BIR Ruling

August 3, 1976 Federation of Filipino-Chinese Chambers of Commerce, Inc. P. O. Box. No. 23 Manila Attention: Mr . Nemesio G . Co Executive Director Gentlemen : This refers to your letter dated July 27, 1976 requesting information whether the sales of jute sacks to some government offices, particularly the National Grain Authority is subject to the withholding tax provision of Republic Act No. 1051. In reply, I have the honor to inform you as follows: On the assumption that the seller of the jute sacks to the NGA is the manufacturer thereof, the sale by the manufacturer to the NGA is not subject to the withholding provisions of Republic Act No. 1051, for the reason that the 7% sales tax due on the sale cannot be determined at the time of payment. The sales tax can only be determined after the cost of raw materials used in the manufacture of the finished products are first deducted from the gross selling price of such finished product. Moreover, if the seller of the jute sacks to the NGA is a mere dealer (one who purchases from the manufacturer for the purpose of resale) the withholding provisions of Republic Act No. 1051, does not also apply for the reason that the dealer is not subject to any percentage tax. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3