BIR Ruling

September 7, 1973 Atty. Reynaldo P. Borja Naga City S i r : This refers to your letter dated August 8, 1973, requesting clarification as to whether R. L. Seller Plastics Company is subject to the 7% manufacturer's sales or 3% contractor's tax for engaging in business as follows: "1. The company is a fabricator of plastic products and it has its fabricating plants at Cainta, Rizal and at 1609 Dapitan St., Sampaloc, Manila. cdtech "2. It fabricates or manufactures only when there is a previous order from customers. For this purpose, a job order contract is entered into by and between the company and the customer, which contract contains the complete specifications and details of the plastic product ordered to be fabricated or manufactured, including the design, form, size, kind of plastics to be used, the price of the order, the date of delivery and others. In almost all job orders the company supplies the materials and labor. "3. The company is likewise engaged in the repair of fabricated or manufactured plastics products. "4. The company does not indiscriminately fabricate of manufacture any particular or specific plastic product for sale to the general public. "5. Its gross receipts is entirely derived from job orders as mentioned in Nos. 2 and 3. "6. The company has its office at 1609 Dapitan, Sampaloc, Manila, where job orders contract with customers are consummated." In reply, I have the honor to inform you that under the foregoing facts, R. L. Soller Plastics Company is both a manufacturer and a contractor. For although it manufactures plastic products only upon previous orders of its customers such fact does not divest it of its character as a manufacturer. The rule is, unless an activity is covered by Section 191 of the Tax Code, one who manufactures articles, although upon a previous order and subject to the specifications of the buyer, constitutes the maker, nonetheless, a manufacturer. (See Celestino Co. and Company vs. Collector, G.R. No. L-8506, August 31, 1956.) Accordingly, the manufactured plastic products of R. L. Soller Plastics Company are subject to the 7% sales tax prescribed in Section 186 of the Tax Code. For engaging in the repair of fabricated or manufactured plastic products, the aforecited company is contractor. Such being the case, its quarterly gross receipts derived from repairing plastic products are subject to the 3% contractors tax imposed in Section 191 of the Tax Code. As a manufacturer and a contractor, R. L. Soller Plastic Company should provide itself with two (2) P50.00 privilege tax receipts, one as a manufacturer and another as a contractor. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."