BIR Ruling

July 1, 1969 Miss Felicitas C. Montoya R-309 Doa Mercedes Bldg. Plaza Miranda, Manila M a d a m : This refers to your letter dated June 6, 1969 stating the following: "A manufacturer of buntal hats exported his manufacture abroad Question, is he subject to 7% tax as well as the privilege tax of P20.00 if not what tax if any should he pay . . . prcd "Is the raw materials for making or manufacturing buntal hats deductible from the sales price, this being an agricultural products . . . "If he bought the buntal hats finished already what kind of tax must he pay, if the same is exported . . . "In as much that the buntal hats weaving is a home industry, may the buyer of finished products (hats) or raw materials (Uway) furnished himself the purchase invoice, (the seller having no sales invoice) duly signed by the seller, for tax purposes . . . "If the finished hats are sold in the Philippines, what kind of tax will he pay . . . cdlex "If he is a manufacturer If he is not a manufacturer but buy a buntal hats already finished . . ." In reply, I have the honor to inform you as follows: A manufacturer of buntal hats who exports the same abroad is exempt from the payment of percentage tax pursuant to Section 188(b) of the Tax Code. "Uway" from which buntal hats are manufactured is an agricultural product. Consequently, for using the same in the manufacture of buntal hats, the manufacturer is not allowed to deduct the value thereof from the gross selling price of the said manufactured articles. cdlex If the exporter buys the buntal hats already made, he is subject to the graduated annual fixed tax prescribed by Section 182(A)(2) of the Tax Code. If the finished hats are sold in the Philippines, the manufacturer if subject to the annual fixed tax of P20.00 pursuant to Section 182(A)(1) of the Tax Code and to the 7% sales tax prescribed by Section 186 of the same Code. A person who buys the buntal hats already made either for export or domestic sale or both is a dealer subject to the graduated annual fixed tax prescribed by Section 182(A)(2) of the same Code. prcd Pursuant to Section 14 of Revenue Regulations No. V-1, the Bookkeeping Regulations, every purchase or expenditure by a taxpayer required to keep books of accounts must be supported by an invoice or receipt issued by the vendor or the person rendering the service. When the persons from whom the purchases are made have no such invoices, the taxpayer concerned must require the vendor to sign a purchase voucher showing the date, the quantity and description of the articles purchased, the consideration paid therefore and the name and address of the seller together with the number, date and place of issue of his residence tax certificate. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue