BIR Ruling No. 031-64

May 6, 1964 BIR RULING NO. 031-64 Messrs. Carlos J. Valdez & Co. Certified Public Accountants 1130 Perez St., Manila (Thru the Honorable, The Secretary of Finance) Gentlemen : With reference to your letter dated April 6, 1964, please find below the answers to the various questions posed by you. "1. Island Woods, a domestic corporation, purchases plywood from another domestic corporation, after which the plywood is wholly and exclusively exported by Island Woods. Are these exportations subject to Sec. 188(e) of the National Internal Revenue Code.?" Island Woods is a dealer-exporter and not a manufacturer-exporter or producer-exporter subject to the graduated annual fixed tax prescribed by Section 182(A)(2) of the Tax Code. The other domestic corporation, as manufacturer of plywood, is subject to the 7% sales tax on its sales of plywood to Island Woods. The sale of plywood to Island Woods is purely a domestic sale and not an exportation within the contemplation of Section 188(e) of the Tax Code. "2. The same corporation, Island Woods, buys plywood from another domestic corporation. It then adds to the plywood a finishing gloss, creates it in cartons, and sells it wholly and exclusively abroad. Is the exportation subject to Sec. 188(e)?" Island Woods is a manufacturer of glossed plywood because by physical and chemical process, Island Woods alters the exterior texture or form of the Plywood in such a manner as to prepare the plywood for a special use or uses to which it could not have been put in its original condition. (Section 194(x), Tax Code) Island Woods shall not be liable to the sales tax on glossed plywood exported pursuant to Section 188(e) of the Tax Code. The other corporation, as manufacturer of plywood, is subject to the sales tax on its sales of plywood to Island Woods. prll "3. The same corporation buys a veneer from another domestic corporation. It then contracts a domestic plywood manufacturer to process the veneer into plywood. The manufactured plywood is then wholly and exclusively exported by Island Woods. Is the exportation subject to Section 188(e)?" Island Woods is a manufacturer of plywood and its exportation thereof is exempt under Section 188(e) of the Tax Code. The domestic corporation from whom Island Woods purchases veneer is subject to the sales tax on its sales of such veneer as manufacturer thereof. The domestic corporation which processes the veneer into plywood for Island Woods is a mere contractor subject to tax under Section 191 of the Tax Code. "4. If the Island Woods Corporation acts only as a purchasing agent for foreign corporations, would the answers to each of the above-stated problems be the same?" Island Woods shall be constituted a commercial broker subject to the fixed and percentage taxes prescribed by Sections 182(A)(1) and 195 of the Tax Code. The sales by the local plywood manufacturers under this set-up shall be considered an exportation exempt from the sales tax under the provisions of Section 188(e) of the Tax Code provided that the agency relationship and the status of the plywood manufacturers as the actual exporters are duly established by documentary evidence. LLpr Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue