Determination of Rate of Percentage Tax Deemed to Have Been Paid

June 25, 1986 BIR RULING NO. 094-86 165 (A) (2) 166 (b) 000-00 094-86 Gentlemen : This refers to your letter dated May 5, 1986 stating that for the past twenty (20) years, you have been manufacturing bottle crown (tansan) for various customers, using tinplate as raw material; and that you have been buying your raw materials from National Steel Corporation, a BOI Registered Pioneer Enterprise. Based on the foregoing representation, you pose the following questions: "1. How to determine what rate of percentage tax should be deemed to have been paid? "2. Who determines the rate of percentage tax, the seller or the buyer?" In reply, I have the honor to inform you as follows: 1. Section 165 of the Tax Code, as amended by P.D. Nos. 1991, 2006 and 2031 prescribes the rates of the sales tax due on certain articles. Consequently, said rates shall be applied on the sales tax which the pioneer enterprise would have paid had the raw materials been taxable. In the instant case, since tinplate is considered an ordinary article, the rate of tax applicable is 20%, pursuant to Section 165(A)(2) of the Tax Code as amended. 2. The second paragraph of Section 5(c) of Revenue Regulations No. 2-86, as amended by Revenue Regulations No. 5-86 reads as follows: "In case the raw materials are purchased from a pioneer enterprise registered with the Board of Investments, enjoying full or partial exemption from the payment of sales taxes, the sales or excise tax which the pioneer enterprise would have paid had it been taxable may also be credited against the sales tax due in the same taxable quarter: Provided, That the percentage of exemption from sales tax is indicated in the invoice of the pioneer enterprise." Under the above-quoted provision, it would seem that the buyer of the raw materials from the pioneer enterprise determines the rate of tax applicable thereto which would have been paid had it been taxable. cdti Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner