Importation of Flavoring Extracts and Essences (raw materials) Used in the Manufacture of Wines and Liquors

March 23, 1987 BIR RULING NO. 085-87 121 (c) 000-00 085-87 Gentlemen : This refers to your letters dated March 4 and March 11, 1987, requesting exemption from the payment of excise tax (specific) on your importation of flavoring extracts and essences which are raw materials used in the manufacture of wines and liquors. In reply, I have the honor to inform you that "medicinal preparations, flavoring extracts and all other preparation, except toilet preparations, of which, excluding water, distilled spirits from the chief ingredient, shall be subject to the same tax as such chief ingredient ". [Sec. 121(c), Tax Code, Emphasis ours] The phrase "distilled spirits form the chief ingredient" is construed to mean that the flavoring extracts or other preparations) excluding water, contain more than 50% alcohol by volume. Consequently, if the imported flavoring extracts or essences (essences fall within the purview of all other preparations) excluding water, contain more than 50% alcohol by volume, such preparations are subject to specific tax payable before release from customs custody. adc On the other hand, if the chief ingredient of the preparations is not distilled spirits, i.e., they contain 50% or less alcohol, excluding water, then such imported preparations are subject to either compensating or advance sales tax as provided under Title V of the Tax Code. However, if said imported preparations are used by you in the manufacture of wines and liquors which are subject to excise tax, they are not subject to the advance sales tax or the compensating tax. [Sec. 162(c) and Sec. 169(b)(2), Tax Code] It is hereby understood that said imported flavoring extracts and essences shall be analyzed to determine their alcohol content, excluding water, before authority to release the same is issued by this Office. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner