BIR Ruling

June 22, 1976 Taxable Gross Receipts on Edible Cooking Oil With reference to your claim for refund of P42,631.99, as alleged erroneous payment of sales tax on cooking oil sold by you during the period from October to December, 1973, I have the honor to inform you that after a careful study of the facts of the case and the applicable law, this Office has arrived at the conclusion that your claim is without legal basis. You contend that pursuant to the ruling of this Office, dated February 5, 1974, the tax payable by you should be based on the actual selling price of the edible oil as set by the Price Control Council; that applying said ruling to your case, no sales tax was due from you as your gross sales amounted to only P5,317,816.78, while the cost of raw materials used in producing the products in question amounted to P7,116,520.01, resulting in an excess of cost of raw materials over gross sales by P1,798,703.23, and therefore, there is no gross sales on which to base the sales tax. We find no merit in your contention for your computation in arriving at the taxable gross receipts is erroneous as you failed to include the subsidy of P2,407,731.60 which you received from the Coconut Consumers Stabilization Fund, either as part of your gross receipts, or as reducing the cost of the raw materials used in the manufacture of your product. As the aforementioned subsidy was intended to help you in the operation of your business, it should be accounted for as payment for the difference between the market value of your product and the controlled price thereof, or as an aid to reduce the cost of production of your product. However said subsidy may be accounted for, the result will be the same a taxable gross sales of P609,028.43, the tax on which amounts to P42,631.99, as can be gleaned in the following computation: A. Subsidy as part of gross sales Sales P5,318,816.78 Subsidy received 2,407,731.66 Total Gross receipts P7,725,548.44 Less: Cost of materials 7,116,520.01 Taxable Sales P609,028.43 7% tax thereon P42,631.99 B. Subsidy deductible from cost Sales P5,318,816.78 Less Cost: Cost of materials P7,116,520.01 Less subsidy 2,407,731.66 4,708,788.35 Taxable sales P609,028.43 7% tax thereon P42,631.99 It is therefore clear that your payment of P42,631.99 as sales tax on your sales for the 4th quarter of 1973 was not erroneous. In view thereof, your claim for refund of the said sum of P42,631.99 should be, as it is hereby, denied. cdtech