BIR Ruling

April 19, 1972 San Miguel Corporation San Miguel Building 6766 Ayala Avenue Makati, Rizal Attention: Mr . D . T . Reyes Gentlemen : This refers to your letter dated April 17, 1972 requesting information as to the tax consequences of the transaction therein presented substantially summarized as follows: SUPPLIER breeds and hatches broiler chicks which are given to GROWER for caring for about 8 weeks. SUPPLIER furnishes the necessary feeds to GROWER as well as technical assistance and veterinary services. Ownership over the chicks reposes all the time with the SUPPLIER. After about 8 weeks SUPPLIER repossesses the grown chicks and pays GROWER a stipulated amount per kilogram of live weight. SUPPLIER then prepares the chicken for the market-dressing and freezing. In reply, I have the honor to inform you that SUPPLIER is considered a producer of agricultural products subject to the fixed tax of P50.00 per annum prescribed by Section 182(A)(1) of the Tax Code. However, SUPPLIER shall be exempt from the sales tax on its sales of the dressed chicken pursuant to Section 188(b) of the same Code. On the other hand, the GROWER is considered an independent contractor subject also to the P50.00 fixed tax per annum and to the 3% contractor's tax on its gross receipts. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue