Imported Articles Used as Raw Materials in the Manufacture of Essential Articles are Subject to 10% Advance Sales Tax

September 2, 1987 BIR RULING NO. 260-87 164 278-86 260-87 Gentlemen : This refers to your letter dated April 29, 1987 requesting a ruling as to the rate of advance sales tax payable by you on your importation of the following products with their corresponding end-uses: Name of Items Uses 1. Vitamin A500 Veterinary 2. Vitamin A250 Pharmaceutical 3. Citric Acid Pharm./Confectionary 4. Sulfamitacin Food/Pharmaceutical 5. Caustic Potash Paper/Food 6. Monoethanol Amine Textile/Pharm./Rubber Surfactant 7. Diethanol Amine Textile 8. Brime Shrimp Prawn Culture 9. Potassium Nitrate Mango Inducer 10. Caustic Soda Textile/Pharm./Water Treatment In your letter dated July 23, 1987, you presented that the aforesaid chemicals for textile processing are actually used for clothing 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 product, except when such material is taxed at a lower rate. [Section 163(2), Tax Code, as amended by Executive Order No. 36] Consequently, since the above-mentioned products are used as raw materials in the production or manufacture of essential articles enumerated in Section 163(2) of the Tax Code, the same shall be taxed at the rate of 10%. In such case, the purchasers shall certify to you as importer, that the articles shall be used exclusively in the manufacture or preparation of any of the said essential articles. If the purchasers fail to issue the certification, the raw materials considered as non-essential and ordinary articles shall be taxed at the rate of 30% and 20%, respectively. On the other hand, if the raw materials used in the manufacture of finished articles considered as ordinary, then the materials considered as non-essential and ordinary, shall likewise, be taxed at the rate of 30% and 20%, respectively. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner