BIR Ruling

November 15, 1971 Plaridel Cigar Factory Obando, Bulacan Attention: Miss Josefa B . Marcelo Gentlemen : This refers to your letter dated July 14, 1970 requesting information whether or not you are liable to the payment of fixed tax for the second semester of 1970 as cigar manufacturer in view of your registration with the NACIDA under Republic Act No. 3470, as amended by Republic Act No. 5326. aisa dc Investigation conducted by this Office disclosed that you are engaged in the business of manufacturing cigars (hand rolled cigars); that the business was started by its original owner, Mr. Valentin Espiritu, sometime in 1958 with a capital investment of about P10,000.00; that Miss Primitiva de Leon is now the registered owner of the business; that under your income tax return for 1969, your capitalization is P35,657.27; that you have been registered with the NACIDA on July 22, 1970; that you have in your employ seventeen workers, two of which are related to the former owner, Mr. Valentin Espiritu; that your plant facilities consists of hand operated wingets and pressers; and that your gross receipts for the year 1969 is P42,750.00 with a gross profit of P5,021.00. In reply, I have the honor to inform you that it appearing that you have not met the requirements of R.A. No. 3470, as amended by RA. No. 5326, particularly on the amount of capitalization and the number of workers, you are not considered a cottage industry and, therefore, you are subject to the payment of the fixed tax imposed under Section 182(A)(3)(r)(2) of the Tax Code, as amended by RA No. 6110. Accordingly, you are liable to the payment of the fixed tax as cigar manufacturer for the second semester of 1970 including 25% surcharge for late payment in accordance with Section 180 of the Tax Code, as amended. It should be noted that pursuant to Section 11 of RA No. 3470, as amended by RA. No. 5326, a cottage industry is an economic activity in a small scale carried on mainly in the homes or in other places for profit and mainly done with the help of the members of the family with capitalization not exceeding fifteen thousand pesos. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue