Non-deductibility of the Cost of Labor

January 12, 1960 BIR RULING NO. 016-60 Mr. Phillip N. Rico Pioneer Insurance & Surety Corporation R-212 Quisumbing Bldg. Dasmarias, Manila S i r : In answer to your letter dated December 15, 1959, I have the honor to inform you that, as a general rule, the cost of raw materials is deductible from the gross selling price of the articles manufactured therefrom, for purposes of the sales tax, if they have been previously subjected to the same rate of tax as the finished products. The only exception to this rule are parts and accessories of automobiles which even if subject to only 7% sales tax are deductible from the gross selling price of the automobiles. (Sec. 184, Tax Code) The deductible cost of imported raw materials consist of the landed cost plus the corresponding mark-up. Cost of labor is not deductible. Accordingly, the computation submitted by you is not correct. aisadc Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue