Tax Liability of the Manufacturer and Printer of Flexible Packaging Materials for Various Companies

May 22, 1987 BIR RULING NO. 134-87 163 (2) 246-86 134-87 Gentlemen : This refers to your letter dated December 19, 1986, stating that your company is a manufacturer and printer of flexible packaging materials for various companies engaged in the manufacture of food and snack items, candies, medicine, bakery products and detergents, that the materials needed in the manufacture of said flexible packaging materials are either imported or locally purchased by you, and that you now request certification from this Office to the effect that your packaging materials as well as the raw materials to be used in the manufacture of said packaging materials are both subject to 10% sales tax. In reply, please be informed that any article subject to the original sales tax, when used as a raw material in the manufacture or preparation of essential articles, shall, subject to certain conditions, be taxed at the same rate as finished product, except when such material is taxed at a lower rate. (Section 163(2), Tax Code, as amended, Section 6.II Rev. Regs. No. 11-86). This Office has ruled that containers are raw materials of the manufactured articles. (BIR Ruling No. 66-027 dated June 29, 1966). Accordingly, since some of the finished products of your customers, like food and snack items, medicine, bakery products and detergents are classified as essential articles subject to 10% sales tax, the flexible packaging materials which that company manufactures are subject to the same rate of 10% sales tax, provided that the customers shall certify to Cygnus Industries, Inc., that the flexible packaging materials shall be used exclusively as packaging materials for the finished products. However, as regards the packaging materials of candies, since they are classified as other articles which are taxable at the rate of 20% under Section 163(4) of the Tax Code, as amended, said packaging materials are also subject to the same rate of sales tax, i.e., 20%. On the other hand, your importation of polyethylene and polyprophylene resins, aluminum foils, cellophane paper and pouch paper and those which are locally purchased by you, like printing inks, solvents, oriented polyprophylene films and raw polyresins, all of which are the raw materials in the manufacture of the flexible packaging materials, will also be subject to the advance sales tax at the same rate of 10% provided that you as importer/manufacturer shall certify to this Bureau that your aforesaid importation as well as those purchased locally shall be used exclusively in the manufacture of said packaging materials. (Section 163(2), Tax Code). If you fail to issue the certification, you will be subject to 20% advance sales tax. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner