Tax Status of the Laguna Distillery

April 11, 1960 BIR RULING NO. 226-60 1st Indorsement Returned to the Chief, Alcohol Tax Division, Bureau of Internal Revenue, Manila, the papers bearing on the case of the Laguna Distillery of Sta. Rosa, Laguna. casia A ruling is requested whether or not the Laguna distillery, for the addition of a coloring matter to its manufactured kamote wine, is constituted a compounder. The Chief, Laboratory Section stated in his report dated January 6, 1960 that kamote wine is produced as follows: "The production of the "Kamote Special Wine" starts with camote being cooked and then mashed preparatory to fermentation by the addition of yeast. The fermented mashed camote is then charged to a pot still where it is boiled to the desired temperature until the distillate is recovered. The distilled spiritous product is what is known as "Kamote Wine" having an alcoholic strength of 50 proof. This is directly bottled for sale without the addition of ethyl alcohol, flavoring extracts or essences, and artificial coloring material." The production of the kamote wine involves, therefore, a continuous process. It does not involve any diluting or mixing. The addition of a coloring matter does not in any manner alter its quality or composition. The term compounder is defined as follows: "Compounder comprises every person who, without rectifying, purifying, or refining distilled spirits, shall, by mixing such spirits, wine, or other liquor with any materials except water, manufacture any intoxicating beverage whatever." It is clear from the definition that a compounder is one who mixes spirits, wine or other liquor with any material except water to produce a different intoxicating beverage. The phrase "any material except water" should not be interpreted as referring to materials that go into the substance of the mixture. As stated by the Chief, Laboratory Section, the coloring matter which the Laguna Distillery proposes to add to its products will not alter the substance of the kamote wine. Under the circumstances, this Office believes that one is not, for the mere addition of a coloring matter to its products, constituted a compounder. It remains a distiller. Moreover, the taxpayer do not actually effect any mixture or dilution to produce its products. prcd (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue