BIR Ruling No. 024-82

January 27, 1982 BIR RULING NO. 024-82 198-00 000-00 024-82 Biofood Corporation 131 Lapu-Lapu Street Caloocan City Attention: Ms . Carmelita A . Mailig Accountant Sir/Madam : This refers to your letter dated July 22, 1980, requesting information as regards the preparation of your returns and payment of the percentage tax in connection with your business as producer of Abalone Mushrooms. You have presented that you are producing locally abalone mushrooms, a vegetable classified as agricultural food products, which you are selling fresh to domestic consumers; that you are now intending to can your product also for sale to domestic consumers and possibly for export in the future; that in the canning of your products, their original state is not altered but salt and water are added and boiled to preserve it; and that the canning is undertaken by another company on a per can contract basis. In reply, I have the honor to inform you as follows: (1) As a producer of agricultural food products such as fresh abalone mushrooms, you are liable to the 1% tax on the gross selling price pursuant to Sec. 198 of the Tax Code, as amended, and implemented by Revenue Regulations No. 8-78. (2) If the fresh abalone mushrooms are preserved by salting, and boiling and thereafter canned, the canned mushrooms are subject to 10% sales tax imposed by Section 199 of the Tax Code, as amended. However, the canned mushrooms sold for export are exempt from the sales tax. [Section 202(e), Tax Code] (3) If another company undertakes the canning of your products, it shall be liable to the 3% contractor's tax under Section 205 of the Tax Code, as amended. casia (4) If your company undertakes the canning of its products and buys the tin cans, it is entitled to tax credit on the 10% sales tax added to the price of the tin cans by the seller thereof, provided that the amount of the tax on the tin cans shall be indicated as separate item in the sales invoice, pursuant to Section 199 of the Tax Code, as amended. On the other hand, if the canning of your products is undertaken by another company which supplied the tin cans, you are not entitled to a tax credit. Very truly yours, RUBEN B. ANCHETA Acting Commissioner