Sale of Agricultural Products in Their Original State is Not Subject to Sales Tax

September 15, 1987 BIR RULING NO. 289-87 161 (1) 163 (3) 000-00 289-87 Gentlemen : This refers to your letter dated April 24, 1987 to the Secretary of Finance which was referred to this Office, relative to your request for clarification as to whether you are exempt from payment of the privilege tax and the sales tax on your sales of agricultural and forest products. It appears that you are a government corporation created by Executive Order No. 786 under the Ministry (now Department) of Natural Resources; that Section 10 of Executive Order No. 786, reads as follows: "SEC. 10. Exemption from all Taxes, Duties, Fees, Imposts and Other Charges by Government Instrumentalities . To enable the NRDC to effectively carry out its purposes and objectives, the NRDC is hereby declared exempt, for a period of ten (10) years from the effectivity of this Order, from the payment of the following: 1. Taxes, duties, fees, imposts, cost, and other charges provided for under the Tariff and Customs Code of the Philippines, as amended; 2. All income taxes, franchise taxes and realty taxes due to the national and/or local government agencies or instrumentalities. 3. All import duties, compensating taxes and advance sales tax, wharfage fees on foreign goods imported for its operations; and 4. All taxes, duties, fees, imposts and other charges imposed on all petroleum and related products used by the NRDC. Any provision of existing laws to the contrary notwithstanding, any donation, contribution, bequest, subsidy or financial aid, which may be made to the NRDC shall be exempted from all taxes of any kind, and shall constitute allowable deductions in full from the income of the donors or givers for income tax purposes." In reply, please be informed that taxes on your sales of agricultural and forest products do not fall within the purview of the above-quoted tax exemption provision. However, agricultural products, whether food or non-food, if in their original state, are subject to 0% sales tax, pursuant to Section 163(3) of the Tax Code as amended. In other words, you are not subject to the sales tax on your sales of agricultural food and non-food products as long as they are in their original state. Likewise, you are not subject to the annual fixed tax of P200.00 prescribed under Section 161 (1) of the Tax Code. atdc On the other hand, you are subject to the corresponding forest charges prescribed by Chapter V, Title VIII of the Tax Code, on forest products gathered and removed by you. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner