Manufacture of Locally Imitation Alcoholic Beverage Flavors

June 19, 1980 BIR RULING NO. 081-80 International Flavors & Fragrances (Philippines) Inc. 3rd Floor, Vinnell-Belvoir Bldg. 2322 Pasong Tamo Ext., Makati R i z a l Attention: Mr . A . A . Sanz Managing Director Gentlemen : This refers to your letter dated March 6, 1979 stating that you will manufacture locally imitation alcoholic beverage flavors such as imitation gin flavor, imitation cognac flavor and similar products. It is represented that said products are normally imported by manufacturers which they use as raw materials in the manufacture of their respective alcoholic beverages; that some of these products contain alcohol while others do not contain alcohol; and that you will import individual raw materials like imitation gin flavor concentrate, juniperberries oils, and other materials not locally available, which raw materials will undergo mixing with local available materials such as alcohol, water, glycerine, etc. in various proportions according to your formula. Based on said representations, you want to know whether you will be required to pay the specific tax on: "1. Locally manufactured products containing over 50% alcohol (tax paid) dry basis. "2. Locally manufactured products containing less than 50% alcohol (tax paid) dry basis. "3. Locally manufactured products containing no alcohol. "4. Imported raw materials for above products containing over 50% alcohol dry basis. "5. Imported raw materials for above products containing less than 50% alcohol dry basis. "6. Imported raw materials for above products containing no alcohol." In reply, please be informed as follows: 1. Locally manufactured alcoholic flavor such as the Imitation Peach Flavor, Imitation Brandy Flavor and the Imitation Whisky Flavor, of which, excluding water, alcohol form the chief ingredient are subject to the specific tax, pursuant to Section 138 of the Tax Code of 1977, as amended. If the alcohol is already tax paid, no further specific or sales tax shall be collected thereon. 2. Locally manufactured alcoholic flavor such as the Imitation Rum Flavor having the following ingredients: Imitation Rum Concentrate 16 Ethyl Acetate 9 Ethyl Oxyhydrate 30 Vanillin 3 Oleo Rosin Vanilla 8 Ethyl Alcohol 6 Water 28 100 === is not subject to specific tax because, the chief ingredient thereof, excluding water, is not alcohol. It is subject to the 10% sales tax prescribed by Section 199 of the Tax Code of 1977, as amended. 3. Locally manufactured alcoholic flavors with no alcohol contents are subject to the 10% sales tax. 4. Imported raw materials containing over 50% alcohol dry basis, which are to be used in the manufacture of local imitation alcoholic beverage flavors (Items 1 and 2) are subject to the specific tax because the same contains distilled spirits as chief ingredient. 5. Imported raw materials for use in the manufacture of imitation alcoholic beverage flavors (Items 1 and 2), if the chief ingredient thereof, excluding water, is not alcohol, are subject to the 10% advance sales tax based on the landed cost thereof, plus 25% mark-up, pursuant to Sections 193(b) and 199, both to the Tax Code of 1977, as amended. 6. Raw materials imported by you containing no alcohol to be used in the manufacture of the above-named products are subject to the 10% advance sales tax based on the landed cost thereof plus 25% mark-up. If imported raw materials which are subject to the advance sales tax are used in the manufacture of articles subject to specific tax, said raw materials are still subject to the said tax because the importer, is not the manufacturer of the finished product. Under Section 193(b) of the Tax Code of 1977, as amended, advance sales tax does not apply to articles to be used by the importer himself in the manufacture or preparation of articles subject to specific tax. cdt Very truly yours, RUBEN B. ANCHETA Acting Commissioner