Materials Actually Used in the Pontoon Project of Subic Naval Base are Exempt from Excise and Sales Taxes

November 19, 1987 BIR RULING NO. 369-87 128 174-87 369-87 Gentlemen : This refers to your letters dated September 18, 1987 and October 6, 1987 requesting in effect a ruling that the materials actually used in your projects at Subic Naval Base, Zambales are exempt from excise taxes. It appears that the Government of the United States of America had awarded to National Slipways Corporation (NSC) the following contracts, viz: USN AFDB, Sections 1C, 2H and 21; USN AFDB, 1B, 1D, 1E, 2E, 2F, 2D and 2C Pontoon; USN AFDL 10; and USN AFDL 1B, 1C, 1D, 1E, 2E, 2F, 2H and 2I Pontoon; that to undertake actual construction, NSC contracted the services of your firm, Philippine Shipyard and Engineering Corporation on account of your more adequate facilities; that until the completion of the project, you actually used 12,134 gallons of paints and thinners amounting to P6,863,052.65 including the excise tax; and that acting on your belief that the materials for said projects are exempt from excise taxes conformably with the US-PI Military Bases Agreement, you did not bill the US Naval Base for the excise tax you paid to the supplier, Cardinal Industries, Incorporated. aisadc In reply, I have the honor to inform you that Article V of the U.S.-P.I. Military Bases Agreement provides as follows: "No import, excise, consumption or other tax, duty or impost, shall be charged on material, equipment, supplies or goods including food stores, clothing, for exclusive use in the construction, maintenance, operation or defense of the bases, consigned to, or destined for, the United States authorities and certified by them to be for such purposes." Accordingly, since said materials were actually used in the pontoon project of Subic Naval Base, the same are exempt from the excise and sales taxes imposed under Sections 128(b) and 163(4) of the Tax Code, as amended. (Philippine Acetylene Co., Inc. vs. Commissioner of Internal Revenue, G.R. No. L-19707, August 17, 1967). Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner