BIR Ruling

August 24, 1967 8th Indorsement Respectfully returned to the Honorable the Secretary of Finance, Manila, the within basic communication, together with all indorsements and comments bearing thereon, with the following comment on the last paragraph of the 5th Indorsement, dated June 29, 1967 of the Secretary of Commerce and Industry. As stated in the 3rd Indorsement of this Office dated May 26, 1967, Section 186 of the Tax Code imposes the 7% sales tax on all logs sold by concessionaires or producers of said logs. However, if the logs are exported by the concessionaires or producers, the export sales are exempt from the sales tax in accordance with Section 188(e) of the Tax Code, which provides that articles shipped or exported abroad by the manufacturer or producer, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the articles so exported, are exempt from the sales tax. As pointed out in the aforecited indorsement of this Office, the liability to the 7% tax of the concessionaires or producers has been confirmed by the Supreme Court, that no exception is provided in Section 186 of the Tax Code, nor is there any law on which to base exemption from the 7% sales tax on logs sold to veneer or plywood manufacturers. Copra is an agricultural product, hence, the sale made by the producers thereof to manufacturers of coconut oil is exempt from the sales tax pursuant to Section 188(b) of the Tax Code. The proposition under consideration cannot possibly be attained by administrative action. It is the cardinal rule in taxation that exemption from tax is purely a matter of legislative grace. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue