BIR Ruling

April 21, 1975 Seventeen Point Sixty-Five Plastics (Manila), Inc. 6th Floor, R. Magsaysay Center Roxas Boulevard, Manila Gentlemen : This refers to your letter dated April 16, 1975 stating that you are a manufacturing concern engaged in the manufacture of plastic products; and that before you accept purchase orders from U.S. Military Bases, you would like to be informed of the following: 1. Tax exemptions (gross receipts tax and income tax) 2. Keeping of separate books, if required. 3. Other levies and excise taxes deductible, if any. In reply, I have the honor to inform you that Article V of the U.S.-P.I. Military Bases Agreement provides as follows: "No import, excise, consumption or other tax, duty or impost shall be charged on material, equipment, supplies or goods, including food stores, clothing, for exclusive use in the construction, maintenance, operation or defense of the bases, consigned to, or destined for, the United States authorities and certified by them to be for such purposes." Thus, only sales made "for exclusive use in the construction, maintenance, operation or defense of the bases", in a word, only sales to the quartermaster, are exempt under Article V from taxation. Sales of goods even to the quartermaster but for a different purposes, are not free from the payment of the tax. (See Philippine Acetylene Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967). It appearing in the Certificate of Exemption No. 05506 issued by Clark Air Base that the plastic bags sold by that firm to the Philippine Regional Exchange, Clark Air Base, is exclusively destined for and actually utilized in the construction, operation, welfare maintenance and defense of the Military Bases, your sales thereof is exempt from the sales tax. However, your sales to the Military Bases, although exempt from the sales tax, forms part of your gross income tax purposes. There is no need of maintaining a separate books of accounts for your sales to the U.S. Military Bases. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5