Sale of Tin Cans to Customers Engaged in the Manufacture of Essential Articles Subject to 10% Sales Tax

November 10, 1986 BIR RULING NO. 235-86 163 (2) 165-86 235-86 Gentlemen : This refers to your letter dated July 22, 1986 stating that your company is engaged in the manufacture of tin cans, that as such you are at present charging your customers 20% sales tax in accordance with Section 165 of the Tax Code, as amended by P.D. 1991 but that some of your customers whose products fall under the classification of essential articles and are taxed at 10% refuse to pay the 20% sales tax. cdtech You now request an opinion as to whether the sale of tin cans by your company to its customers engaged in the manufacture of essential articles is subject only to 10% sales tax. In reply, please be informed in the affirmative. Under Section 163(2) of the Tax Code as amended by Executive Order No. 36 which took effect on August 1, 1986, any article subject to the original sales tax, when used as a raw material in the manufacture or preparation of essential articles, shall, subject to certain conditions, be taxed at the same rate as the finished product, except when such material is taxed at a lower rate. This Office has ruled that containers are raw materials of the manufactured articles. (BIR Ruling No. 66-027 dated June 29, 1986). Accordingly, since the finished products of your various customers are all classified as essential articles subject to 10% sales tax, the tin cans which that company manufactures are subject to the same rate of 10% sales tax, provided that the customers shall certify that the tin cans shall be used exclusively as containers of said essential articles. (Section 6.II, Revenue Regulations No. 11-86). If your customers fail to issue the certification, you will be subject to 20% sales tax, pursuant to Section 163(4) of the Tax Code. cd Very truly yours, (SGD.) ROMULO M. VILLA Acting Commissioner