BIR Ruling No. 068-62

April 6, 1962 BIR RULING NO. 068-62 Mr Virgilio S. Farcon c/o Oceanic Commercial, Inc. 2155 Pasong Tamo, Makati Rizal S i r : Reference is made to your letter dated August 15, 1960, requesting information on the following facts: "A buys from local manufacturers soaps in rectangular sizes, like Pink Camay, Lux, etc. A in turn delivers them to B, whereby the latter dissolves the aforementioned soaps. While in the stage of dissolution, B cuts new ingredients bought on his own account, thus converting them into medicated soaps using his own formula. These soaps are later on reformed in rounded shape and delivered back to A, who pays B the agreed contract price. A provides for the boxes, cellophane and literature before they are sold to the public. These soaps are called medicated in the sense, that they are used to remove pimples, blackhead, dandruffs, as well as aid in the whitening of the skin." "(a) Is A here considered a manufacturer as defined under the Internal Revenue Code? "(b) If so, what raw materials are deductible in arriving at the tax-base? "(c) What rate of percentage tax shall be applied for purposes of monthly percentage tax?" In reply thereto, I have the honor to inform you that under the circumstances, A is considered a manufacturer as the term is defined in Section 194(x) of the Tax Code and the cakes of soap manufactured by him are subject to the 7% sales tax prescribed in Section 186 of the same Code. The total cost of all raw materials that go into the manufacture of the soap which have previously subjected to the same rate of sales tax is deductible from the gross selling price of the latter. cdtech Very truly yours, BENEDICTO PADILLA Acting Commissioner of Internal Revenue