Taxability of Lighter Fluid

January 9, 1959 BIR RULING NO. 034-59 The Caltex (Phil.) Inc. P.O. Box 783, Manila Gentlemen : With reference to your letter dated July 1, 1958, as supplemented by that dated October 16, 1958, relative to the question of whether the lighter fluid being manufactured by that corporation is subject to the specific tax under Section 142(c) of the National Internal Revenue Code or to the 7% sales tax under Section 186 of the same Code, I have the honor to inform you as follows: The products subject to the specific tax prescribed in said Section 142(c) are naphtha, gasoline and all other similar products of distillation. According to Webster's New International Dictionary, 2nd edition, naphtha is "any of several volatile inflammable liquids obtained by distilling certain carbonaceous materials and used as solvents in dry cleaning, varnish making, etc., and as fuels; as petroleum naphtha or mineral naphtha from petroleum; . . . Naphtha from petroleum may be either a crude distillate (crude naphtha) comprising petroleum ether, gasoline, benzine, etc., or a refined fraction distinct from gasoline and benzine". On the other hand, petroleum is "an oily, inflammable liquid, almost colorless to black, but usually of a dark-brown or greenish hue, existing at many places in the upper strata of the earth". And gasoline is a "volatile, inflammable, liquid hydrocarbon mixture used as a fuel, especially for internal combustion engines. . . It is made by the refining or the cracking of petroleum, by low temperature distillation of coal, by recovery from natural gas, etc." cdta As the investigation conducted by this Office disclosed that lighter fluid is a product of original distillation from crude oil (or petroleum), it would seem from the abovequoted definitions that said product is similar to naphtha and gasoline, which are products of distillation from petroleum. However, although the former and the latter are similar in that both are products of distillation from petroleum, their similarity ends there, for unlike naphtha and gasoline, lighter fluid is not motor fuel. That the "products of distillation" mentioned in Section 142 of the Tax Code refer to motor fuel is readily gathered from the provisions of said law which reads as follows: "SEC. 142. Specific tax on manufactured oils and other fuels . On refined and manufactured mineral oils and motor fuels, there shall be collected the following taxes: (a) Kerosene or petroleum, per liter of volume capacity, two and one-half centavos; (b) Lubricating oils, per liter of volume capacity, seven centavos; (c) Naphtha, gasoline, and all other similar products of distillation, per liter of volume capacity, eight centavos; and (d) On denatured alcohol to be used for motive power, per liter of volume capacity, one centavo: Provided , That if the denatured alcohol is mixed with gasoline, the specific tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For the purposes of this subsection, the removal of denatured alcohol of not less than one hundred eighty degrees proof (ninety per centum absolute alcohol) shall be deemed to have been removed for motive power, unless shown to the contrary. (As amended by Sec. 11, Republic Act No. 56; Sec. 1, R.A. 1435)" cdti The reference to motor fuel is even made clearer by Section 361 of the Tax Code which provides that 20% of "the proceeds of the tax on motor fuels prescribed in subsecs . (b), (c), and (d) of section one hundred forty-two of this Code " shall accrue to the provincial road and bridge funds of the different provinces and the remaining 80% shall be deposited in the National Treasury to constitute a special fund for the maintenance, reconstruction, improvement, and, where practicable, for the construction of provincial and national roads and bridges." (Emphasis supplied). In view thereof, and as lighter fluid is obviously not a motor fuel, this Office is of the opinion that the lighter fluid being manufactured by you is not subject to the specific tax, but is subject, instead, to the 7% sales tax. llcd Very truly yours, (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue