BIR Ruling [DA-138-03]

April 29, 2003 BIR RULING [DA-138-03] 151; 103-90 Mr. Eleucadio R. Ruste Manager, RCDG Construction San Jose Claret, Zamboanga City S i r : This refers to the letter of Head Excise Tax Area VI Manuel R. Garrido of Revenue Region No. 19, Davao City dated January 24, 2001 requesting in effect for a ruling on whether RCDG Construction is exempt from payment of the 2% excise tax. It is represented that "1. Mr. Ruste is a sand and gravel Concessionaire therefore, there would be levied a 2% Excise Tax on his extraction based on the actual fair market value of his gross output (Sec. 151). "2. Mr. Ruste has a contract with the government to build those roads, bridges, etc. and sand and gravel used in these projects are instrumental in said project, where he GENERATED an INCOME by receiving PAYMENT of said project. "3. The BIR Ruling No. 003-89 RE: Mr. Alberto P. Concha: Refers only to sand and gravel (including earthfill) hauled by the contractor for the government who undertook the said project. In this case, Mr. Ruste is the one who is undertaking the project per his Contract with the DPWH or any government entity. His hauling and extraction of sand and gravel is used for his project with the government and NOT for the project undertaken by the government as stated in the BIR Ruling "that sand and gravel including filling materials (earthfill) hauled by the contractor FOR THE GOVERNMENT are not subject to the 3% Excise Tax. . . . " Based on the records and listing of the Excise Tax Unit of Revenue Region No. 15, Zamboanga City, RCDG Construction is engaged in quarry resources/sand and gravel extraction since 1994 to the present. In reply, please be informed that Section 151(A)(2) of the 1997 Tax Code provides that "(A) Rates of Tax. There shall be levied, assessed and collected on minerals, mineral products and quarry resources, excise tax as follows: "(1) . . . "(2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) based on the actual market value of the gross output thereof at the time of removal, in the case of those locally extracted or produced; . . . Moreover, Section 151(B)(4) of the same Code defines "quarry resources" as follows: "(4) ' Quarry resources ' shall mean any common stone or other common mineral substances as the Director of the Bureau of Mines and Geo-Sciences may declare to be quarry resources such as, but not restricted to, marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate: Provided, That they contain no metal or metals or other valuable minerals in economically workable quantities. Section 2(h) of Revenue Regulations No. 13-80 dated November 7, 1980 or Regulations Governing the Taxation of Minerals and Mineral Products implementing B.P. Blg. 84 contains the foregoing definition and also provides, in the second paragraph thereof, that "quarry resources include sand and gravel whether removed from river beds or quarried." Such being the case, said products are subject to the then 3% excise tax based on the actual market value of the annual gross output thereof at the time of removal of those locally extracted or produced. (BIR Ruling No. 103-90 dated May 29, 1990) EDCIcH In view of the foregoing, RCDG Construction is subject to the 2% excise tax imposed under Section 151(A)(2) of the 1997 Tax Code based on the actual market value of the gross output thereof at the time of removal. Finally, BIR Ruling No. 3-89 dated January 17, 1989 finds no application in this case since the taxpayer in the said case is engaged merely in the hauling or transporting of sand and gravel which activity is not subject to the 2% (then 3%) excise tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group