Taxability of Cooperative Marketing Associations on Shares in the Sugar Milled by Various Sugar Centrals

May 11, 1966 BIR RULING NO. 020-66 The National Federation of Sugar Cane Planters Gonzaga Bldg., cor. Rizal Ave. & Carriedo M a n i l a Gentlemen : This refers to the exemption of cooperative marketing associations organized under Act No. 3425 from the 2% tax prescribed by Section 189 of the Tax Code on their shares in the sugar milled by the various sugar centrals. In previous rulings, this Office held that said associations are exempt from the aforesaid tax. These rulings were predicated on the fact that the milling of the sugar were undertaken by the associations for and in behalf of their members. It is observed, however, that a member-planter has a direct milling contract with the central and the mere fact that the member authorized the central by the "Marketing Agreement and Power of Attorney" he executed with the association to issue the quedans covering his share in the milled sugar does not transfer the individual liability of the member-planter to the association for the payment of the tax. This arrangement served nothing more than to facilitate the marketing by the association of the sugar of its members which is the principal purposes of the organization of said associations. It may be stated in this connection, that, as a rule, exemption from taxation can be claimed only by those who are directly and personally liable therefor. The associations cannot, therefore, properly claim for exemption from the 2% tax, the tax being the direct and personal liability of the member-planters. For the foregoing considerations, this Office believes as it hereby holds that each individual planter-member is subject to the 2% tax on his share in the sugar milled by the Central which the Central should withhold and pay to the government. The various rulings heretofore issued to your member-associations to the effect that their share in the milled sugar is exempt from the 2% tax is hereby revoked, there being no factual basis therefor. It is, therefore, requested that you advise your members and the centrals accordingly. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue This is to certify that the above ruling was duly signed by the Commissioner of Internal Revenue on May 11, 1966 . (SGD.) PRISCILLA R. GONZALES Asst. Rev. Operations Head (Legal)