Tax Exemption of Shares in the Sugar Milled Under a Marketing Agreement

August 15, 1966 BIR RULING NO. 031-66 The President National Federation of Sugar Cane Planters Gonzaga Building Rizal Avenue cor. Carriedo M a n i l a S i r : This refers to your request for the reconsideration of B. I. R. Ruling No. 60-020 holding cooperative marketing associations liable for the 2% tax on the share corresponding to their members in the sugar milled by the centrals. In reply, I have the honor to inform you that it appearing that the facts of this case fall four-square with those of the case entitled "Calamba Sugar Planters' Cooperative Marketing Association, Inc. vs. Collector of Internal Revenue (C. T. A. Case No. 216, January 5, 1957), the ruling of the Court of Tax Appeals in the said case, which has not been appealed by this Office, is applicable to your case. In said case the Court ruled that the 2% tax is the direct liability of the cooperative marketing association in view of the "Marketing Agreement and Power of Attorney" executed by and between it and its members and therefore, its share in the sugar which is caused to be milled on behalf of its planters-members, in accordance with the aforementioned agreement, is exempt from the 2% tax imposed by Section 189 of the Tax Code. In view thereof, and in accordance with the ruling in the aforecited case, the member-associations of that Federation and all associations similarly situated are exempt from the payment of the 2% tax prescribed by Section 189 of the Tax Code on their shares in the milled sugar which they cause to be milled under a marketing agreement with their members. B. I. R. Ruling No, 66-020 is hereby superseded. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue