Internal Revenue Case of Williams Equipment Company, Ltd

April 2, 1959 BIR RULING NO. 172-59 The Regional Director BIR Regional District No. 3 M a n i l a S i r : There is returned to you the entire docket bearing on the Internal revenue case of Williams Equipment Company, Ltd. involving the proposed assessment of a total advance sales tax deficiency of P83,782.80. The proposed assessment involves, among others, a deficiency tax on freon gas and wicks. It appears that Williams Equipment is an exclusive dealer of servel gas stoves and refrigerators and parts thereof. Sometime after August 24, 1956, or after the effectivity of Republic Act No. 1612, the taxpayer imported freon gas and wicks. The shipment was withdrawn from customs custody after the payment of 7% advance sales tax. It is now contended that the rate of tax should have been 30% because freon gas and wicks are parts and accessories of refrigerators and gas stoves. In the re-investigation of this case conducted by the Investigation Division the following information was gathered, to wit: "Freon gas is a chemical compound. It is imported in cylinders, of one (1) ton capacity. From these cylinders, the freon gas is transferred into smaller cylinders of 50 lbs., 125 lbs., etc. by a machine, so that the same can be easily utilized without such inconvenience than when the freon gas is in its original cylinders. Some of this freon gas in smaller containers are sold to various dealers. They are sold to manufacturers of mosquito bums and manufacturers of hair sprays. In both cases, the freon gas serves as a means of propulsion or a means of expelling the chemicals of a mosquito bum or hair spray. This freon gas is likewise sold to movie companies for use as an ingredient in cleansing fluids for cleaning films. "In refrigerators, it serves as a refrigerant. From the cylinder, it is charged into a compressor by machine. After the compressor is sufficiently charged, the connections are removed and the compressor is tightly sealed. Once inside the refrigerator, this freon gas circulates throughout the system by the help of a motor in the refrigerator. This motor is so made that the freon gas circulated throughout the system is again recovered by the same and is pumped anew. The freon gas stays in the refrigerator for a normal period of three years unless sooner expelled through leakage in the system. "Wicks are imported in boxes. Each box contains wicks measuring four (4) feet. They are cut into smaller pieces for use in servel gas stoves." Considering the nature and uses of freon gas and the wicks in question, we have come to the conclusion that they are not parts and accessories of refrigerators and gas stoves or of any other article. You are, therefore, advised to modify the assessment accordingly. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue