Tax Liability on Sales of Coagulated Rubber Juice/Sap Gathered from Rubber Plantation

July 31, 1986 BIR RULING NO. 133-86 198 069-86 133-86 Gentlemen : This refers to your letter dated May 31, 1985 requesting for and in behalf of your client, T.S. Zafiro Ledesma, a ruling on his tax liability on the sales of coagulated rubber juice/sap gathered from his rubber plantation. You orally represented that your client is engaged in producing rubber from rubber trees plantation which he owned and operated; that from these rubber trees latex (rubber juice/sap) are collected through tapping by daily morning cutting of a spiral incision in the bark of rubber trees and placing a cup below the lower end of the incision to receive the flow of latex; that thereafter the latex are sold after having been coagulated; and that there is nothing added whether chemical or otherwise, in said liquid latex to produce coagulated rubber latex. In reply, please be informed that coagulated rubber juice/sap gathered from rubber plantation is an agricultural product. The transformation and/or processing of liquid latex (rubber juice/sap) into coagulated rubber latex is not considered manufacturing. (CIR) vs. American Rubber Co. 18 SCRA 842) Accordingly, under Section 198 of the Tax Code, prior to its amendment by Presidential Decrees Nos. 1991 and 1994 which took effect on January 1, 1986, your client, Mr. T. S. Zafiro Ledesma is subject to the sales tax of 1% based on his gross selling price or gross value in money of the coagulated rubber latex sold and to the annual fixed tax of P100 (now P200) prescribed by Section 192(1) (now Sec. 161(1)) of the same Code. However, starting January 1, 1986 agricultural products are now subject to the 0% sales tax pursuant to Section 165(A) (4) (formerly Sec. 198) of the Tax Code as amended. Such being the case, beginning January 1, 1986, as producer of coagulated rubber latex, your client is subject to the 0% sales tax and is, therefore, no longer subject to the P200 (formerly P100) annual fixed tax on his sale thereof. (Revenue Memorandum Circular No. 2-86). cdtech He is, likewise, subject to income tax on his income derived from the sale of said agricultural product at the rates prescribed under Section 21(b) of the Tax Code as amended. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner