BIR Ruling

February 20, 1973 Dr. Patricio S. Mangonon President, Manaog Mill District Producers Cooperative Marketing Association Inc. Manaog, Pangasinan S i r : This refers to your letter dated January 29, 1973 requesting clarification of our letter to you dated December 14, 1972 wherein it was held that the Manaog Mill District Producers Cooperative Marketing Association, Inc. is exempt from the 2% Miller's Tax imposed by Section 189 of the Tax Code on its sugar produced from the sugarcane land belonging to its various members which cane that cooperative caused to be milled under a milling contract with the Hint Sugar Co., Inc. of Manaog, Pangasinan, the exemption take effect on October 1, 1972; and that the shares of the members of that cooperative is subject to the said 2% tax in accordance with Revenue Memorandum Circular No. 22-71. In reply, I have the honor to inform you that as hereinabove stated, that cooperative is exempt from the 2% millers, tax imposed in Section 189 of the Tax Code on its share of the sugar which it produced from its sugarcane land which it caused to be milled in the sugar central. Thus, the exemption from the 2% tax as envisioned in Section 48 of Act No. 3425 as amended, contemplates a situation where a cooperative undertakes the production of the sugar in its own sugar land and causes said sugar to be milled under a milling agreement with the sugar central. Under this circumstance, the share of the cooperative in the milled sugar as determined in the Milling contract on agreement is exempt from the 2% tax. In the case, however, of member planters of sugar producers cooperative marketing associations who produce sugar from their respective sugar lands and cause their sugar produce to be milled in the sugar central by virtue of milling contracts or agreements individually executed with the sugar centrals or cause the milling thereof pursuant to the so-called "Milling Agreement and Power of Attorney" entered into by and between the association and the member thereof, the share of the members in the milled sugar is subject to the 2% tax prescribed in Section 189 of the Tax Code. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue