Purchase of Denatured Alcohol is Exempt from Specific Tax

May 14, 1991 BIR RULING NO. 080-91 131; 138 578-88 080-91 Gentlemen : This refers to your letter dated February 20, 1991, requesting confirmation of your opinion that the denatured alcohol which you purchased is exempt from specific tax. You have represented that you are registered with the Board of Investment (BOI) for the manufacture of pentaerythritol (penta) under pioneer status; that one of the basic materials for the manufacture of penta is acetaldehyde; that on the other hand, the raw material for the manufacture of acetaldehyde is denatured ethyl alcohol; and that ethanol alcohol which will be denatured by the producer before its removal from the factory and sale to your company is not for oral intake. In reply, please be informed that your opinion is confirmed. Section 131 of the Tax Code is explicit in its provisions that domestic alcohol of not less than one hundred eighty degrees proof (ninety percent absolute alcohol), when suitably denatured and rendered unfill for oral intake, shall be exempt from the specific tax prescribed in Section 138 unless the same is used for motive power in which case it shall be subject to specific tax at the rate of five centavos per liter of volume capacity under Section 145 (a) (4) thereof. Such being the case, since the denatured alcohol to be purchased by you will be used as raw material in the manufacture of penta, the same is exempt from the specific tax under said Section 138 of the Tax Code but subject to the 10% value-added tax pursuant to Section 100(a) of the same code. Very truly yours, (SGD.) JOSE U. ONG Commissioner