3% Excise Tax on Quarry Resources (Sand and Gravel Included)

January 17, 1989 BIR RULING NO. 003-89 100 (a); 115 151 (a) (2) 000-00 003-89 Gentlemen : This refers to your letter dated November 24, 1988 which was referred to this Office by the Secretary of Finance, in effect requesting for a ruling as to whether you should register as manufacturer, producer or importer and to produce the official receipt of payment of excise tax from January to November, 1988, as required by the Officer-In-Charge of Excise Tax Area VI-Mindanao. cdtech As represented, you are a bona fide contractor registered with the Philippine Contractors Association Board and engaged in the construction of government infrastructure projects such as roads, bridges and school buildings; that in your construction business, you use sand and gravel which you haul from river beds to the construction project sites. You stated that you did not register with the Excise Tax Office because you do not consider yourself as a manufacturer, producer or importer; that you did not pay the excise tax on the sand and gravel because it is the government who owns and uses the same and you are merely paid for hauling services computed in kilometer distance; and that you believe that sand and gravel including filling material (earthfill) hauled by the contractor for the government are not subject to the 3% excise tax. In reply, please be informed that quarry resources subject to the 3% excise tax imposed by Section 151(a)(2) of the Tax Code, include sand and gravel whether removed from river beds or quarried. [Sec. 2(h), Revenue Regulations No. 13-80] However, if you are merely engaged in hauling/transporting sand and gravel to be used exclusively for Government projects and in no case shall be disposed of, commercially, in which case, your taking of sand and gravel from river beds is covered by a gratuitous permit granted by the Director of Mines, pursuant to Mines Administrative Order No. MRD-16, S. 1977, then you are not subject to the 3% excise tax. With respect to your hauling services for which you are paid, your quarterly gross receipts derived thereon are subject to 3% tax pursuant to Section 115 of the Tax Code, as amended by Executive Order No. 273. On the other hand, if you shall sell sand and gravel then you are subject to the 3% excise tax in addition to the 10% value-added tax. (Sec. 126, Tax Code) In the latter case, you are required to register with the Excise Tax Team Area VI-Mindanao, pursuant to Section 18 of Revenue Regulations No. 5-87 implementing Title IV (VAT Law) of the Tax Code, as amended by Executive Order No. 273. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner