BIR Ruling

September 16, 1969 The Regional Director Revenue Region No. 11 Naga City S i r : This refers to the query posed by the Zone Supervisor (Special Tax) of that Region as to whether or not the La Union Chewing Tobacco Factory which is registered with the NACIDA under the firm name "Naga Tobacco Corporation", Naga City, is exempt from the payment of specific tax on chewing tobacco under R.A. No. 3470 (NACIDA). Investigation conducted by that Office disclosed that the Naga Tobacco Corporation is engaged in manufacturing chewing tobacco with a capital investment of P5,500.00; that it employs 15 laborers who are close relatives of the stockholders of the corporation and uses only one operated pressing machine; that the business is carries on a small scale with an average monthly production of 700 kilos; and that it is duly registered with the NACIDA. In reply, please be informed that the Naga Tobacco Corporation, although registered with the NACIDA and operating as a cottage industry has become subject to the payment of specific tax on chewing tobacco in view of the amendment of Section 16 of Republic Act No. 3470 by Republic Act No. 5326. Under the amendment which took effect on June 15, 1968, the production, manufacture and sale of cottage industry products shall be exempt from all taxes, except specific and income taxes, for a period of five years from the date of registration. Prior to the amendment, cottage industry products were exempt from all business and specific taxes. In view thereof, an assessment should be made against the said corporation to collect unpaid taxes due from the manufactured chewing tobacco covering the period from June 15, 1968 up to this date. Furthermore, the establishment where the corporation manufactures or keeps the chewing tobacco is now subject to the supervision of the Bureau of Internal Revenue, pursuant to Section 149 of the Tax Code. prcd Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue