VAT on the Sale of Tobacco

February 16, 1988 BIR RULING NO. 048-88 103 (a) 000-00 048-88 Gentlemen : This refers to your letter dated November 18, 1987 requesting a ruling whether the sale of tobacco from the trading centers to the redrying plants and finally to the cigarette factories is subject to the payment of value-added tax. It is alleged that trading centers operate only for a period of 3 to 4 months each tobacco season; that the sales of the redryers (packers) to the cigarette factories is done only once a year; and that the apportionment of the cost of flue-cured done only at the end of the year. In reply, please be informed that your request is answered in the affirmative. Pursuant to Section 103(a) of the Tax Code, as amended by Executive Order No. 273, the sales of non-food agricultural products" in their original state by the primary producer or owner of the land where the same are produced" are exempt from VAT. Accordingly, the sales by the trading centers and the redrying plants are not exempt from VAT since they are not the primary producers or owners of the lands where the tobacco was produced. The fact that there are difficulties encountered by the industry in the matter of reporting, collection, or remittance of payments do not justify exemptions from VAT. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner