Correct Business Classification of Jokson Paper (Phils.), Inc.

September 23, 1986 BIR RULING NO. 192-86 164 203-83 192-86 Gentlemen : This refers to your letters dated June 20 and July 29, 1986 requesting for and in behalf of your client, JOKSON PAPER (PHILS.), INC., a ruling on the correct classification of its business. cdtech It is represented that Jokson Paper (Phils.), Inc. is engaged in the business of purchasing large size paper products or materials in rolls from local paper mills, except for the foldcote, and cutting the same into small sizes as follows: " Coupon Bond We purchase from local paper mills in rolls, then converted to standard sizes and wrap into reams for sale. " File Folder We purchase from local paper mills or imported in rolls, then converted to big size for die cut machine. Die cut to desired sizes for file folder. " Brown envelope We purchase the paper from local mills in rolls, sheeted to big size then fed into the envelope making machine. " Yellow pad We purchase paper from local mills in rolls, then sheeted big printing size, print the line in offset machine and cut to intermediate yellow pad. " Cartolina (Bristol) We purchase paper from local mills in rolls, sheeted and cut to standard size (22 1/2 x 28 1/2). " Onion Skin We purchase paper from local paper mills, then sheeted and cut to standard size. " Chipboard We purchase paper from local mills, the paper sheeted already to be used by us and our customers as back covers for intermediate yellow pad. " Claycoated Board We purchase paper locally in rolls, sheeted to standard size (31 x 43), to be used for notebook covers by our customers. " Mimeograph/Groundwood/white wove We purchase paper from local mills in rolls, sheeted and cut to standard size (8 1/2 x 11; 8 1/2 x 13). " Bookpaper We purchase paper from local paper mills in rolls, cut and converted to printing and commercial sizes in making of quality notebooks and books by our customers. " Foldcote We import paper from United States of America, in rolls, then converted it to printing sizes for the printing of various packaging materials by our customers. " Newsprint We purchase paper from local paper mills in rolls, sheeted and converted to standard size for printing of books and various reading materials by our customers." These cut papers are then sold to customers such as bookstores and printers. In reply, please be informed that based on the abovementioned facts, your client is a mere dealer of paper products subject to the annual fixed tax of P200.00 and to the 1.5% subsequent sales tax imposed under Sections 161(1) and 164, both of the Tax Code, as amended. However, with respect to the making of brown envelop and yellow pad, your client is considered a manufacturer. Accordingly, it is subject to an annual fixed tax of P200.00 under Section 161(1) of the Tax Code and to the 10% sales tax on the manufactured yellow pad and 20% sales tax on the manufactured brown envelop under Sections 163(2)(j) and 163(4) of the same Code. Moreover you shall be subject to an advance sales tax of 20% on your importation of paper from the United States in rolls pursuant to Section 162(c) in relation to Section 163(4) of the Tax Code, as amended. When you sell said imported foldcote paper, it is subject to the 20% original sales tax based on the gross selling price thereof. However, the sales tax due shall be reduced by the amount of advance sales tax paid on the importation. (Rev. Reg. Nos. 5-86 as amended dated Dec. 27, 1986). Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue TAN: T5150-J0923-A-4