1% Sales Tax — Agricultural Products

March 5, 1980 BIR RULING NO. 033-80 Kenram (Phil.) Inc. 7th Floor, J & T Building 3894 R. Magsaysay Blvd. Sta. Mesa, Manila Attention: Mr . Ernesto V . Santos Treasurer Gentlemen : This refers to your letter dated December 16, 1978, requesting confirmation that your agricultural products, namely: palm oil and palm kernel which were exempt from the sales tax as agricultural products under our ruling to that firm dated September 18, 1974 are now subject to the 1% sales tax by virtue of the amendment effected by P.D. No. 1358 to Section 198 of the Tax Code of 1977. It is represented that the extraction of palm oil and kernels from the fresh fruit bunches involved the following steps, viz: "A. PALM OIL 1. As the fresh fruit bunches (FFB) are brought in from the field, they are weighed and the rendiment evaluated. 2. The fresh fruit bunches are steam heated to arrest natural fermentation and enzymic action that could deteriorate the quality of the oil by increase of free fatty acid content. It also softens the pericarp (outside covering of the fruits) and liquifies the solidified oil particles disposed within the pericarp. 3. The fresh fruit bunches are threshed to remove the fresh fruits from the stems. 4. The separated fruits are placed in steam jacketed vessels to loosen the pericarp from the nut. 5. The fruits are fed to a screw press and the crude oil is thus separated from the pericarp. 6. To purify the crude oil, solid impurities are removed. 7. The now pure crude oil is pumped to storage tanks to await shipment to customer. cd i "B. KERNELS 1. The nuts are dried then broken to derive the kernel (seed). 2. The kernels are cleaned, dried and put in bags for export." In reply, please be informed that since there is no change in the process of producing your palm oil and kernel products which were considered by this Office as agricultural products, thus exempt from the sales tax pursuant to the former provision of Section 188(b) which later became Section 202(b) of the Tax Code of 1977, and since the Secretary of Finance in his ruling dated October 22, 1975 also considered such products as agricultural product or products of the soil which have been processed in marketable form by extraction without the aid of chemical or any sophisticated manufacturing process, it is the opinion of this Office, as it hereby holds, that your aforesaid products are now subject to the 1% sales tax pursuant to Section 198 of the Tax Code, as amended by P.D. No. 1358. cdta Very truly yours, RUBEN B. ANCHETA Acting Commissioner