Domestic Alcohol to be Specially Denatured for Use in the Manufacture of Vinegar Exempt from the Specific; However, the Same is Subject to 10% Value-Added Tax

May 21, 1996 BIR RULING NO. 058-96 100; 131 138 000-00 058-96 Lazatin Consolidated /Corporation 252 Sto. Rosario Street, San Jose Angeles City Attention: Mr . Carmelo F . Lazatin Vice-President Gentlemen : This refers to your letter dated September 8, 1995 requesting exemption from the excise (specific) tax of your specially denatured alcohol for use in the manufacture of vinegar. cdta It appears that the formula approved by this Office in the denaturing of ethyl alcohol is as follows: "For every 100 liters of heads and tails alcohol of not less than 180 proof, they shall be added 25 liters of vinegar (10 percent acidity)." Per report of our Laboratory Section, the vinegar (taken as 10 per cent acetic acid by weight) used as denaturant is not the ordinary table vinegar that can be taken orally as food but one that destroys the character of ethyl alcohol as beverage and render it unfit for oral intake; that the resulting specially denatured alcohol undergoes aerobic bacterial oxidation converting it into vinegar or acetic acid solution; that the chemical change is brought by the fermentation of the specially denatured alcohol with the aid of micro-organisms, their nutrient and other conditions; and that the final product is vinegar which is fit for oral intake but no longer contains ethyl alcohol as chief ingredient. Based on the foregoing, the domestic alcohol which you will purchase to be specially denatured for use in the manufacture of vinegar shall be exempt from the specific tax imposed under Section 138 of the Tax Code, as amended. (Section 131, Tax Code, as amended) However, the same shall be subject to the 10% value-added tax under Section 100 of the same Code. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue