Internal Revenue Taxes Payable by a Person Engaged in the Sand and Gravel Business

February 9, 1960 BIR RULING NO. 056-60 Mr. Efren C. Reyes 30 Espaa Extension Quezon City S i r : This is in reply to your letter dated September 28, 1959, wherein you requested us to issue a ruling on the following queries: cdi "1. What internal revenue taxes must be paid by a person engaged in the sand and gravel business? "2. Is the cost of sand and cement used in the manufacture of concrete hollow blocks deductible from the gross sales which is subject to the 7% manufacturer's tax?" Producers of gravel and sand are subject to the fixed and percentage taxes prescribed in sections 182(A-1) and 186 of the Tax Code. This Office has consistently ruled that a person who gathers or removes sand and gravel from non-timber public lands or private lands of the National Government or from beds of seas, rivers, streams, creeks and other public waters, is considered a producer of sand and gravel and, as such, he is subject to the fixed and percentage taxes prescribed in sections 182(A-1) and 186 of the Tax Code. The sale of sand and gravel by the producers thereof is subject to the 7% sales tax. So that if the vendor of sand and gravel is not the producer thereof but has only purchased the same from said producers, he shall be considered as a mere dealer subject to the graduated fixed annual tax prescribed in section 182 of the Tax Code, as amended. cdt The manufacturer of concrete hollow blocks may deduct from his gross sales, for purposes of the sales tax, the cost of sand used in the manufacture thereof provided it can be shown that such raw materials had been tax paid under section 186 of the Tax Code. The cost of cement cannot be deducted because cement is now considered a mineral product and, therefore, it could not be subjected to the sales tax. Please be guided accordingly. Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue