BIR Ruling No. 122-65

November 2, 1965 BIR RULING NO. 122-65 SyCip, Gorres, Velayo & Co. Certified Public Accountants 85 Ayala Avenue, Makati Rizal Attention : Mr . V . O . Jose Partner Gentlemen : Reference is made to your letter dated August 3, 1965, stating as follows: ". . . our clients engaged in the following manufacturing activities will be exempt from payment of sales tax under Section 188(b) of the Tax Code when they produce or raise the raw materials used by them in the manufacture of their products: "1. Commonwealth Foods "It is engaged in the manufacture of roasted and instant coffee which it sells to the public. It imports coffee beans and/or buys the same locally as raw materials for the aforesaid purpose. "2. Philippine Food Industries , Inc . "It manufactures cocoa powder, cocoa butter and other cocoa or chocolate products for sale to the public. The cocoa beans which are used in the manufacture of the aforesaid products are either imported or bought locally. "3. Delta Manufacturing Corporation "It imports cattle or buys them locally which it slaughters for the purpose of manufacturing into various meat products such as corned beef, beef loaf, steaks, etc. which it sells to the public. "Our said clients are at present paying percentage taxes on the sales of these manufactured products. However, in view of the provision of Section 188(b) of the Tax Code exempting from percentage tax "agricultural products . . . whether in their original form or not when sold, bartered or exchanged in this country by the producer or owner of the land where produced . . .," our said clients would like to know if they may avail of this exemption should they produce or raise their own respective raw materials for the manufacture of their aforesaid products. In this connection, we would like to know the applicability of the Supreme Court decision in Philippine Packing Corporation vs. Collector of Internal Revenue, G.R. No. L-9040, December 26, 1956, exempting the canning of pineapple chunks from payment of sales taxes because "exemption is not divested merely because the products themselves have undergone processing of some kind" to our said clients." In reply, I have the honor to inform you as follows: Commonwealth Foods may be exempted from the sales tax on its sales of roasted coffee beans, but it shall be subject on the instant coffee, the latter being essentially a manufactured article. Philippine Food Industries, Inc. will remain liable for the sales tax on its sales of cocoa powder, cocoa butter and other cocoa or chocolate products, these products being also essentially manufactured articles. Delta Manufacturing Corporation will remain liable for the sales tax on its sales of all its products, the latter being also essentially manufactured articles. cdll Very truly yours, (SGD.) MISAEL P. VERA Acting Commissioner of Internal Revenue