BIR Ruling

August 8, 1966 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants P.O. Box 589, Manila Attention: Mr . M . Gutierrez Tax Department Gentlemen : This refers to your letter dated April 14, 1966, requesting for and in behalf of your client, Nutritional Products Inc., authority to bill as a separate item in its sales invoices only the estimated sales tax on its sales on the basis of the following representation, viz: LLphil "The manufacture of our client's products (Nescafe and Reconstituted Condensed Milk) involves intricate processes, making it very difficult to bill on the sales invoice the exact amount of the 7% manufacturer's sales tax since the actual cost of raw materials used in the manufacture of the products sold cannot be definitely ascertained. The total amount of sales tax due on the monthly sales can be known only at the end of the month after determining the actual cost of materials that went into the manufacture of the finished product sold. In view of the difficulty of determining the actual cost of deductible materials, our client proposes to bill its customer the sales tax based on the gross selling price less an estimated or average cost of deductible raw materials. The estimate will be determined on the basis of prior month's operation. At the end of the month, the company will compute the actual sales tax due, based on the gross selling price of the article sold less the cost of tax-paid raw materials used in the finished products. Our client, however, will pay the government the estimated sales tax billed to its customers as shown in the sales invoices or the actual sales tax computed on the basis of actual monthly sales, whichever is greater." In reply, I have the honor to inform you that, based on the foregoing representation, your request is hereby granted subject to the condition that if the tax billed is higher than the actual amount of the tax due, the amount so billed should be paid to the Government and if the tax billed is lesser than the actual amount of the tax due, then the actual amount due should be paid to the Government. LLjur Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue