BIR Ruling No. 114-84

June 29, 1984 BIR RULING NO. 114-84 204-000-00-114-84 S i r : This refers to your memorandum dated April 25, 1984 requesting a ruling as to whether or not the importation of ceramic colors used in coloring bottles which are used as containers of beer, is exempt from the payment of compensating tax. It appears that the imported ceramic colors are used by the importer in the manufacture of bottles used as containers of beer, a product which is also manufactured by the same importer; that cost of the bottle is not included in the cost of the beer when sold to the customer so that the latter has to return the bottle or pay for the cost of the bottle if the same is not returned; and that said ceramic colors are not solely used in coloring beer bottles but may be used also in coloring other containers. In this connection, please be informed that since the imported ceramic colors are not used in the manufacture or preparation of the beer subject to specific tax, but used only in the manufacture of the bottles used as containers of the beer, and considering further that cost of the bottle is not included in the cost of the beer when sold to customers, said importation does not form part of the beer, and is therefore, subject to compensating tax based on the landed cost thereof without mark-up pursuant to Section 204 of the Tax Code. The tax-exemption under Sections 193(b) and 204(a) of the Tax Code does not apply in this particular case because the imported coloring material is not used in the preparation or manufacture of the beer product subject to specific tax, but used only in the manufacture of the bottles. In other words, in order to be exempt from the payment of the compensating tax, the article (ceramic colors) should be combined with or made part of the product subject to specific tax which in this case is the beer. In case the imported ceramic colors are sold, bartered or exchanged, the same will be subject to the advance sales tax. atdc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner