Common Carrier's Tax on Land and Sea Transport: The 3% Percentage Tax Under NIRC Section 117

Under NIRC Section 117, a domestic land carrier that transports passengers for hire — a bus line, taxi or TNVS operator, jeepney operator, or car-for-rent business with a driver — pays a 3% percentage tax on its quarterly gross receipts, separate from VAT and computed on a specific, narrower base than the general 3% rule in Section 116. Getting percentage tax compliance right here means knowing exactly what Section 117 covers, what it excludes, and how cargo, sea, and international transport are taxed under entirely different rules.

This post is a mechanical deep-dive on Section 117 alone. For the broader landscape of specialized percentage taxes — including how common carriers, banks, and insurance premiums each get their own rate — see the pillar post Percentage Tax Beyond 3%: Common Carriers, Banks, Insurance, and Stock Transactions.

What does NIRC Section 117 actually say? #

Section 117, captioned “Percentage Tax on Domestic Carriers and Keepers of Garages,” names four specific categories subject to the 3% rate: cars for rent or hire driven by the lessee, transportation contractors (including anyone who transports passengers for hire), other domestic carriers by land for the transport of passengers, and keepers of garages. It then carves out two exclusions by name. As reproduced in a public compilation of the codified National Internal Revenue Code text, the operative section reads:

“SEC. 117. Percentage Tax on Domestic Carriers and Keepers of Garages. — Cars for rent or hire driven by the lessee; transportation contractors, including persons who transport passengers for hire, and other domestic carriers by land for the transport of passengers (except owners of bancas and owners of animal-drawn two wheeled vehicle), and keepers of garages shall pay a tax equivalent to three percent (3%) of their quarterly gross receipts.”

That 3% rate has stood since the 1997 Tax Code (Republic Act No. 8424) and was carried forward unchanged through the Section 117 amendments made by Republic Act No. 9337 in 2005. It is why the tax is commonly called the “common carrier’s tax” (CCT) in BIR practice and industry usage, even though the statutory heading itself says “domestic carriers.”

Who is excluded from the 3% rate? #

Section 117 names exactly two exclusions, and both are narrow: owners of bancas, and owners of animal-drawn two-wheeled vehicles. Neither exclusion is about the size of the operation — it is about the mode of conveyance. A banca is a traditional Philippine outrigger boat, typically operated informally for short water crossings rather than as a land carrier; an animal-drawn two-wheeled vehicle (a kalesa or similar cart) is likewise carved out by name, most likely reflecting its status as informal, small-scale, non-motorized transport at the time the exclusion was written into law. Every other passenger-hauling land carrier operating under a Certificate of Public Convenience (CPC) — buses, taxis, jeepneys, UV Express and shuttle vans, car-for-hire businesses, and TNVS operators like Uber or Grab drivers holding a CPC — falls inside Section 117’s coverage, not outside it.

Passenger transport vs. cargo: why the tax base splits #

Section 117 taxes passenger transport specifically — it does not extend to what the same carrier earns from hauling cargo or freight, which follows the standard VAT/percentage-tax framework instead. A trucking company moving goods, for example, is not a “common carrier” for Section 117 purposes merely because it operates commercial vehicles; its freight receipts are subject to 12% VAT if it is VAT-registered or exceeds the VAT threshold, or to the general 3% percentage tax under Section 116 if it is not. This is a different legal basis from Section 117 even when the resulting percentage happens to be the same 3% figure. The distinction matters for classification and for which BIR form fields and Alphanumeric Tax Code (ATC) apply on BIR Form 2551Q, the Quarterly Percentage Tax Return used to remit both Section 116 and Section 117 taxes.

The table below separates the regimes that apply across different transport activities and carrier types.

For the separate regime that applies to international carriers, see Gross Philippine Billings Tax: How BIR Taxes International Airlines and Shipping Carriers — GPB tax is an income tax substitute at 2.5%, not a percentage tax, and it only reaches carriers doing international, not domestic, transport.

Does the 3% tax reach inter-island ferries and sea transport? #

Not under Section 117 itself — the section’s text says “other domestic carriers by land,” and it does not name water or sea carriers among the categories it covers. This is a common point of confusion, since “common carrier’s tax” gets used loosely to describe any transport-sector percentage tax. In practice, a domestic ferry operator or inter-island shipping line does not sit inside Section 117’s enumerated list; its passenger and freight gross receipts instead fall under the ordinary VAT/percentage-tax framework that applies to most businesses — 12% VAT if the operator is VAT-registered or exceeds the VAT threshold, or the general 3% percentage tax under Section 116 if it is not. A ferry operator below the VAT threshold can end up paying the same 3% rate as a bus company, but on a different legal basis (Section 116, not Section 117) — a distinction that matters if BIR ever questions which ATC and statutory ground was used on a filed BIR Form 2551Q. Domestic sea carriers are also separate from the international carriers covered by the Gross Philippine Billings regime, which applies only to voyages originating in the Philippines bound for a foreign destination.

Does a local government also get to tax a common carrier’s gross receipts? #

Generally, no — the Local Government Code specifically withholds that power from cities, municipalities, and provinces. Section 133(j) of Republic Act No. 7160 (the Local Government Code of 1991) bars local government units from imposing “taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire, and common carriers by air, land, or water,” except as the Code itself otherwise provides. The Supreme Court has upheld this exemption against attempts by local governments to impose a local business or franchise tax on carriers’ transport gross receipts, holding that the specific bar in Section 133(j) prevails over an LGU’s more general taxing authority. This means the national 3% common carrier’s tax under NIRC Section 117 is not something a bus company or garage operator pays twice — once nationally, once locally — on the same passenger gross receipts. It does not exempt the carrier from other, unrelated local impositions (business permits, real property tax on depots and terminals, or regulatory fees), which are a separate matter from a gross-receipts tax on transport revenue.

