Manner of Billing the Sales and/or Specific Taxes on Raw and Packaging Materials by Supplier

June 26, 1986 BIR RULING NO. 098-86 166 000-00 098-86 Gentlemen : This refers to your letter dated April 29, 1986 stating that your client, The Ault & Wilborg Company (Far East) is an American corporation doing business in the Philippines as manufacturer of printing inks and paints and paints; that as such manufacturer, it claims sales tax credit for sales and/or specific taxes billed to it by suppliers of raw and packaging materials; and that the said sales and/or specific taxes are billed by some of the suppliers in the following manner: SAMPLE NO. 1 Sales Invoice No. 101557 Sold to: AULT & WIBORG QUANTITY UNIT DESCRIPTION UNIT PRICE AMOUNT 950 kgs ADOMID No. 2 P 115.00 P109,250.00 Sales Tax of P9,931.82 to be paid by Mftr. SAMPLE NO. 2 Sales Invoice No. 86899 Sold to: THE AULT & WIBORG CO. (FAR EAST) QUANTITY UNIT DESCRIPTION UNIT PRICE AMOUNT 10 Alcohol P5,500.00 P55,000.00 Net Sales 53,249.10 Specific Tax 1,750.90 P55,000.00 P55,000.00 ______________________________________________________________ SAMPLE NO. 3 Sales Invoice No. 29124 Sold to: AULT & WIBORG COMPANY QUANTITY UNIT DESCRIPTION UNIT PRICE AMOUNT 2,850 KGS. Paraloid P45.00 P128,250.00 B-44 40% Recapitulation: Sales P116,590.91 Plus 10% Sales Tax 11,659.09 P128,250.00 _______________________________________________________________ SAMPLE NO. 4 Sold to: THE AULT & WIBORG CO. (FAR EAST) QUANTITY UNIT DESCRIPTION UNIT PRICE AMOUNT 50 kgs. Benzoil P192.00 P9,600.00 Peroxide 75% Sales P8,727.27 Tax 872.73 Inv. Value P9,600.00 Sales Invoice No. 121945 ________________________________________________________________ SAMPLE NO. 5 SALES INVOICE Sold to: THE AULT & WIBORG CO. QUANTITY UNIT DESCRIPTION UNIT PRICE AMOUNT 1.85 tons Styrene P33,000.00 P61,050.00 Monomer Net Price P58,393.05 Advance Sales Tax 2,656.95 Total P61,050.00 Based on the foregoing representation, you now request information as to whether the manner of billing the sales and/or specific taxes on raw and packaging materials by the supplier thereof as illustrated above constitutes substantial compliance of the regulations, such that The Ault & Wiborg Company (Far East) will be entitled to credit the said sales and/or specific taxes against its sales tax liability on the sale of its manufactured products. In reply, please be informed that with the supplier's sales invoice samples 2, 3, 4 and 5, your client may credit against its sales tax liability on the sale of its manufactured products the amount of sales and/or specific taxes on the raw materials, part, accessory, or other article intended for conversion into, and to form part of the finished article considering that the amount of said sales and/or specific taxes is indicated as a separate item in the supplier's sales invoice and provided further, that the following substantiation requirements are complied with, viz: (1) The manufacturer has adopted and employed the sales tax credit accounting method prescribed in Revenue Regulations No. 19-84; (2) The supplier issuing the invoice (i) is duly registered and accredited by the Commissioner of Internal Revenue as a registered supplier of raw material and said supplier is not a manufacturer, and (ii) complied with the requirement to use the sales tax credit accounting prescribed in Revenue Regulations No. 19-84; (3) The supplier's invoice indicates the amount of sales tax as a separate item in the invoice, and the supplier's accreditation number. (See also Sec. 5(c)(4), Revenue Regulations No. 2-86). aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner