ASTM Graded Sand Refined Silica Subject to Excise Tax Imposed on All Non-metallic Minerals and Quarry Resources

September 13, 2004 BIR RULING NO. 019-04 RR 13-94 Sec. 107 (A); 151 (A) (2) 000-00 Sytengco Enterprises Corp. No. 10 Resthaven St., SPDM Quezon City Attention: Mr. Renan M. del Rosario Senior Vice-President Gentlemen : This refers to your letter dated August 24, 2001 requesting for exemption from the payment of excise tax on ASTM Graded Sand which you import from U.S. Silica Company, Berkeley Springs, West Virginia (plant: Illinois). In connection therewith, you posited that although Revenue Regulations No. 13-94 cites Sand and Gravel among non-metals that should be levied excise tax, it is clear from explanations therein that what is referred to as 'sand' is the common sand which is a quarry source (Sec. 3f); that implicit in the explanations that the sand subject to excise tax, is merely quarried, loaded into trucks and sold and delivered to the construction site "as is"; that "in contrast, ASTM Graded Sand is sand that has undergone purification and pulverization such that its particle size distribution can be characterized with certainty, in accordance with the mesh sizes of the American Standard for Testing and Materials (ASTM)"; that "this fact is supported by a Certificate of Analysis and Material Safety Data Sheet (MSDS), documents that certainly do not accompany ordinary, common and quarried sand," a copy of which is herein attached; and that "the application of ASTM graded sand is exclusively used in the cement manufacturing industry as a strengthening/hardening agent." In reply, please be informed that pursuant to Revenue Regulations No. 13-94, implementing the provisions of then Section 151, Chapter VII; Title VI of the 1977 Tax Code (also Section 151 of the Tax Code of 1997), the pertinent portion of which reads as follows, viz. : "SEC. 2. Coverage . The following goods such as but not limited to those enumerated hereunder shall be considered as minerals and mineral products: "I. METALS A. Ferrous 1. Iron Iron Ore 2. Ferroalloying Manganese Ore, Metallurgical, Chemical and Refractory Chromite, Molybdenum B. Non-ferrous 1. Base Copper, Tin, Mercury 2. Light Aluminum, Magnesium, Titanium 3. Precious Gold, Silver, Platinum 4. Rare Uranium, Radium, Beryllium "II. NON-METALS A. Mineral fuels 1. Fluid a. Liquid Indigenous Petroleum b. Gaseous Natural Gas 2. Solid a. Hard Coal Anthracite b. Soft Coal Semi-Anthracite c. Compressed Coal Coke B. Other Non-metals such as but not limited to: Sand and gravel, Stone, Cement materials, Gypsum, Sulfur, Salt, Marble, Limestone, Coral, Shale, Slate, Quartzite, Schist, Volcanic Cinder, Perlite, Tuff, Granite Basalt, Andesite, Gabbro, Conglomerate and Other Quarried Materials, Phosphate Rock, Potash, Nitrates and Guano and Pyrite, Silica, Feldspar, Talc, Fire Clay, Clay and all varieties of clay, Sandstone, Corundum, Industrial Diamonds, Pumice, Emery, Magnesia, Asbestos, Mica, Ocher, Clay, Diatomite, Barite, Bentonite, Fuller's earth, Quartz. (Emphasis supplied.) Section 151 (A) (2), as implemented by Section 5A.2 and 5C of Rev. Regs. No. 13-93, provides for the payment of excise taxes on minerals, mineral products and quarry resources removed from customs custody. IEHDAT Thus, the law subjects to excise tax those minerals, as well as mineral products which, although produced and prepared in a marketable state by simple treatment processes such as washing or drying, have not undergone any chemical change or process or manufacturing, or in the case of quarry resources, any common stone or other common mineral substance, which include, among others, common sand and gravel, whether removed from river beds or quarried. In the case of ASTM Graded Sand, it is represented that it has undergone some extent of purification and pulverization and is being used as strengthening/hardening agent by cement factories. Furthermore, in its Memorandum dated May 20, 2002, the BIR Laboratory Section, Large Taxpayers Assistance Division II, headed by Ms. Cleotilde M. Jose, categorically stated, as follows: "Relative thereto, please be informed that based on the product data submitted, ASTM Graded Sand Refined Silica is the mineral quartz which is white in color, has a specific gravity (g/cc) of 2.65, and silicon dioxide (SiO2) [ sic ] content of 99.7%. Moreover, the material safety data sheet states the other synonyms or common names of sand as silica sand, quartz, crystalline silica, flint and ground silica. It also shows the silicon dioxide contents 99.099.9% by weight. "The term silica denotes silicon dioxide, the most common binary compound of silicon and oxygen. It occurs widely in sand, quartz, flint or diatomite and as colorless crystals to white powder. It is odorless and tasteless and has a density of 2.2 to 2.6. Silica constitutes approximately 60 wt % of the earth's crust, occurring either alone or combined with other oxides in the silicates. Commercially, it is the source of elemental silicon and is used in large quantities of [ sic ] building materials. "The mineral quartz, a form of silica, is most nearly a pure chemical compound of silicon dioxide. Its density at 0C [ sic ] is 2.65 g/cc. "As claimed by the taxpayer, ASTM Graded Sand is sand that has undergone purification and pulverization such that its particle size distribution can be characterized with certainty, in accordance with mesh sizes of the American Standard for Testing and Materials (ASTM). However, as previously mentioned, quartz is most nearly a pure chemical compound of silicon dioxide with density of 2.65 g/cc. This fact proves that no complex purification process is required in order to achieve a 99.7% silicon dioxide content . Pulverization is the physical process of reducing the size of the mineral to the size of the powder or dust or to any other size required to meet certain standards. In this case, it does not affect or change the major chemical composition of the mineral which is silicon dioxide." "xxx xxx xxx." (Emphasis supplied) In an addendum to the above report dated September 2, 2002 and confirmed by the ACIR-LTS on September 2, 2002, the BIR Laboratory Section categorically stated that ". . ., ASTM Graded Sand Refined Silica is the mineral quartz known as sand. Its specific gravity (g/cc) of 2.65 is the same as the density of the mineral quartz (2.65 g/cc) which is most nearly a pure chemical compound. For solids and liquids, specific gravity is numerically equal to density. "In view thereof, we categorically state that ASTM Graded Sand Refined Silica is the mineral known as silica, sand or quartz covered by Sec. 151 (A)(2) and Sec. 2, II.B of Revenue Regulations No. 13-94." Since Section 131 (A) of the Tax Code of 1997 imposes excise taxes on imported articles and Subsection (B) thereof requires the application of the rate and basis of excise taxes on the locally manufactured articles, ASTM Graded Sand Refined Silica shall, accordingly, be subject to the excise tax rate of two percent (2%) imposed to all non-metallic minerals and quarry resources as provided in Section 151(A)(2) of the same Tax Code. DAHCaI Finally, it is also subject to the value-added tax on importation imposed under Section 107(A) of the same Tax Code. This ruling constitutes the final decision of this Office on the matter. Very truly yours, (SGD.) GUILLERMO L. PARAYNO, JR. Commissioner of Internal Revenue