BIR Ruling No. 088-64

December 29, 1964 BIR RULING NO. 088-64 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants P. O. Box 589 Manila Gentlemen : This has reference to your letter dated August 28, 1964 stating that your client is primarily engaged in business as a printer of packaging materials, such as folding boxes, carton, wrapper and labels; that said packaging articles are made or printed by your client based on the specific orders of its customers on materials furnished by your client; and that the finished articles are delivered to the customers in knocked-down condition. The attached samples of said packaging articles show that in addition to the printing effected thereon, they are trimmed in such manner that by merely folding them along impressed guidelines the desired packaging material or wrapper is produced. LibLex You now request a ruling as to what internal revenue business taxes your client should pay, if the said packaging articles are made or printed by your client out of materials furnished by it. You also request a ruling as to what internal business taxes your client should pay if the customers will furnish the materials. In answer thereto, I have the honor to inform you that, based on the above-mentioned facts your client is essentially a printer subject to the fixed and percentage taxes prescribed by Sections 182(A)(1) and 191 of the Tax Code. The taxable receipts of your client as such printer consist of the total amount paid it for job done which includes cost of labor and materials, if both are furnished by it, or cost of labor only, if the materials are furnished by its customers. It may be stated in this connection that the manufacturer of the articles to be contained in the printed packaging materials cannot, for purposes of the sales tax deduct from the gross selling price thereof the cost of said printed packaging materials. However, in case the manufacturer supplies the printer with the raw materials used in the production of the packaging materials, the cost of such raw materials is deductible from the gross selling price of his product provided that such cost is duly established by the corresponding purchase invoices or vouchers. On the other hand, in order that the cost of the raw materials shall not be considered as forming part of the taxable gross receipts of the printer, the latter must establish by evidence that the raw materials were furnished by the manufacturer; otherwise, the raw materials shall be considered to have been furnished by the printer himself, and the cost thereof considered as part of his taxable gross receipts. LLphil Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue