Rate of Sales Tax Applicable to Wander (Phil.). Inc.'s Purchase of Packaging Materials Exclusively Used on Its Products

November 10, 1986 BIR RULING NO. 241-86 163 165-86 241-86 Gentlemen : This refers to your letter dated July 7, 1986, requesting in behalf of your client, Wander (Philippines) Inc. a ruling as to the correct rate of sales tax applicable to its purchase of packaging materials which it exclusively uses on its products. It is represented that Wander (Philippines) Inc., is a manufacturer of beverages commercially known as "Ovaltine", "Julep" and "Meritene"; that it also manufactures candy or confection called "Ovalteenies" (Ovaltine in tablet form); that the following containers, products labels, and other packaging materials for "Ovaltine", "Julep.. and "Meritene" are supplied by independent manufacturers in accordance with company designs and specification viz: 1. Glass jars and other containers for Ovaltine, Julep and Meritene Current deliveries have the name "Ovaltine", "Julep", or "Meritene" imprinted on them, some jars, however, are still imprinted with the name "Wander". It is expected that by the end of this month, all such jars will be imprinted with the name of the specific product they contain. 2. Plastic caps for Ovaltine, Julep and Meritene Same status and description as the glass jars. 3. Product Labels all are imprinted with the specific product name. 4. Corrugated boxes all are imprinted with the specific product name. That its products " Ovalteenies " are packed in a special kind of paper imprinted specifically with the name "Ovalteenies"; that the glass jars cannot be interchanged with each other because each of the beverages, i.e., Ovaltine, Julep and Meritene, is contained in specifically designed jars and containers, and that suppliers of the packaging materials and containers have been billing Wander, Inc. 20% sales tax. In reply, please be informed that Ovaltine, Julep and Meritene are beverages, hence, classified as essential articles taxable at 10% under Section 163(2) of the Tax Code as amended by Executive Order No. 36. Accordingly, the containers and other packaging materials such as glass jars, plastic caps and corrugated boxes purchased by your client are subject also to the same rate of sale tax i.e., 10% provided that your client shall certify to the suppliers that the containers and packaging materials shall be used exclusively in the manufacture of said essential articles. If your client fails to issue the certification, the containers and packaging materials shall be subject to the 20% sales tax. As regards the containers and packaging materials of Ovalteenies candies, since they are classified as other articles which are taxable at the rate of 20% under Section 163(4) of the Tax Code as amended, said containers and packaging materials are also subject to the same rate of sales tax, i.e., 20%. cdta Very truly yours, (SGD.) ROMULO M. VILLA Acting Commissioner