Purchase of Alcohol Without the Prepayment of Specific Tax

June 23, 1988 BIR RULING NO. 260-88 134-00 000-00 260-88 Gentlemen : This refers to your letter dated June 6, 1988 requesting reconsideration of BIR Ruling Nos. 156-88 and 166-88 reading: cdtech ". . . the excise tax imposed on certain goods is in addition to the value-added tax. (Section 126, Tax Code, as amended by Executive Order No. 273) The 10% value-added tax on the alcohol shall be based on the gross selling price, excluding the VAT. The excise tax or the specific tax, if any, on said alcohol shall form part of the gross selling price. [Section 100(d), Tax Code, as amended] Accordingly, even if the withdrawal of the alcohol is under bond, i.e., without prepayment of the specific tax, still in the computation of the 10% value-added tax due thereon, the gross selling price shall include the specific tax. This is so because under the joint bond filed by the distiller and the rectifier, the latter shall pay the specific tax due on the rectifier alcohol." (Section 134, Tax Code) It is represented that you are a registered rectifier-compounder and a grantee of Rectifier's Permit designated as Assessment Nos. A-1-3 (Manila) and A-1-30 (Cebu); Compounder's permit designated as Assessment Nos. A-1-3A (Manila) and A-1-12A (Cebu); and that as a rectifier permittee, you are allowed to purchase alcohol without the prepayment of specific tax subject to your setting up a joint bond with the distiller. You contended that since specific tax does not form part of the price in your purchase of alcohol, it should not also form part of the tax base in computing the VAT to be paid by the distiller. In reply, please be informed that your request is hereby granted. Under Section 2(k) of Revenue Regulations No. 5-87 reading: "Sec. 2. . . . (k) "Gross selling price" means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods, excluding the value-added tax. The excise tax, if any, on such goods shall form part of the gross selling price . It shall include other charges such as packaging, delivery and insurance, even if these amounts are separately billed or invoiced." (Emphasis supplied) the excise tax, if any, shall form part of the gross selling price. In other words, if the selling price does not include excise tax, it shall not form part of the gross selling price for purposes of computing the VAT payable by the distiller. The gross selling price of under bond alcohol sold by the distiller to you (rectifier-permittee) does not include excise tax because the condition of the bond provides that you will pay the excise tax on your finished product which is rectified alcohol. Actual payment of the excise tax on under bond alcohol takes place only upon your transfer of the rectified alcohol from the rectifier's tank to the compounder's tank under B.I.R. supervision. (See BIR Ruling No. 215-88) This revokes BIR Ruling Nos. 156-88 and 166-88) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner