress Laundry Services Inc. for a fixed monthly linen, towel, and uniform contract at ₱60,000 per month.

Bahay Kubo withholds ₱1,200 each month as the invoice is booked, remits it through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, and issues CleanPress a BIR Form 2307 each quarter summing the cumulative service fees paid, ATC WC120, and total tax withheld for the period — a consolidated ₱180,000 in fees and ₱3,600 in EWT per quarter under the Section 2.58(B) minimum, or three separate monthly certificates if the hotel chooses the per-transaction approach instead. Over a full year, that’s ₱720,000 in service fees and ₱14,400 in cumulative EWT, either way.

If instead a hotel guest personally pays CleanPress’s retail counter ₱350 for same-day dry cleaning of a personal suit, no withholding applies at all — the guest is a private individual with no trade or business behind that payment.

Frequently asked questions #

Does a hotel, hospital, or restaurant have to withhold tax when paying a commercial laundry or dry-cleaning company? #

Yes, if the payor is a corporation or a business-registered individual. A hotel, hospital, restaurant, or similar business paying a commercial laundry or dry-cleaning company under a recurring linen or uniform contract is a withholding agent under RR No. 2-98, Section 2.57.3(A)-(B), and must withhold expanded withholding tax and issue BIR Form 2307.

What withholding tax rate and ATC code apply to laundry and dry-cleaning service payments? #

Commercial laundry and dry-cleaning services generally fall under the 2% general contractor/business-services bracket under RR No. 2-98, Section 2.57.2(E), as amended by RR No. 11-2018 — ATC WI120 for an individually run laundry business or WC120 for one organized as a corporation.

Does an individual customer dropping off clothes at a neighborhood laundromat need to withhold tax? #

No. Under RR No. 2-98, Section 2.57.3(B), withholding applies only to payments connected to a trade or business. An individual walk-in customer paying a neighborhood laundromat or dry cleaner for personal clothing is not a withholding agent, and the laundry business does not receive a BIR Form 2307 for that payment.

How often must BIR Form 2307 be issued for a recurring monthly laundry or linen contract? #

The BIR minimum under RR No. 2-98, Section 2.58(B), is a consolidated BIR Form 2307 furnished no later than the 20th day after each calendar quarter closes, or within three days of a specific payee request made earlier. Many businesses on a recurring linen contract issue a certificate every month anyway, matching the monthly billing cycle, but the regulation itself only requires the quarterly consolidated minimum.

Does the withholding base include pickup or delivery fees the laundry service bills as part of the contract? #

Generally yes, when the pickup or delivery is bundled into the laundry service itself rather than a separately reimbursed, pass-through cost. A flat monthly linen-service fee that already covers collection and delivery is withheld on in full; only a genuine third-party cost the laundry service pays on the client’s behalf and re-bills at cost, separately itemized, would sit outside the withholding base.

Summary #

A commercial laundry or dry-cleaning business paid under a recurring hotel, hospital, or restaurant contract sits in the flat 2% general business-services bracket (ATC WI120/WC120) under RR No. 2-98, Section 2.57.2(E) — the same bracket covering pest control, waste hauling, security, and janitorial contractors elsewhere in this series. An individual walk-in customer paying for personal laundry, by contrast, generally triggers no withholding at all, because Section 2.57.3(B) limits an individual’s withholding obligation to payments connected to a trade or business. On a recurring contract, each month’s fee is withheld as it’s paid, accrued, or invoiced under the Section 2.57.4 timing rule, while the BIR Form 2307 certificate itself follows the Section 2.58(B) quarterly-or-sooner issuance rule. See BIR Form 2307 for Contractors and Subcontractors for the general 2% bracket this rate draws from, BIR Form 2307 for Pest Control and Waste Hauling Services for a closely analogous recurring-contract supplier, and Is BIR Form 2307 Issued Per Transaction, Monthly, or Quarterly? for the certificate timing rule in full.