Sale of Sauerkraut Subject to C-13 Graduated Annual Fixed Tax Imposed by Sec. 161 (2) of the Tax Code

June 23, 1986 BIR RULING NO. 085-86 161 (2) 039-86 085-86 Gentlemen : This refers to your letter dated January 31, 1985 requesting a ruling as to the correct rate of tax that should be paid on the product resulting from the following process: "I buy my cabbage from wholesalers at the Divisoria or at the Pasay Markets. I then remove the rotten and green leaves, wash it and then cut it into 1/8 inch strips. The cabbage strips are then packed in tanks with brine and then stored for at least 30 days to ferment into sauerkraut. The sauerkraut is then packed in plastic jars or in plastic bags and sealed. The packed sauerkraut is then refrigerated and aged for another 20 days before being sold." In your letter, you also stated that you started paying the 1% sales tax when your NACIDA Certificate of Registration expired in August, 1984. In reply, I have the honor to inform you that since sauerkraut is an agricultural product, the sale of sauerkraut is considered a subsequent sale of agricultural product in its original state and, therefore, not subject to the 1.5% sales tax. (Sec. 165B, Tax Code, as amended by P.D. No. 2006) However, you shall be subject to the C-13 graduated annual fixed tax imposed by Section 161(2) of the Tax Code. (Revenue Memorandum Circular No. 2-86) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner