BIR Ruling

November 20, 1972 4th Indorsement Respectfully returned to the Commissioner of Customs, Manila, the within papers relative to his request for a ruling as to the correct rate of advance sales tax applicable to the importations of automobile parts and accessories by Lisengiap Trading corporation which is not a car assembler or manufacturer, in the light of the decision of the Supreme Court in the case of "Jose Zamora (Golden Taxicab) vs. The Court of Tax Appeals and the Commissioner of Internal Revenue, G.R. No. L-23272, November 26, 1970". In this case, the Court, among others, said: cdti ". . . However, 'parts and accessories of automobiles' are subject to the 7% rate, under Section 186, by virtue only of the first proviso in subdivision (a) of Section 184, which limits the application of said section 186 to 'parts and accessories of automobiles imported as replacements or as completely knocked down parts for the assembly of automobiles . . .' Indeed, this qualification is in consonance with the spirit and letter of section 186, which provides that the rate therein fixed shall be 'paid by the manufacturer or producer .' In other words, it is not intended for the end-users or consumer . There would have been no reason to insert the aforementioned qualification, and the same would not have been made, had the purpose of the provision been to apply section 186 to the importation of parts and accessories of automobiles as completely knocked down parts, regardless of whether or not the importer was an automobile manufacturer or assembler . The issue taken in the appealed decision is further bolstered up by the subsequent proviso, in section 184(a), to the effect that 'the total cost of such materials or parts on which tax has already been paid under section one hundred and eighty-six . . . shall be deductible from the gross selling price or gross value in money of the assembled or manufactured articles . . .'". " Then, too, it is not difficult to understand why the application of the 7 per centum rate was limited only to importations made by those engaged in the manufacture and assembly of automobiles The Government wanted to encourage the establishment of factories or plants for the manufacture or assembly of automobiles in the Philippines to increase job opportunities for local laborers and mechanics and reduce the drain on our dollar reserve resulting from the purchase of foreign-made automobiles." (Emphasis ours) From the foregoing decision of the Supreme Court, which ruled that the lower rate of 7% applies only to importations of completely knocked down parts made by manufacturers or assemblers of automobiles, it is clear that the previous stand of this Bureau as contained in its letter dated August 18, 1966, and occurred in by the Secretary of Finance in his letter to the Philippine Automotive Association dated May 11, 1967, has already been superseded. In view thereof, all importations for resale of parts and accessories of automobiles by Lisengiap Trading Corporation and other importers who are not car assemblers or manufacturers shall be subject to the 100% advance sales tax based on the landed cost thereof plus 100% mark-up, pursuant to Section 183(b) in relation to Section 184(a), both of the Tax Code. Consequently, since it appears from the within papers that the taxpayer has already paid the 7% advance sales tax, deficiency taxes should be collected prior to the release of the goods from Customs custody. This revokes the ruling contained in the letters of this Office dated September 15, 1972 and October 3, 1972 to Lisengiap Trading Corporation and to that Office, respectively, (copies enclosed). MISAEL P. VERA Commissioner of Internal Revenue