Taxability of a Corporation Engaged in the Processing of Agricultural Products

October 14, 1968 BIR RULING NO. 023-68 Mr. Abelardo Termulo Certified Public Accountant P. O. Box 1536 M a n i l a S i r : This refers to your inquiry regarding the taxability of a corporation (referred to as Corporation A) which is organized to engage in the processing of agricultural products such as coconuts into various intermediate products, such as copra and coconut shell charcoal. cdtech On the basis of the foregoing you posed the following questions: "1. Are sales by Corp. A to local buyers of its copra and coconut shell charcoal exempt from percentage taxes by virtue of Sec. 188(b) of the Tax Code (sales of agricultural products whether in their original form or not)? "2. Are export sales to foreign buyers of its copra and coconut shell charcoal exempt from percentage taxes by virtue of Sec. 188(e) of the Tax Code? "3. If Corp. A. aside from its processing operations, also purchases copra and coconut shell charcoal from other local producers and resells or exports these abroad, may we assume it is not subject to percentage taxes by virtue of the fact that in such a case it is merely acting as a merchant?" In reply, I have the honor to inform you as follows: If Corporation A processes coconuts purchased from the producers thereof into intermediate products, such as copra and coconut shell charcoal, it is considered a manufacturer, hence, subject to the fixed and percentage taxes prescribed in Sections 182(A)(1) and 186 of the Tax Code. However, the export sales of Corporation A of its processed or manufactured products are exempt from the sales tax, pursuant to Section 188(e) of the Tax Code. If it purchases copra and coconut shell charcoal for export, then it is a dealer, subject to the graduated annual fixed tax prescribed in Section 182(A(2) of the Tax Code. LLjur Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue