BIR Ruling

March 9, 1976 Pacwood, Inc. P. O. Box 3977 Manila Attention: Mr . Renato N . Noel Vice President Gentlemen : This refers to your letter dated February 19, 1976 requesting a ruling as to whether or not under the facts hereinbelow stated, you are a manufacturer, subject to the manufacturer's fixed and percentage taxes. cdtech "As supplier of treated poles to the National Power Corporation, National Electrification Administration and of treated sawn lumber to building contractors and other end-users, we undertake the following: "1. We buy round wood poles and sawn lumber. We do not produce the poles nor saw the lumber from logs. "2. The wood poles and sawn lumber are bought in specific lengths and sizes. In our yard, we just trim the ends of poles, and we recut or resaw and or plane the sawn lumber as would be specified by the end-user. "3. We subject the wood poles and lumber to pressure-treatment with wood preservatives either by oil-borne (Creosote) or water-borne (Tanalith).In the process, the Creosote oil or Tanalith penetrates the grain of the wood poles or lumber. "4. Treatment does not alter the physical or chemical qualities of the wood. It merely lengthens or preserves the life usage of the wood against insect attacks, dry rot or decay and the elements. "5. Then we sell the treated wood pole or lumber as such to end-users." In reply, I have the honor to inform you that under the foregoing facts, you are a dealer of round wood poles and lumber, subject to the graduated annual fixed tax prescribed in Section 182(A)(2) of the Tax Code. The treatment applied to the wood pole or lumber prior to the sale thereof does not constitute manufacturing. Thus, it has been ruled that: acd "The cutting of glasses into specific sizes by the dealers thereof to meet the sizes desired by their customers does not constitute manufacturing, and neither are the dealers considered contractors because the cutting of the glasses into desired sizes and/or installation thereof in buildings are merely incidental to the main contract of purchase and sale. Said sales are only subject to the graduated fixed annual tax under Section 182 of the Tax Code." (BIR Ruling, June 10, 1955). "He who buys already manufactured lumber for the purpose of recutting them into standard sizes and kiln-drying them preparatory to the resale thereof is a mere dealer subject to the graduated annual fixed tax imposed by Section 182(A)(2) of the same Code." (BIR Ruling No. 37, s. 1965) aisadc Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3