BIR Ruling

July 19, 1967 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants P.O. Box 589, Manila Attention: Mr . M . Gutierrez Tax Department Gentlemen : This refers to your letter dated December 12, 1966 stating the following: "On behalf of our client, Borden Chemical Co. (Phils.) Inc., we are requesting that it be authorized to bill as a separate item in its sales invoices issued to its customers only the estimate of the 7% manufacturer's sales tax due on its sales. LexLib "The manufacture of our client's products (formaldehyde, casco resin, catalysts, cascanites, etc.) involves intricate processes, making it very difficult to bill on the sales invoice the exact amount of the 7% manufacturer's sales tax since the actual cost of raw materials used in the manufacture of the products sold cannot be definitely ascertained. The total amount of sales tax due on the monthly sales can be known only at the end of the month after determining the actual cost of materials that went into the manufacture of the finished product sold. In view of the difficulty of determining the actual cost of deductible raw materials, our client proposes to bill its customers the sales tax bases on the gross selling price less an estimated or average cost of deductible raw materials. The estimate will be determined on the basis of prior month's operation. At the end of the month, the company will compute the actual sales tax due, based on the gross selling price of the article sold less the cost of tax-paid raw materials used in the finished products sold. Our client, however, will pay the government the estimated sales tax billed to its customers as shown in the sales invoices or the actual sales tax computed on the basis of actual monthly sales, whichever is greater." In reply thereto, I have the honor to inform you that, based on the aforequoted facts, the Borden Chemical Co. (Phils) Inc. may be authorized to bill as a separate item in its sales invoices issued to its customers only the estimate of the 7% manufacturer's sales tax due on its sales, provided that, the amount of the tax payable by your client at the end of the month shall be the total of the taxed due on its sales and not the total of the taxes as billed in the invoices, and provided further that where the sales tax as billed is greater than what is actually due, the former is the tax due. LLpr Illustration Gross sales for the month P1000.00 Cost of raw materials 600.00 Taxable amount 400.00 7% sales tax 28.00 Billing Total sales tax billed 30.00 (1st Ex.) Total sales tax billed 25.00 (2nd Ex.) Tax due and payable 1st example 30.00 2nd example 28.00 Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue