BIR Ruling No. 079-62

July 11, 1962 BIR RULING NO. 079-62 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants P. O. Box 589, Manila Gentlemen : Reference is made to your letter dated February 20, 1962, stating the following: casia "One of clients is engaged in milling corn grains by wet process. For its raw materials, it uses locally-produced corn grains. In the "wet milling" process, raw corn (in kermels) is transported by elevators to the cleaners for purposes of separating sands, stones, etc. from the corn kermels. From this first step, the corn kermels are soaked in water and sulphur dioxide in the steeping tanks to prevent them from popping and to keep them from farmeating. This process softens, disinfects, bleaches and preserves the corn grains and last for about two days. The steeped corn kermels then go the de-watering from to separate the water from the corn. This process produces steep-water, which is concentrated and then mixed with gluten will produce gluten feeds. "After separating the water from the corn kermels, the de-watering corn kermels are ground in the first grinders (pre-milling process) and then transferred to degerminators or macerators. At this point, the ground kermels are separated from the germ. From this point, the ground corn grains (minus the germ) are further milled (fine milling process) to separate the husks and the grits. After this grinding, the kermels become starch milk, which are being used as raw materials in the manufacture of starch. "From the foregoing corn milling operations, the direct resultant products and/or products of the corn milled are as follows: 1) Grits 2) Gluten Meal 3) Hull 4) Corn Gluten feeds (mixture of 1, 2, and 3) 5) Corn germ; and 6) Starch milk." In answer thereto, I have the honor to inform you that, under the aforequoted circumstances, the business of your client constitutes manufacturing and not merely the milling of corn. Accordingly, it is subject to the fixed and percentage taxes prescribed in Sections 182(A)(1) and 186 of the Tax Code and not to the percentage tax imposed in section 189 thereto. The cost of starch milk used in manufacturing starch is deductible from the gross selling price or gross value in money of the latter, it being also subject to 7% sales tax under said section 186. It may be stated that a similar query, wherein we took the same position as the present, was referred by this Office to the Department of Finance for Opinion on July 20, 1961. However, we have not received said opinion up to now. cdll Very truly yours, JOSE B. LINGAD Commissioner of Internal Revenue