BIR Ruling

November 15, 1972 Caltex (Philippines) Inc. P. O. Box 783 Manila Attention: Mr . J . F . Hennelly Asst . Gen . Manager Administration Gentlemen : This refers to your letter dated November 2, 1972 stating the following: "In the refining of crude petroleum, we have a by-product consisting of Components A & B. We plan to sell Component A to a local manufacturer who shall utilize this as feedstock. In our delivery of the by-product, the local manufacturer will extract Component A and return to us Component B. The by-product itself, and other Components A and B, if sold singly, are subject to 7% sales tax. "We should like to have your confirmation that in our billing of sales made to the local manufacturer, we may bill him only for the cost of Component A since he is returning Component B. Both components A and B are identifiable and the costs ascertainable after the local manufacturer has extracted Component A." In reply, I have the honor to inform you that since you are selling only Component A to the local manufacturer of feedstock, then your billing to him only for the cost of Component A is correct. Moreover, the 7% sales tax due on your sales of said Component A shall be based on the amount billed to the local manufacturer. Your subsequent sale of Component B, if you should sell, is likewise subject to 7% sales tax. The foregoing ruling is of course predicated on your representation that Components A & B are articles similar in substance to liquified petroleum gas. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue