Tax Imposed in the Manufacture of Printed Boxes, Cartons, Tin Can, Crown Caps and Other Flexible Packaging Materials

May 27, 1987 BIR RULING NO. 139-87 163 (2) 000-00 139-87 Gentlemen : This refers to your letters dated October 8, 1986 and January 29, 1987 requesting a ruling to the effect that the sales by your members of the following raw materials for the manufacture of printed boxes, cartons, tin can, crown caps and other flexible packaging materials to be used as containers of essential articles/products under Section 163(2) of the Tax Code, as amended, be subject only to 10% sales tax: Type of Ink Purpose 1. Tin lithographic ink, Used in the manufacture of metal decorating ink, crown caps of the aluminum crown finishing and tin can types commonly varnish gold lacquer, used by beverages sanitary can liner. manufacturers, dried milk PVC dry blend, PVC powder and processed food wet blend manufacturers in cans. 2. Rotogravure ink Used in the manufacture of packaging materials of processed meat, fruits, detergents, pharmaceutical packaging and other processed food products for human consumption. 3. Flexographic ink Used in the manufacture of polybags commonly used by cement manufacturers and corrugated cartons for transport packaging for practically all consumer packages. 4. Lithographic ink, Used in the manufacture of typographic ink and writing pads and notebooks, letterpress ink pharmaceutical packaging detergents. In reply, please be informed that under Section 163(2) of the Tax Code as amended by Executive Order No. 36, 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 the finished products except when such materials are taxed at a low rate. This office has ruled that containers are raw materials of the manufactured articles. (BIR Ruling No. 66-027 dated June 29, 1966). Accordingly, since the finished packaging/containers products of your various customers are also classified as essential articles subject to 10% sales tax, the ink which your members manufacture and use as raw material thereof also is subject to the same rate of 10% provided that your customers shall certify that the ink shall be used exclusively as raw materials of the said essential articles. If your customer fails to issue the certification, you will be subject to 20% sales tax, pursuant to Section 163(4) of the same Code. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner