BIR Ruling No. 043-64

June 10, 1964 BIR RULING NO. 043-64 Stewart, Cunanan & Co. Certified Public Accountants P. O. Box 2288, Manila Gentlemen : Reference is made to your letter dated April 27, 1964, quoted as follows: "One of our clients, who is engaged in the manufacture and sale of television sets, is contemplating to purchase from the local market some of its requirements for parts and accessories. Our client is aware that only parts and accessories previously subjected to the 30% sales tax rate may be deducted from the gross selling price of the television sets for purposes of computing the sales tax due from it. However, considering that some of these materials may also be used in the manufacture of radio sets and, therefore, subjected to tax at the rate of 7% only under Section 186 of the Tax Code, our client would not be in a position to know the actual rate of sales tax paid on the materials purchased by it and has to rely solely on the representations of the seller of these materials. The representations that the materials were subjected to the 30% sales tax rate may be orally given or indicated in the sales invoices. The questions raised by our client are as follows: "Assuming that the seller of the materials made a false representation in the sense that upon investigation it was found that only 7% sales tax was paid on these materials and not 30% as represented; "(1) Will the deduction claimed as cost of these materials in the sales tax return of our client be disallowed by your office, or "(2) Alternatively, will your office instead go after the seller of the materials and assess from him the difference in the sales tax at the rate of 30% as represented by him and the amount actually paid by him at the rate of 7%." In reply thereto, I have the honor to inform you that the cost of the parts and accessories alleged to have been misrepresented by the seller thereof to your client that they were previously subjected to 30% sales tax, although actually to 7% sales tax only, is deductible from the gross selling price of the television sets manufactured from said parts and accessories. However, your client must prove by documentary evidence the fact of such misrepresentation in order that this Office can have a basis for assessing the seller of the parts and accessories to deficiency sales tax, and consequently, allow your client to deduct from his gross sales the cost of the aforesaid parts and accessories. aisadc Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue