Rate of Sales Tax Liability of Manufacturers of Crown Caps for Beverages

July 23, 1986 BIR RULING NO. 124-86 165 (A) (3) 101-86124-86 Gentlemen : This refers to your letter dated May 15, 1986 requesting clarification as to whether that association, as manufacturers of crown caps for such beverages as Coca-Cola, Pepsi-Cola, 7-Up, Pop Cola and the like is subject also to the same rate of sales tax as are imposed on beverages. You also want to know the rate of sales tax liability of your suppliers on raw materials. In reply, please be informed that Section 6 of Revenue Regulations No. 5-86 provides that in general, materials, parts and accessories of articles subject to sales tax on original sale shall be subject to the same rate of tax as the finished article: Provided, that material, parts and accessories of articles classified as essential articles which are taxable at 10% under Section 165(A)(3) of the Tax Code, shall be taxed at the same rate as the finished product, only if such materials, parts and accessories can only be used in the manufacture of an article taxable at 10%. Accordingly, inasmuch as aforesaid beverages are classified as essential articles taxable at the rate of 10%, the crown caps you manufacture and are exclusively used as part and accessory of said beverages, are also subject to the same rate of sales tax, i.e., 10%. On the other hand, your suppliers of raw materials shall be subject to the same sales tax rate of 10% as are imposed on that association only if such raw materials are not of common or general use and that the same can only be used in the manufacture or production of crown caps. Otherwise, such materials are considered ordinary articles taxable at 20% pursuant to Section 165(A)(2) of the Tax Code, as amended. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner