BIR Ruling No. 105-65

September 14, 1965 BIR RULING NO. 105-65 Services & Support Squadron (PROV) United States Air Force Litton Bldg., Roxas Blvd. M a n i l a Attention : Mr . Wayne T . Montgomery Officer-In-Charge Gentlemen : This refers to your letter dated May 10, 1965 requesting that this Office refund to the Liberty Motors, Inc. the customs duties, special import tax, and advance sales tax paid by the said corporation on the ten (10) Willys jeeps which it sold to you, on the ground that that agency of the United States Government is exempt from taxes and duties on its importation. cdll In reply, I have the honor to inform you that while it is true that under the military bases agreement between the United States and the Philippines, your importations, as well as your local purchases, for military purposes are exempt from taxes, such exemption does not extend beyond the transaction effected by you. It will be noted that the Liberty Motors, Inc. imported completely knocked-down parts of jeeps for use in its business of assembling jeeps. On said importation it paid the corresponding taxes and duties. Thereafter, it assembled the CKD parts into jeeps, the jeeps in question being among them. When it sells the assembled jeeps, the corporation shall be liable for the sales tax, said tax to be based on the gross selling price less the total landed cost of the imported CKD parts, plus 25% mark-up, in accordance with Section 186 of the Tax Code. It is this sales tax which the Liberty Motors, Inc. would have shifted to you by adding said tax to the selling price of the ten jeeps in question. And it is the only tax for which you can claim exemption under the abovementioned agreement. You cannot claim exemption for the duties and taxes paid by the Liberty Motors, Inc. on the said CKD jeeps because the aforesaid duties and taxes were paid on a previously consummated transaction which is distinct and separate from your purchase of the ten assembled jeeps in question. In the light of the foregoing, we hereby hold that your purchase of the ten assembled jeeps from Liberty Motors, Inc. is exempt from the sales tax. However, your request for the refund to Liberty Motors of the duties and taxes previously paid by it on its importation of the CKD jeeps which were subsequently assembled and sold to you cannot be granted for lack of legal basis. Very truly yours, (SGD.) MISAEL P. VERA Acting Commissioner of Internal Revenue