Taxability of the Purchase of Waste/Reject Acetate Tow

December 20, 1984 BIR RULING NO. 187-84 199 (a)-000-00-187-84 Gentlemen : This refers to your letter dated July 20, 1984 requesting authority to purchase waste/reject acetate tow from cigarette manufacturers and use the same as fillings in the manufacture of stuffed toys, pillows, or other similar items. Acetate tow, the fibrous material found in the rods of filter-tipped cigarettes, is a synthetic fiber made of cellulose acetate. (Chemical Process Industries, Shreva, Chapter 34, page 743) Since acetate tow is used solely in the manufacture of articles subject to specific tax, it is not subject to percentage tax pursuant to Section 195(b) of the Tax Code. But after it is adhered to the cigarette, the whole becomes the finished product subject to the specific tax thus, its importation, manufacture, use, sale or disposition is subject to BIR supervision. The wastes (dirty, odorous, stained and unsanitary) are then disposed off by burning following the manner of disposition for wastes paper prescribed under Cigarette Paper Regulations No. V-7 dated December 1, 1950 and in accordance with Revenue Memorandum Order No. 16-63. However, in view of your representation that wastes acetate tow are dirty, odorous, stained and unsanitary, therefore, unfit for human use and considering their economic value to "NACIDA registered industries as stuffing materials for dolls, toys, etc., you are hereby authorized to purchase from the cigarette manufacturers their wastes acetate tow and resell these to the NACIDA registered industries as stuffing materials for dolls, toys, etc., subject to the following terms and conditions: 1. The cigarette and/or filter manufacturers should make proper application with the Specific Tax Service, Bureau of Internal Revenue, to dispose of their wastes acetate tow in accordance with Revenue Memorandum Order No. 16-63. 2. A representative of the Bureau of Internal Revenue shall inspect and certify to the fact that the wastes acetate tow are not fit for human use. 3. The cigarette and/or filter manufacturer should pay the 10% advance sales tax based on the landed cost thereof plus 25% mark-up under Section 193(b) in relation to Section 199(a), both of the Tax Code, as amended by Executive Order No. 883. Moreover, as the importer of the acetate tow, the said manufacturer are subject to the fixed tax of P2,000 pursuant to Section 192(3)(t) of the Tax Code as amended. The net taxable income shall also be subject to income tax under Section 24(a) of the same Code. atdc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner