Non-withholding of the 2% Tax Corresponding to the Share of the Members of Sugar Producers' Cooperative Marketing Association, Inc.

October 27, 1959 BIR RULING NO. 526-59 Messrs. Garcia, Perlada & Associates Suite 315 Gonzaga Building Rizal Avenue corner Carriedo M a n i l a Gentlemen : Reference is made to your letter dated October 26, 1959 requesting exemption from the 2% tax of the share of the members of your client, the Sugar Producers' Cooperative Marketing Association, Inc., in the sugar milled by the centrals out of the sugar cane delivered by said members to the Association which the latter caused to be milled by said centrals. A careful perusal of the Articles of Incorporation of your client discloses that it was duly organized in accordance with the provisions of Act No. 3425. As a matter of fact, it was issued a Certificate of Affiliation by the Agricultural Credit and Cooperative Financing Administration. In accordance with the Marketing Agreement and Power of Attorney entered into by the Association and its members, the latter agreed to deliver to the Association their produce for milling in the centrals under existing milling contracts. The Association, on the other hand, agreed not only to undertake the milling of the produce of its members but also to market the same. The proceeds of the sale by the Association of the sugar of its members are turned over by the Association to the latter less only advances and interests and cost of management and production. Under these terms and conditions, the Marketing Agreement and Power of Attorney are clearly within the scope of the functions of the Association, as envisaged by Republic Act No. 3425. Considering the foregoing circumstances, this Office is of the opinion and so holds that your client, the Sugar Producers' Cooperative Marketing Association, Inc., is, for undertaking the milling and marketing of the produce of its members, exempt from the 2% tax imposed by section 189 of the Tax Code on the share of its members in the sugar which it caused to be milled by the centrals. This will serve as authority for the centrals in not withholding the 2% tax corresponding to the share of the members of your client in the sugar and by-products which it caused, for and in their behalf, to be milled by said centrals. LLjur Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue