BIR Ruling

August 6, 1970 Sycip, Gorres, Velayo & Co. Certified Public Accountants P. O. Box 589 Manila Attention: Mr . M . Gutierrez Tax Division Gentlemen : This refers to your letter dated December 19, 1969 and March 19, 1970 requesting clarification on the rate of sales tax to be paid by your client, P.I. Manufacturing, Inc., 97 Industrial Avenue, Malabon, Rizal on its sales of locally manufactured appliances for cooking, warming, or keeping warm food or beverage under Section 185(i) of the Tax Code, as amended by Republic Act No. 6110, and also the rate of advance sales tax applicable to its importation of parts and accessories of the aforesaid appliances. You would like also to have our opinion on the propriety of deducting the cost of raw materials which had been previously taxed at 30% under Section 185 prior to its amendment by Republic Act No. 6110 but which were used in the manufacture of appliances sold after September 1, 1969, the date Republic Act No. 6110 took effect. It is represented that in the process of manufacturing gas stove, your client manufactures within the manufacturing enterprise the following parts: (a) stove body, (b) burner bowl, (c) bracket holder, (d) burner adopter, and (e) C.I. grills, that the following parts are purchased from local manufacturers or dealers: (a) pig iron, (b) rubber support, (c) stove bolts, (d) sheet metal screw, (e) serial no. plate, (f) carton box, and (g) foundry pig; that it purchase locally from local importers the following parts: (a) automatic ignition cock with accessories, (b) top burner with accessories, (c) dumper slip check with accessories, (d) pilot with accessories, (e) microswitch with accessories, (f) cok knob and accessories, (g) contracting pipe with accessories, (h) fitting nut for contracting pipe, (i) self hose end, and (j) battery case; and that the parts imported by your client are the following: (a) steel sheet, (b) porcelain-enamel frits, (c) foundry coke, (d) ferro silicon, and (e) foundry pig. It is also represented that in manufacturing electric range, your client manufactures within the manufacturing enterprise the following parts: (a) main top, (b) splashboard, (c) front frame, (d) back frame, (e) oven jacket, (f) drawer, (g) drawer cover, (h) oven inner door, (i) oven outer door, (j) side panel, (k) door hinge, (l) door hinge stopper, (m) back cover, (n) cooking tray, (o) tray, (p) oven drawer support (q) base, (r) drawer rod, (s) door hinge spring, (t) terminal rod, (u) terminal cap, (v) upper and lower heating element tray, (w) oven casing support, (x) oven, (y) thermostat adapter, (z) drawer lock, and (aa) plug button; that the following parts are purchased from local manufacturers or dealers: (a) paints, (b) thinner, (c) spring strap, (d) serial no. plate, (e) knobs, (f) heater cord, (g) solid asbestos wire, (h) stove bolts and nuts, (i) sheet metal screws, (j) satina paper, (k) outlet receptacle, (l) electric bulb 5 watts, (m) calrod heating elements, (n) carton box, (o) wood crate, (p) name plate, (q) eagle plug, and (r) glass; that it purchase locally from local importers the following parts: (a) "Eagle" plug, (b) "Arkles" switch, (c) "Wilcolator" thermostat, (d) selector switch, (e) porcelain cleats, (f) porcelain spool insulator, (g) kanthal wire, (h) glass wool, (i) pilot light "lumolite, (j) resitor 1/2 w., (k) door pull, (l) plastic spacer, and (m) heating element; and that the parts imported by your client are the following: (a) steel sheet, (b) porcelain-enamel frits, (c) stainless steel strip, and (d) brass rod. It is further alleged that in manufacturing electric stove, your client manufactures within the manufacturing enterprise the following parts: (a) stove body, (b) footing, (c) cord holder, and (d) base cover; that the following parts are purchased from local manufacturers or dealers: (a) paints, (b) thinner, (c) metal washer, (d) stove bolts with nuts, (e) rubber footing, tappered, (f) porcelain brushing, (g) switch knobs, (h) calrod heating elements, (i) plug, (j) sheet metal screws, (k) asbestos wire, (l) heater cord, (m) label, (n) caution tag, (o) serial no. plate, and (p) carton box; that it purchase locally from local importers the rotary switch and heating element; and that it imports the following parts: (a) steel heat, (b) porcelain-enamel frits, (c) terminal, and (d) Pilot light "Lumolite". In reply, I have the honor to inform you that under the foregoing facts and circumstances, your client's locally manufactured gas stove, electric range, and electric stove are subject only to the 7% sales tax pursuant to Section 185 (i) in relation to Section 186, both of the Tax Code, as amended by Republic Act No. 6110. Moreover, its importation of parts and accessories to be used in the manufacture of the aforesaid appliances are subject to the 7% advance sales tax with a 25% mark-up in accordance with Section 183(b), in relation to Section 186, both of the Tax Code, as amended. aisadc With regard to the propriety of deducting the cost of raw materials which had been previously taxes at 30% under Section 185 of the Tax Code prior to its amendment by Republic Act No. 6110 effective on September 1, 1969 but which were used in the manufacture of appliances and sold thereafter, it is the opinion of this Office that such deduction is proper and may be allowed. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue