BIR Ruling

November 23, 1972 Commissioner Baltazar Aquino Bureau of Public Highways Manila S i r : This refers to your letter dated October 20, 1972 requesting clarification as to what reasons are valid for exemption from the withholding provisions of Revenue Regulations No. V-40, as amended by Revenue Regulations No. 21-67. It is stated that in executing the required Taxpayer's Certificate, many of your suppliers claim exemption on the allegation (a) That the supplies and materials (lumber and wood products, G.I. steel and plumbing hardware, electrical merchandise and appliances, cement and cement products, and aggregates such as sand, gravel, escombro, and the like) are locally produced, or (b) That the corresponding taxes had already been paid. In reply, I have the honor to inform you that although the sales by manufacturers and producers of the abovementioned construction materials are subject to the 7% sales tax under Section 186 of the Tax Code, the sales thereof to that Bureau are not subject to the withholding provisions of Republic Act No. 1051, as implemented by Revenue Regulations No. 21-67, for the reason that the 7% sales tax due thereon cannot be determined at the time of payment. The sales tax can only be determined after the cost of raw materials used in the manufacture of the finished products are first deducted from the selling price of such finished products. Moreover, if the suppliers of the construction materials mentioned above are mere dealers (those who purchase from the manufacturers and producers for resale) the withholding provisions of Republic Act No. 1051, as implemented by Revenue Regulations No. 21-67, likewise, do not apply for the reason that the sales tax due on said products were already paid by the manufacturers and producers thereof. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue