BIR Ruling

June 29, 1977 Exemption from the 2% Tax Prescribed in Section 189 of the Tax Code This refers to your letter dated March 4, 1977 requesting that the share of that cooperative in the sugar which it caused to be milled by the CAREBI (Phils.), Inc. be exempted from the 2% tax prescribed in Section 189 of the Tax Code. From the document submitted by you, it appears that the Zambales Sugarcane Cooperative, Inc., is a sugar cooperative marketing association organized under the provisions of Act 3425, as amended, and duly registered with the Sugar Quota Administration; that it is organized by persons engaged in the production of sugar. And from the milling agreement entered into by and between the individual planter-members and the cooperatives a copy of which was submitted to this Office, it appears that the member-planters agree to produce and sell to the Cooperative and the Cooperative agrees to buy the sugar cane produced from the members' sugar cane plantation; that the Cooperative shall have the sugar came milled into centrifugal sugar; that absolute title to all sugar cane produced from the land of the member pass in favor of the cooperative, and that the member-planters shall be paid their sugar cane within 15 days after the Cooperative receives the date and report on the sugar cane delivered and sugar produced therefrom without waiting whether the sugar was sold by the Cooperative. As it appears that that Cooperative is registered with the Sugar Quota Administration pursuant to Section 4(1) of Presidential Decree No. 388, as amended by Presidential Decree No. 775, it is exempt from the payment of the merchant's sales tax, the income tax, and all other percentage taxes of whatever nature and description pursuant to Section 4(1) of the aforementioned law in relation to Section 48 of Act No. 3425, as amended by Republic Act No. 702. Accordingly, if after investigation, it is verified that the sugar cane it caused to be milled into sugar has owned by the Cooperative and the resulting sugar thus milled is likewise owned by it, the share of that Cooperative in said sugar is exempt from the 2% tax. However, sugar milled from sugar cane belonging to the planter-members of that Cooperative which is merely caused by that Cooperative to be milled in behalf of such member-planters is subject to the 2% tax. techasia