BIR Ruling No. 119-62

October 31, 1962 BIR RULING NO. 119-62 Mr. Claro A. Mendinueto Certified Public Accountant 299 Quezon Blvd. Ext. Quezon City S i r : Reference is made to your letter dated September 11, 1962, stating the following: "Summarized below are facts under which a corporation and a wholly owned subsidiary will operate: "X" Corporation is engaged in the assembling of Brand "A" and Brand "B internal combustion semi-diesel engines. In the past, sales of all the assembled engines were handled by "X" Corporation. Management, however, realized that selling of two competitive engines by one corporation did not help in increasing sales. Therefore, it has been decided that "X" Corporation should handled the selling of Brand "A" and the selling of Brand "B" should be handled by "Y" Corporation. Under this arrangement, "X" Corporation, after assembling Brand "B" will transfer these engines to "Y" Corporation at cost . "Y" Corporation will handled all selling activities for Brand "B" and sell the engines at their list price." "With reference to Section 186 of the National Internal Revenue Code, may I have your advice as to which of the two corporations should be liable for the percentage tax on Brand "B" engines?" In reply thereto, I have the honor to inform you that under such circumstances "X" corporation and not "Y" corporation is liable for the payment of the 7% sales tax prescribed in Section 186 of the Tax Code, the basis of which shall be the selling price of "Y" corporation. Very truly yours, JOSE B. LINGAD Acting Commissioner of Internal Revenue