Availment of the Sales Tax Credit

April 22, 1987 BIR RULING NO. 110-87 166-a 000-00 110-87 Gentlemen : This refers to your letter dated May 15, 1985 and September 10, 1986 requesting a ruling as regards availment by your customers of the sales tax credit under Section 166 of the Tax Code, as amended. It is represented that you are an offset-letterpress printer; hence, subject to the 4% contractor's tax; that you purchase printing materials only upon receipt of your customer's purchase orders for their specific printing requirements; that the 10% sales tax is passed on to you by your suppliers; and that your customers would like to avail of the sales tax credit on the sales tax passed on to you on printing materials you purchased from suppliers who are manufacturers/dealers/importers. In reply, I regret to inform you that your customers cannot claim as tax credit the sales tax passed on to you by your suppliers. Section 166(a) of the Tax Code, as amended by Executive Order No. 36, reads as follows: "Section 166. Tax Credit . (a) Creditable Taxes . Any excise, sales or miller's tax paid under this Title and Title IV of this Code on domestically manufactured, processed, produced or imported raw materials, part, accessory or other article locally purchased or imported by the manufacturer for conversion into or intended to form part of any finished product for sale shall be credited against the sales tax on the original sale of the finished product, except agricultural products: Provided, however , That the amount of sales tax on domestically purchased raw materials, part or accessory, is separately indicated in the sales invoice." Under the above-quoted provision, only the manufacturer can claim tax credit with respect to the excise, sales or miller's tax paid on raw materials purchased by him and used in the manufacture of his finished products. The tax credit is claimed against the sales tax due on the original sale of said finished products. In the instant case, as printer, you rendered printing service to your customers for which you derived gross receipts subject to the 4% contractor's tax. Your customers did not manufacture the articles which you actually printed for them. Moreover, you are not subject to the 1.5% tax on subsequent sales imposed by Section 164 of the Tax Code, as amended, on the articles printed by you for which you were paid for printing services rendered. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner