Tax Liability of a Person Engaged in the Manufacture of Bakery Products (in bakery shop)

February 18, 1959 BIR RULING NO. 092-59 E. F. Constantino & Assoc. R-216 Doa Salud Bldg. 671 Dasmarias St., Manila P.O. Box No. 1081 Gentlemen : Reference is made to the query contained in your letter dated July 31, 1958, stated as follows: LLjur "In behalf of our client, may we ask some clarification regarding paying his percentage tax. Our client is engaged in the manufacture of bakery products (in bakery shop). We are computing the 7% tax on sales after having subtracted all deductible raw materials. The principal raw material is flour. The said materials are of course with containers (empty bags) which do not form part of the finished products. "Our procedure is not to decrease the value of the raw materials by the value of the empty bags in computing the 7% tax, because we understand the empty bags mentioned herein are part of the imported raw materials and they have been subjected already to tax." In reply thereto, I have the honor to inform you that, if the flour in question were purchased or imported already contained in bags or containers and the purchase price paid therefor, or the total landed cost, plus mark-up, on which the sales tax due thereon was assessed and collected, included the value of said bags or containers, then the cost of said flour used by your client in his manufacture of bakery products should not be reduced by deducting therefrom the value of the aforesaid bags or containers. In this connection, please be informed that, upon the sale of the empty bags, the receipts therefrom should be reported for income tax purposes. cdtech Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue