Rate of Sales Tax for Packaging Materials and Imported Materials Used in the Manufacture of Said Packaging Materials

November 12, 1986 BIR RULING NO. 246-86 163 (2) 165-86 246-86 Gentlemen : This refers to your letter dated August 27, 1986 stating that your company is engaged in the manufacture of plastic and aluminum packaging materials for the following companies with their corresponding products: Universal Robina Corporation Chippy, Cheese curls, etc. Purefoods Corporation Hotdogs Magnolia Phils. Popsicles, Pinipig crunch Newton Food Products Biscuits RFM Corporation Chicken New London Biscuits Sunflower Crackers May's Food Products Chocolates Leslie Corporation Clover Chips Monde Denmark Nissin Biscuits Nissin Soda Crackers Brooks Phils. Sportswear CFC Corporation Biscuits Besuto Food Corporation Prawn Crackers Royal Food Products Voltes V Curls Island Biscuits Corporation Curls Ideal Macaroni & Spaghetti Sun Mac Macaroni Producers Food Int'l. Dried Mangoes Honai Food Corporation Pritos Ring Liwayway Marketing Rinbee Cheese Sticks Nutritive Snack Food Corporation Pee Wee Crunchy BBQ Marigold Commodities Corporation Tamarind that each company provides its own design and specification for its products, and that you are also importing the raw materials needed in the manufacture of the said packaging materials like resins, aluminum foil and wire, paper and printing ink. Based on the foregoing, you now request a ruling as to the rate of sales tax you are to pay both for the packaging materials and the imported materials to be used in the manufacture of said packaging materials. In reply, please be informed that 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 products, except when such material is taxed at a lower rate. (Section 163(2), Tax Code as amended by Executive Order No. 36). This Office has ruled that containers are raw materials of the manufactured articles. (BIR Ruling No. 66-027 dated June 29, 1966). Accordingly, since the finished products of your various customers are all classified as essential articles subject to 10% sales tax, the packaging materials in the form of plastic and aluminum wrappers (samples attached) which that company manufactures are subject to the same rate of 10% sales tax, provided that the customers shall certify to Solvic Industrial Corporation that the plastic and aluminum wrappers shall be used exclusively as packaging materials for the finished products. On the other hand, your importation of resins, aluminum foil and wire, paper and printing ink which are the raw materials in the manufacture of the plastic and aluminum packaging materials will also be subject to the advance sales tax at the same rate of 10% provided that you as importer/manufacturer shall certify to this Bureau that your aforesaid importation shall be used exclusively in the manufacture of said packaging materials. (Section 163(2), Tax Code). If you fail to issue the certification, the above importation will be subject to 20% advance sales tax. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue