Taxability of Tax-Exempt Industries

May 5, 1959 BIR RULING NO. 229-59 Mr. Gonzalo G. Mendoza P. O. Box 1827 M a n i l a S i r : With reference to your letter dated April 24, 1959 in connection with the taxability of tax-exempt industries, I have the honor to inform you as follows: cdi 1. The cost of locally purchased raw materials used by tax-exempt industries in their manufacture is deductible, for purposes of the sales tax, from the fross selling price of the manufactured products if they have been previously taxed under the same section under which the manufactured articles are subject. 2. The cost of raw materials imported beginning January 1, 1959 is deductible in full provided that 10% of the collectible advance sales tax had been paid pursuant to Republic Act No. 901. The deductible cost consists of the landed cost plus the applicable mark-up. 3. The deductibility of the cost of raw materials imported prior to January 1, 1959 is pending decision by the Secretary of Finance. 4. The amount of sales tax payable by tax-exempt industries during the year 1959 is 10% of the tax payable by those who are not tax-exempt. 5. In determining the deductible cost of imported raw materials the full mark-up is considered. 6. Pending the decision of the Secretary of Finance, it is advisable not to deduct the cost of raw materials imported prior to January 1, 1959 in order to avoid liability for the corresponding penalties in the event the Secretary of Finance should decide against deductibility. aisadc Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue