BIR Ruling No. 029-80

October 6, 1980 BIR RULING NO. 029-80 188-00 000-00 29-80 Management Multi-Services, Inc. 77-A Times, West Triangle Quezon City Attention : Atty . Benjamin I . Fernandez This refers to your letter dated October 3, 1980 requesting a ruling (1) whether your client, Rizal Poultry and Livestock Association, Inc., San Mateo, Rizal, having been granted exemption from the payment of income tax is, likewise, exempt from business taxes; and (2) whether it is subject to tax in respect of stocks sold to non-members. In reply, I have the honor to inform you that in a ruling issued by this Office on March 16, 1976, your client was granted exemption from income tax as an agricultural organization not organized principally for profit pursuant to Section 27(a) of the Tax Code. The income covered by the exemption from income tax is also exempt from business taxes. It should be noted that business tax is imposed on business which is restricted to activities or affairs where profit is the purpose, or livelihood is the motive. (Commissioner vs. The Club Filipino, Inc., G.R. No. L-12719, May 31, 1962) In fact, the income would be subject to internal revenue taxes (income and business taxes), if the same is derived by a tax-exempt organization from its activities which are conducted for profit, regardless of the disposition made of such income. (Sec. 27, Tax Code, as amended by P.D. No. 1457). As regards the inventory stocks of your client which exceed the needs of its members, the same may be sold to non-members without affecting its tax-exempt status. This is so because your client still remains an agricultural organization not organized principally for profit. However, such sales to non-members shall be subject to income and business taxes. Very truly yours, ROMULO M. VILLA Acting Commissioner