BIR Ruling

August 16, 1976 Wheat Flour Used in the Manufacture of the Bakery Products Deductibility from Gross Selling Price This refers to your letter dated July 26, 1976 requesting clarification on the following: "1. Bakery products, for sales tax purposes, fall under Sec. 186. Said section provides, among others, that only products taxable under the same and Sec. 189, are deductible materials. "Wheat flour, by virtue of PD 69, is now taxable under Sec. 186-B in place of Section 186. "Question 1 Does it follow, under the plain terms of Section 186, that flour, being the main material for bakery products, is no longer deductible material therefrom, for purposes of the sales tax? "Question 2 How logical is the provision that products taxable under Sec. 186 are deductible materials under Sec. 186-B but not vice-versa?" In reply, I have the honor to inform you that the cost of wheat flour taxable under Section 186-B of the Tax Code and which is used in the manufacture of bakery products is still deductible from the gross selling price of the latter for purposes of the 7% sales tax imposed by Section 186 of the same Code. The articles subject to tax under Sections 186 and 186-B of the Tax Code are ordinary articles. Consequently, the cost of raw materials which have been subjected to tax under either section when used as raw material in the manufacture of articles subject to tax under said sections, is deductible from the gross selling price of the manufactured article for purposes of determining the sales tax due thereon. cdtech With the resolution of your first query, it is unnecessary to answer the second.