Taxability of Imported Kraft Paper to be Manufactured as Paper Bags by Another Company

February 9, 1966 BIR RULING NO. 006-66 Mr. Virgil F. Murray Peter Paul Philippine Corporation P. O. Box 1155, Manila S i r : This refers to your letter dated January 6, 1966, stating as follows: "Periodically and routinely over the years we have requested release without the prepayment of advance sales tax or compensating tax of Kraft Paper bags to be used by us exclusively for the packaging of desiccated coconut to be exported overseas. Subject to the establishment of re-export bond these requests have always been approved. cdll "Our studies convince us that these kraft paper containers could be fabricated locally if kraft paper of the same quality were available. This would be advantageous to the local economy in that the fabrication and printing of these containers would be creating employment here in the Philippines and not as now in the country of origin. "We are therefore addressing this inquiry to you to determine whether the paper can be entered under the same provisions as the fabricated containers." As represented by your lawyer, the imported kraft paper will be manufactured into paper bags by another company in accordance with your specifications. In reply thereto, I have the honor to inform you that the importation of the aforementioned kraft paper which will be manufactured into paper bags to be used exclusively by your corporation as containers of desiccated copra for consignment abroad is exempt from the sales of compensating tax pursuant to Section 183(b) of the Tax Code. However, the company which manufactures the paper bags for you is constituted an independent contractor subject to the fixed and percentage taxes prescribed by Sections 182(A)(1) and 191 of the same Code. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue