BIR Ruling

July 12, 1966 Muller and Phipps Manufacturing Corporation P.O. Box 950 Manila Attention: Mr . C . B . Enriquez Treasurer Gentlemen : This refers to your letter dated February 8, 1966 requesting for a ruling as to whether or not that firm shall be considered as a manufacturer, and, therefore, subject to the sales tax on its sale of hair spray produced in the following manner: 1. Muller and Phipps Manufacturing Corporation will import the bulk material and the spray container from the franchise owner. Muller and Phipps Manufacturing Corporation shall pay the import duty and the advance sales tax due on the bulk material and spray container before their withdrawal from customs. cdta 2. The bulk material will be filled into the spray container without undergoing any further processing. 3. Then the valve assembly, which consists of a gas-tight valve, shall be crimped to the filled can. 4. Freon, nitrogen, or other compressed gas, which acts as the propellant, shall be filled into the can through the valve. 5. Finally, the actuator button shall be placed in the spray container and the can shall be covered with a cap. In reply, I have the honor to inform you that for filling the bulk material and the propellant in the spray containers, crimping the valve assembly and placing the actuator button and cap thereof, Muller and Phipps Manufacturing Corporation is constituted a manufacturer of atomized hair spray within the purview of Section 194 (x) of the Tax Code, hence, subject to the manufacturer's annual fixed tax of P20.00 and to the 50% sales tax prescribed by Section 182 (A)(1) and 184 (c), respectively, of the Tax Code. It is to be observed that the bulk material of itself lacks the all important characteristics of a hair spray and cannot be utilized for such purpose until the freon, nitrogen or other compressed gas is mixed therewith to serve as propellant. Clearly, the processes you apply to the raw materials imported give rise to a different product ready for use to which the principal raw material, the bulk material, could not have been put in its original condition. Your production of the atomized hair spray, therefore, falls within the purview of manufacturing as defined by Section 194 (x) of the Tax Code. cdtech Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue