BIR Ruling No. 239-61

July 25, 1961 BIR RULING NO. 239-61 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants 100 San Luis, Manila Gentlemen : Reference is made to your letter dated May 17, 1961, requesting approval of the proposed method of computing the sales tax to be paid by your clients, The following illustration is given in your letter. cdti "For purposes of illustrating the method proposed to be adopted, we shall assume the following facts: For the first month, the company has a gross sale of P2,000.00; it purchased P500.00 worth of raw materials locally; imported P500.00 worth of raw materials for which it paid P35.00 as advance sales tax. Under these assumed, the sales tax is proposed to be computed as follows: "Gross selling price P2,000.00 Less Cost of locally purchased materials 500 Amount subject to tax P1,500.00 ======== 7% sales tax P105.00 Less Advance sales tax paid 35 Sales tax due for the month P70.00" ========= In reply, I have the honor to inform you that the above computation is not in accordance with law hence, the same cannot be authorized by this Office. The law authorizes the manufacturer to deduct the cost of raw materials used, not the sales tax paid thereon, from the gross selling price of the manufactured articles. While it is true that in your letter the result of both computation is the same yet, this may not be true in all cases. aisadc In view thereof, it is regretted that this office cannot authorize the use of the proposed computation of the sales tax due from your clients. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue