Sale of Coca-Cola in Cans to Philippine Airlines for Resale in Its International Flights Subject to Manufacturer's Sales Tax

March 8, 1984 BIR RULING NO. 054-84 202-d-145-83-054-84 Gentlemen : This refers to your letter dated July 20, 1982, requesting information as to whether your sale of Coca-Cola in cans to the Philippine Airlines, which, in turn, will sell the same in its international flights, is exempt from the sales tax. In reply, please be informed that under Section 202(d) of the Tax Code, quoted as follows: "(d) Articles shipped or exported by the manufacturer or producer, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the articles so exported". In order to enjoy exemption from the sales tax, the articles must be shipped or exported abroad by the manufacturer or producer himself. Since your company will not ship or export the canned Coca-Cola products directly but will instead sell them locally to the Philippine Airlines which in turn will sell the same in its international flights, said sale is subject to the 10% manufacturer's sales tax imposed by Section 199(a) of the Tax Code. However, the advance sales tax paid on the imported cans shall be credited against the sales tax due on the Coca-Cola product. Considering the foregoing opinion that this transaction is not an export sale, there can also be no duty drawback on the imported cans. aisadc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner