Taxability of the Packaging Materials and the Imported Materials to be Used Thereof

January 19, 1987 BIR RULING NO. 012-87 163 (2) 165-86 012-87 Gentlemen : This refers to your undated letter stating that your company is engaged in the manufacture of plastic packaging materials for the following companies with their corresponding products: cd Company Product R & M Preserves Dried Lemon, Pineapple, Papaya Honai Foods Corp. Chocolate Wafer, Kimbee Vanilla Wafer CFC Corporation Manor House, Rolling Stones Island Biscuit, Inc. Hunter Soda Sweet, Lemon Wafer, Everflakes Leslie Corporation Macho Corn Chips, Banana Chips Croley Foods Mfg. Corp. New London Butter Coconut Liwayway Marketing Corp. Oishi Prawn Crackers, Yummy Flakes Besuto Food Corp. Onion & Garlic Cracker, Teeny BBQ Cracker Asian Biscuit Corp. Marie Biscuits, Cream Sandwich Beeggy Men Trade Center Dried Jackfruits, Dried Mango Metro Biscuit Corp. Double Crosser, Choco Creams, Zoo Time Biscuits M.Y. San Biscuits, Inc. Sky Flakes Cracker Nissin Biscuits, Ltd. Japan Marie Biscuits Lemon Cookies, Chocolate Wafers Universal Robina Corp. Chicken Sticks, Cheez Balls Mansion Biscuit Corp. Zest Flakes, Crackers, Rollchen Waffel that each company provides its own design and specification for its products; and that you are also importing the raw materials needed in the manufacture of the said packaging like resins, aluminum foil, wire, paper and printing ink among others. Based on the foregoing, you now request a ruling to the effect that your packaging materials and the imported materials to be used in the manufacture of said packaging materials be subject to 10% sales tax. In reply, please be informed that any article subject to the original sales tax, when used as a raw material in the manufacture or preparation of essential articles, shall, subject to certain conditions, be taxed at the same rate as the finished product, except when such material is taxed at a lower rate. (Section 163(2), Tax Code as amended by Executive Order No. 36). This Office has ruled that containers are raw materials of the manufactured articles. (BIR Ruling No. 66-027 dated June 29, 1966). Accordingly, since the finished products of your various customers are all classified as essential articles subject to 10% sales tax, the packaging materials (samples attached) which that company manufactures are subject to the same rate of 10% sales tax, provided that the customers shall certify to Flexible Packaging Products Corporation that the plastic and aluminum wrappers shall be used exclusively as packaging materials for the finished products. On the other hand, your importation of resins, aluminum foil, wire, paper and printing ink which are the raw materials in the manufacture of plastic and aluminum packaging materials will also be subject to the advance sales tax at the same rate of 10% provided that you as importer/manufacturer shall certify to this Bureau that your aforesaid importation shall be used exclusively in the manufacture of said packaging materials (Section 163(2), Tax Code). If you fail to secure the certification, the above importation will be subject to 20% advance sales tax. (BIR Ruling No. 246-86 dated November 12, 1986). cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner