Withdrawal by PD 1955 of Tax Exemption Privilege Granted to Cooperatives

November 22, 1985 BIR RULING NO. 209-85 205 000-00 209-85 Gentlemen : This refers to your letter dated April 12, 1985 stating that the Limcoma Marketing Cooperative, Inc. (Limcoma), of Lipa City, is organized under Presidential Decree No. 175; that its primary purpose is to assist the farmer-members in the production of various agricultural products, including cattle, poultry, swine and other livestocks; that besides buying these items from the farmers, the cooperative also buys goods or supplies for the farmer-members to whom these are sold at the lowest possible costs; that for this business, the cooperative maintains separate books of accounts, purchase and sales invoices and other records; that besides trading farm products and farmer's supplies, the cooperative also mills and mixes animal feeds using the raw materials or specification of the farmer-members and charges minimal fee for the service; and that for this business, it also maintains separate books of accounts and sales invoices to record receipts of fees. In reply, please be informed that the tax exemption privilege granted to the cooperatives under Section 5(a) of P.D. 175 has been withdrawn by P.D. 1955 as implemented by Revenue Memorandum Circular No. 25-84 dated October 12, 1984. Accordingly, for engaging in the business of buying and selling farm products and farmer's supplies, you are subject to the annual graduated fixed tax prescribed by Section 192(2) of the Tax Code, the initial amount of which is P20.00. Thereafter, the amount of the tax will depend upon the amount of gross sales during the preceding calendar year. For milling and mixing raw materials owned by the farmer-members, you come within the purview of independent contractor subject to the annual fixed tax of P100.00 and to the 4% contractor's tax under Section 192(1) and Section 205 of the same Code as amended by P.D. 1959. Moreover, you are also subject to the corporate income tax prescribed in Section 24(a) of the Tax Code, as amended. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner