BIR Ruling No. 090-82

March 29, 1982 BIR RULING NO. 090-82 192-2 000-00 090-82 Mr. Cirilo P. Villanueva Cirilo P. Villanueva & Associates Certified Public Accountants 1470 Instruccion, Sampaloc Manila S i r : This refers to your letters dated September 24, 1981 and January 25, 1982 requesting a ruling as to what tax your client, Mr. Wilfredo Martinez is liable for engaging in buying and selling of sand, gravel and stones. It is represented that your client will purchase sand, gravel and stones from duly licensed quarry concessionaires who are paying their ad valorem (Mining) taxes and from producers who extract from their private lands and pays the corresponding sales tax; that your client will classify these materials through an apparatus by segregating fine sand and gravel to have sizes of 3/8", 3/4" and G-1, the larger type of gravel; that with respect to the stones, the larger stones will be crushed by a machine to smaller sizes, not for any special purpose, but only to conform with the sizes of 3/8", 3/4" and G-1 for resale to customers in construction works; and that taxes due on the said stones are paid the suppliers. In reply, I have the honor to inform you that under the foregoing facts, your client is considered a dealer of sand, gravel and stones, subject to the graduated annual fixed tax prescribed in Section 192(2) of the Tax Code of 1977, as amended. The crushing of the larger stones by machine into smaller sizes before they are sold, does not constitute manufacturing. Thus, it has been ruled that: cdti "The cutting of glasses into specific sizes by the dealers thereof to meet the sizes desired by their customers does not constitute manufacturing, and neither are the dealers considered contractors because the cutting of the glasses into desired sizes and/or installation thereof in buildings are merely incidental to the main contract of purchase and sale. Said sales are only subject to the graduated fixed annual tax under Section 182 of the Tax Code." (BIR Ruling, June 10, 1955). "He who buys already manufactured lumber for the purpose of recutting them into standard sizes and kiln-drying them preparatory to the resale thereof is a mere dealer subject to the graduated annual fixed tax imposed by Section 182(A) (2) of the same Code." (BIR Ruling No. 37 , s. 1965) Moreover, it has been held that roasting coffee or grinding spices does not constitute manufacture; and that application of labor to an article either by hand or by machinery does not make the article necessarily a manufactured article. (Castle Bros., Wlf & Sons vs. Mc Coy, 21 Phil. 300) cd Very truly yours, RUBEN B. ANCHETA Acting Commissioner