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

June 25, 1996 BIR RULING NO. 067-96 100,131 130 058-96 067-96 Philippine Aslam Corporation 4/F Centro Bldg., 180 Salcedo St. Legaspi Village, Makati City Attention: Mr . Romulo Kehyeng Chairman of the Board Gentlemen : This refers to your letter dated November 20, 1995 requesting for a ruling on the exemption from the payment of excise (specific) tax of your specially denature alcohol for use in the manufacture of vinegar. It appears that the formula approved by this Office in the denaturing of ethyl alcohol is as follows: aisadc "For every 100 liter of heads and tails alcohol of not less than 180 proof, there shall be added 25 liters of vinegar (10 percent acidity)." Per report of our Laboratory Section, the vinegar (taken as 10 percent 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 about 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. LLpr Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue