BIR Ruling

September 28, 1973 Mr. Herminio T. Disini President Philippine Tobacco Filters Corporation 5th Floor, Prudential Bank Bldg. Ayala Avenue, Makati, Rizal S i r : This refers to your letter dated September 14, 1973 stating that you have been paying the 7% advance sales tax on the acetate tow which you import for use in production of cigarette filter rods; that after a re-study of your operations in the light of conditions presently prevailing, you have reached the conclusion that you should not be subject to the advance sales tax, a matter which you are now submitting to us for favorable consideration and action. In reply, I have the honor to inform you that, notwithstanding the reasons adduced by you to support your stand, nevertheless, this Office believes, and so holds, that you are subject to the 7% advance sales tax on your importations of acetate tow which you use in the manufacture of cigarette filter rods, in accordance with the provisions of Section 185(b) in relation to Section 186, both of the Tax Code, as amended by Presidential Decree No. 69. Under Section 185(b) of the Tax Code, duly imported articles to be used in the manufacture or preparation of articles subject to specific tax are exempt from the advance sales tax therein imposed. So that the importation by the cigarette manufacturer alluded to in your letter of acetate tow to which it manufactures into filter rods for exclusive use in its production of cigarettes is exempt from the advance sales tax. As you are not a manufacturer of cigarettes which is subject to specific tax, you cannot avail of the exemption from the payment of the advance sales tax under the aforesaid provision of the Tax Code. However, your sales of cigarette filter rods to cigarette manufacturers is subject to the 7% advance sales prescribed in Section 186 of the Tax Code. However, in the event that you export your manufactured cigarette filter rods, the advance sales tax paid on the imported acetate tow which is used in the manufacture of cigarette filter rods exported shall be allowed to be credited against your other tax liabilities. (Last paragraph of Section 183(b) of the Tax Code). cdtech 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."