Worked example: computing the tax for a provincial bus company #

A provincial bus operator holding a valid Certificate of Public Convenience computes its quarterly common carrier’s tax by applying the 3% rate to its actual gross receipts from passenger fares for the quarter, unless the BIR’s prescribed minimum quarterly gross receipts for its vehicle class would produce a higher figure. Assume a bus company operating routes between provincial terminals reports ₱2,000,000 in actual gross receipts from passenger fares for the quarter — fare box collections plus any online/prepaid ticket sales attributable to those trips, before deducting fuel, driver wages, or other operating costs.

Because ₱2,000,000 in actual receipts far exceeds the BIR’s per-unit minimum quarterly gross receipts schedule for public utility buses set under Revenue Regulations No. 9-2007 (a presumptive floor of ₱3,600 to ₱7,200 per bus per quarter, depending on seating capacity, used mainly to catch underreporting by small or individual operators), actual receipts control the computation here — the minimum schedule only matters when it would produce a higher figure than what the carrier reports. This ₱60,000 is remitted through BIR Form 2551Q, due on or before the 25th day after the close of the quarter, and covers passenger receipts only — any separate cargo or courier revenue the same bus company earns would be evaluated under Section 108 (VAT) or Section 116, not folded into this Section 117 computation.

What percentage tax compliance looks like for a common carrier #

Percentage tax compliance for a Section 117 carrier means three things done consistently every quarter: confirming the CPC is current, isolating passenger gross receipts from any cargo or ancillary revenue, and filing BIR Form 2551Q with the correct ATC on or before the 25th day after quarter-end. A carrier that also earns cargo or freight income needs to track that revenue stream separately since it does not belong in the Section 117 base — comingling passenger and freight receipts on the same percentage tax line risks both an understated Section 117 base and a misreported VAT or Section 116 filing on the freight side. Carriers that grow past the VAT threshold on non-Section-117 activities (freight, ancillary services) should also confirm whether that growth triggers mandatory VAT registration for those specific revenue streams, even while the passenger transport itself stays under Section 117’s 3% rate regardless of gross receipts level.

For the general percentage tax framework this specialized rule sits alongside, see VAT vs. Percentage Tax in the Philippines, and for how Section 117 compares against the other specialized Title V rates — banks, insurance, franchise grantees, stock transactions — see the pillar post Percentage Tax Beyond 3%: Common Carriers, Banks, Insurance, and Stock Transactions.

Frequently asked questions #

What is the common carrier’s tax under NIRC Section 117? #

The common carrier’s tax is a 3% percentage tax under NIRC Section 117 charged on the quarterly gross receipts of domestic land carriers that transport passengers for hire, including transportation contractors, cars for rent or hire driven by the lessee, and keepers of garages. It excludes owners of bancas and owners of animal-drawn two-wheeled vehicles.

How is the 3% common carrier’s tax computed? #

The tax due equals 3% of the carrier’s actual quarterly gross receipts from passenger transport, or the BIR’s prescribed minimum quarterly gross receipts for that vehicle type and area under Revenue Regulations No. 9-2007, whichever is higher. A bus company with ₱2,000,000 in actual quarterly gross passenger receipts owes ₱60,000 in common carrier’s tax for that quarter.

Does the 3% common carrier’s tax under Section 117 apply to cargo or freight? #

No. Section 117 covers passenger transport specifically. A domestic land carrier’s gross receipts from hauling cargo or freight are generally subject to 12% VAT if the carrier is VAT-registered or exceeds the VAT threshold, or to the general 3% percentage tax under NIRC Section 116 if it is not VAT-registered and falls below that threshold — a different legal basis from Section 117 even where the arithmetic rate happens to match.

Are inter-island ferries and other sea carriers taxed under Section 117? #

No, not by the text of the law. Section 117 by its own wording covers “other domestic carriers by land” — it does not name water or sea carriers. A domestic ferry or shipping line’s passenger and freight receipts instead fall under the standard VAT/percentage tax framework: 12% VAT if VAT-registered or above the VAT threshold, or the general 3% percentage tax under Section 116 if not, rather than Section 117’s common carrier’s tax specifically.

Can a city or municipality impose its own tax on a common carrier’s gross receipts? #

Generally no. Section 133(j) of the Local Government Code (Republic Act No. 7160) withholds from local government units the power to tax the gross receipts of transportation contractors, persons transporting passengers or freight for hire, and common carriers by air, land, or water. The Supreme Court has upheld this exemption, so the national 3% common carrier’s tax under NIRC Section 117 is not layered with a local equivalent on the same transport gross receipts — though LGUs may still impose other standard local charges unrelated to that gross receipts base, such as business permit fees.

Summary #

NIRC Section 117 imposes a 3% common carrier’s tax on the quarterly gross receipts of domestic land carriers transporting passengers for hire — buses, taxis, jeepneys, car-for-hire operators, TNVS drivers with a CPC, and keepers of garages — excluding only bancas and animal-drawn two-wheeled vehicles by name. It does not reach cargo or freight revenue (governed by VAT or Section 116), does not reach sea or water carriers by its own text (also governed by VAT or Section 116), and does not reach international carriers (governed by the 2.5% Gross Philippine Billings tax). Section 133(j) of the Local Government Code further bars LGUs from layering a local tax on the same gross receipts. A bus company reporting ₱2,000,000 in quarterly passenger fares owes ₱60,000 in common carrier’s tax, filed via BIR Form 2551Q by the 25th day after quarter-end. See the pillar post Percentage Tax Beyond 3% for how this rate sits alongside the other specialized percentage taxes under Title V.