Request for Exemption from Payment of New Rates of Sales Taxes Imposed by Sec. 165 of the Tax Code

July 9, 1986 BIR RULING NO. 100-86 165 000-00 100-86 Mesdames : This refers to your letter dated October 18, 1985 requesting exemption from the payment of the new rates of sales taxes imposed by Section 165 of the Tax Code, as amended. It is represented that Tahanang Walang Hagdanan, Inc. (TWH) is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission; that said corporation was organized for charitable purposes; that it is engaged in the business of manufacturing metalcraft and woodcraft, consisting mostly of toys; and that TWH has been granted exemption from the payment of income tax as a social welfare organization under Section 27(g) of the Tax Code. In reply, I regret to inform you that your request cannot be granted for lack of legal basis. The records of this case disclose that your production and sale of the said articles are conducted for profit. In fact, this is not denied by your accountant, L.C. Diaz & Company. Pursuant to the last paragraph of Section 27 of the Tax Code, as amended by P.D. No. 1457, income of whatever kind and character of all the organizations enumerated therein derived from any of their properties, real or personal, or from any of their activities conducted for profit is subject to internal revenue taxes, regardless of the disposition made of such income . In other words, you are exempt from income tax in respect of income received by you as a social welfare organization, pursuant to Section 27(g) of the Tax Code. However, you are subject to income tax imposed under Section 24(a) and to the fixed and percentage (sales) taxes imposed under Sections 161 and 165 of the Tax Code on your business of manufacturing metalcraft and woodcraft. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner