50% Advance Sales Tax - Perfumes, Essences, Extracts, etc.

March 16, 1979 BIR RULING NO. 009-79 50% Advance sales tax perfumes, essences, extracts, etc . This refers to your letter dated January 17, 1979 requesting that the importation of 70kg. of Fruit Spice by Wellcome (Philippines), Inc., a member company of that Association, be subject only to the 10% advance sales tax. It is contended that the abovementioned imported article will be used by Wellcome (Phil.), Inc., in the manufacture of Espectrin Suspension, a locally manufactured medicine; and that said imported article is used to mask the bitter, 'unpalatable taste of the chemicals. In reply, I have the honor to inform you that your request is hereby denied for lack of legal and factual basis. In the laboratory analysis conducted by this Office, it was ascertained that the aforesaid imported article is an essence and/or extract. It may be stated that "essences" and "extracts" are among those taxed under Section 194(b) of the Tax Code, as amended. "Section 194(b) of the Tax Code, as amended, impose a tax of 50% on, inter alia : '(b) Perfumes, essences, extracts, toilet waters, cosmetics, hair dressings, hair dyes, hair restoratives, aromatic cachuous, toilet powders, . . .' (Emphasis ours) "The essences and extracts referred to in the aforecited provision are not limited to those used for toilet preparations since the law itself does not contain such limitation; nor can it be said that Section 194(b) is limited to articles used for toilet preparations, considering that aromatic cachuous, which are included in the enumeration, are essentially used for imparting flavor or aroma to drugs and foodstuffs. Cachuous is defined in Webster's Third International Dictionary, as follows: 'An aromatic pill or pastille made of licorice, various aromatics, and gum and used to sweeten the breath.' "Licorice is 'a dried root of gummy texture and sweet rather stringent flavor that is the source of extracts used to mask unpleasant flavors (as of drugs) or to impart pleasing flavors (as to confection or tobacco)'. (Webster's Third International Dictionary) "The laboratory report of analysis dated July 27, 1978 conducted by this office reveals that the 'aromatic chemicals' in question is a 'yellow colored oily organic compound' and 'used generally as flavoring for food products such as dairy products, candies and many others to impart butter aroma. "Consequently, the butter aromatic chemicals are aromatic cachuous within the purview of Section 194(b) of the Tax Code as correctly ruled in the Authority to Release Imported Goods dated July 17, 1978." (BIR Ruling dated August 4, 1978). cd In view thereof, this Office believes and hence, finally decides, that the aforesaid imported article is subject to the 50% advance sales tax based on the landed cost thereof plus 100% mark-up pursuant to Section 193(b) in relation to Section 194(b), both of the Tax Code of 1977, as amended by Presidential Decree No. 1358. Please be guided accordingly.