BIR Ruling

April 1, 1976 The Manager Constant Commercial Company Rm. 905 Enterprise Bldg. Quintin Paredes St. Manila S i r : This refers to your letter dated February 17, 1976 requesting a ruling as to the business taxes that corporation is liable to for engaging in business hereinbelow stated: aisa dc "1. We purchase locally from importers and dealers, as well as make direct importations of blank tapes (big rolls).It is worthy to mention that due to climate conditions prevailing, these tapes are not manufactured locally. "2. We repack these blank tapes, to make them marketable, by the simple process of cutting them into sizes and winding them into the spools of cassettes which are locally manufactured. It is important to state that these cassettes are refillable by blank tapes once they are already worn-out or are non-producing sounds anymore. It is noted, however, that our customers have preference to the former." In reply, I have the honor to inform you that as an importer of blank tapes you are subject to the P50.00 annual fixed tax prescribed in Section 182(A)(1) of the Tax Code, and the imported blank tapes (in rolls) are subject to the 40% advance sales tax to be based on the landed cost thereof plus 50% mark-up pursuant to Section 183(b) in relation to Section 185-B, both of the Tax Code. If, as represented, you merely repack the blank tapes which you import and those which you purchase locally from importers and dealers by cutting them into sizes and winding them into the spools of cassettes which are also purchased from local manufacturers, you are a repacker of blank tapes and, therefore subject to the graduated annual fixed tax prescribed in Section 182(A)(2) of the Tax Code. Cutting the tapes in bulk into smaller sizes and winding them into the spools does not constitute manufacturing. This, it has been ruled that: "The rewinding of big balls of thread into smaller balls for the purpose of resale is subject only to the graduated annual fixed tax (C-13) under Section 182 of the National Internal Revenue Code, such acts of rewinding being not considered as manufacturing." (Internal Revenue Bulletin, Vol., 1, No. 5). This ruling is based on your aforesaid representation. Should it be found later that the facts are not the same as presented, then this Office will revoke or modify this ruling. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3