Tax Liabilities of Firm Engaged in Buying Fletches and Transforming Them into Marketable Products for Export

April 7, 1984 BIR RULING NO. 067-84 202 (d)-300-82-067-84 Gentlemen : This refers to your letter dated February 21, 1984 requesting a ruling on your tax liability for engaging in the business of buying fletches (square logs with only the outer portion which contains the bark removed); sawing the fletches into marketable shapes and sizes; treating the swan lumber with chemicals; and then kiln-drying the same to make it durable. High grade lumber are then bundled and exported; whereas, the low grade lumber are sold in the local market. It is significant to note that the size and shape of the fletches you purchased from sources are large-measuring 18 to 20 feet in length; hence, not readily marketable for ordinary applications in industry. In reply, please be informed that, for engaging in the business of buying large pieces of square logs called fletches which are not yet suitable for use in industry; then sawing and transforming the same into marketable shapes and sizes; afterwards, chemically-treating, kiln-drying, and bundling the same for export to foreign buyers, you come within the purview of a manufacturer under Section 187(x) of the Tax Code. Such being the case, you are subject to the fixed tax of P100.00 per annum and to the 10% sales tax imposed by Sections 192(1) and 199(a) of the same Code on your lumber which are sold in the local market. However, with respect to the lumber which are exported to foreign buyers, you are exempt from percentage tax pursuant to Section 202(d) of the Tax Code, as amended by B.P. Blg. 84. cdta Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner