Taxability of the Proprietor of a Rice and Corn Mill

December 5, 1958 BIR RULING NO. 689-58 Mr. Bernardo Misa Molave, Zamboanga del Sur S i r : With reference to your letter dated February 3, 1958, addressed to the President of the Philippines, which was referred to this Office for action, I have the honor to inform you that your client, Mr. Nicanor M. Quinain, as proprietor of a rice and corn mill, is subject to a privilege tax (C-14) of P20.00 per annum and to a percentage tax of 2% of the gross value in money of the rice and corn milled by him, pursuant to Sections 182(A)(1) and 189 of the National Internal Revenue Code, notwithstanding the fact that he mills only for compensation the palay or corn belonging to others. The law does not distinguish proprietors of rice and corn mills who mill their own produce from those who mill only for compensation. However, pursuant to Section 4 of Revenue Regulations No. 7, known as the "Rice and Corn Mills Regulations", in case palay or corn is milled for compensation, the 2% tax shall be charged to the owner thereof, and withheld by the operator or proprietor of the rice or corn mill. It will, therefore, be observed that the operator or proprietor in such case is a mere withholding agent of the Government, but if he fails to withhold the tax, he shall be held liable for the payment thereof. Accordingly, the insistence of you client that there should be indicated in his privilege tax receipt the phrase "operator of rice and corn mill for hire or for service" is of no significance because with or without this phrase, his tax status remains the same. The sample cash receipt attached to your letter is not in conformity with the regulations. We quote, hereunder, the provisions of Revenue Regulations No. 7, otherwise, known as the "Rice and Corn Mills Regulations" which are self-explanatory. "Section 9. Records to be Kept by Proprietors or Operators of `Rice and Corn Mills . Proprietors or operators of rice and corn mills shall keep a record book substantially in the form and manner indicated below: They shall record in the debit side the palay or corn received in the mill or mill warehouse, whether for deposit, milling or grinding, for or without compensation; the products and by-products produced therefrom; the date of receipt; the number of the receipt issued; and the name of the owner, his address and residence certificate, if any; and, if palay or corn is milled or ground for compensation, the amount of tax due on the milled rice or corn, including the by-products, withheld from the owner thereof. If the milled rice or corn is exempt from tax, it shall be so stated therein. In the credit side the following shall be recorded the palay or corn and the products (husked rice or ground corn) and by-products removed from the mill or mill warehouse; the kind, quantity, and value of the by-products produced by the mill from a certain quantity of palay or corn; the date of sale or removal from the mill or mill warehouse; the number of the invoice issued; and, the name of the person to whom sold or delivered, his address and residence certificate, if any. In case the palay or corn received in the mill or mill warehouse has not been milled or ground and the owner thereof, whether he be the proprietor or operator of the mill or any other person, removes them from the mill or mill warehouse in the state, entry of such removal shall be made in column 6 in the credit side of the above given form and the corresponding invoice shall be issued in accordance with Section 11 of these regulations. cdta SECTION 10. Proprietors or Operators of Rice and Corn Mills to Issue Receipts Covering "Palay" or Corn Delivered or Received in the Mill or Mill Warehouse . Proprietors or operators of rice and corn mills shall issue a receipt for every quantity of palay or corn delivered or received in the mill or mill warehouse. The issuance of temporary receipts is hereby prohibited. If the palay or corn belongs to the proprietor or operator of the mill, he shall issue a receipt in his name. The receipt shall be serially numbered in duplicate, the original to be delivered to the owner of the palay or corn and the duplicate to be retained by the proprietor or operator of the rice or corn mill. Said receipt should be substantially in accordance with the form given below: RECEIPT Serial No. ________ _____________________________ (Proprietor or Operator of Mill) ______________________________ (Address) Date _______, 19____ From whom received _____________________________________________ Address _____________________________________________________ Current Price Quality Kind of Article Unit Total _________ __________________ ____________ ___________ _________ __________________ ____________ ___________ _________ __________________ ____________ ___________ Holder of C ___________ Date Issued ____________ ____________________ (Manager or person in charged of the mill) "Section 11. Proprietors or Operators of Rice and Corn Mills to Issue Invoices . Proprietors or operators of rice and corn mills shall issue invoices covering the milled rice or ground corn sold or delivered by them from the mill or mill warehouse. If the owner of the milled rice or ground corn is the proprietor or operator of the mill, he shall issue the invoice in his name. The invoice shall be serially numbered in duplicate, the original to be delivered to the owner or buyer of the milled rice or ground corn, and the duplicate to be retained by the proprietor or operator of the rice or corn mill. Said invoice should be made substantially as follows: cdti INVOICE Serial No. _________ _________________ (Name of the Mill) _________________ (Address) Date _______, 195___ To Whom sold or Delivered __________________________________ Cost Selling Price or Amount Quantity Kind of of Market Value of tax Article Milling Unit Total withheld _______ ________ ________ ________ _______ ________ _______ ________ ________ ________ _______ ________ Holder of C __________ Date of issue _________ _______________________________ (Manager or person in charge of the mill) "Section 13. Record Book Subject to Prior Approval . Before the record book prescribed in Section 9 hereof is used, the pages thereof should be serially numbered in a permanent and legible manner and the book presented to an internal revenue officer for approval. If he approves the same, he shall make the following authentication on the inside face of the front cover thereof. "Approved for purposes of Revenue Regulations No. ______ for use by _____________, holder of C _________________. This book contains ______ pages. ____________________ (Internal-Revenue Officer) ___________________ (Date) "Section 14. When Entries to be Made . In the record book, the quantity of palay or corn received in the mill or mill warehouse, as well as the palay or corn, and the products and by-products sold or removed therefrom, shall be entered not later than the close of the day following that on which they are received, sold or removed, as the case may be. If no palay or corn is received or no sale or removal is made on any day, then that fact shall be noted in the book within the same period. All entries shall be made in ink in a neat and legible manner and all columns shall be correctly added at the close of each month and the total entered at the foot of the respective columns. "Section 15. Disposition and Care of Record Book and Duplicates of Receipts and Invoice . The record book herein prescribed shall be preserved for a period of five years from the date of the last entry therein and shall be kept at all times in the place of business of the proprietors or operators of rice or corn mills, subject to inspection by any internal-revenue officer, and upon demand shall immediately be produced and submitted to such inspection. The duplicates of the receipts and invoices shall also be preserved for a like period from the date of issue of the last receipt or invoice and shall be subject to the same requirement with respect to preservation and inspection by internal revenue officers as the record book. No page of the record book or any of the duplicates of the receipts and invoices shall be torn off or mutilated for any reason whatever." Very truly yours, (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue