BIR Ruling

May 29, 1975 The General Manager Fortuna Metal Mfg. Co. 218 West 7th Avenue Caloocan City S i r : This refers to your letter dated May 27, 1975 stating that you are a manufacturer of stainless steel bracelets; that you import the raw materials on which your broker paid 7% compensating tax; and that you manufacture the stainless steel bracelets for sale to watchmakers, watch dealer and the general public. cd On the basis of the foregoing, you request information (1) as to the rate of sales tax due on your original sales of the manufactured steel bracelets; and (2) whether you can subtract the corresponding 7% compensating tax paid on the raw materials from the gross selling price or tax due upon the consummated sale when you pay the quarterly sales tax. In reply, I have the honor to inform you as follows: Your sales of the manufactured stainless bracelet is subject to the 7% sales tax prescribed in Section 186 of the Tax Code. As a manufacturer, your importation of raw materials used in the manufacture of your finished product is subject to the 7% advance sales tax, the tax to be based on the landed cost thereof plus 25% mark-up pursuant to Section 183 (b) in relation to Section 186, both of the Tax Code. Your broker therefore made a mistake in paying the compensating tax due on your importation of raw materials. It is therefore suggested that you request your broker to reliquidate your aforesaid importation of raw materials and pay the advance sales tax due thereon in order that you may be allowed to deduct the cost of said raw materials from your gross selling price of the finished product. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5