BIR Ruling No. 265-82

October 19, 1982 BIR RULING NO. 265-82 199-a 000-00 265-82 Messrs. Sycip, Gorres, Velayo & Co. 6760 Ayala Avenue Makati, Metro Manila Attention: Mr . M . Gutierrez Tax Division Gentlemen : This refers to your letter dated July 17, 1981 requesting opinion in behalf of your clients who are subject to the manufacturer's sales tax, as to whether or not their sales to the government entities or instrumentalities, like the Food Terminal, Inc. (FTI) are subject to the withholding provisions of Republic Act No. 1051, as implemented by Revenue Regulations No. 16-77 dated October 11, 1977. In reply, I have the honor to inform you that under Section 4 of Revenue Regulations No. 16-77, only the internal revenue taxes that can be fixed, determined, computed or ascertained at the time of payment shall be deducted and withheld from money payments. Paragraph (a) of said section provides that one of the internal revenue taxes that can be deducted and withheld is the sales tax due from producers or manufacturers provided for in Sections 194, 195, 196, 197, 198, 199 and 201 of the Tax Code. It is also provided therein that the sales tax due from producers and manufacturers allowed to deduct the cost of raw materials used shall be withheld only if billed separately in the invoice. In other words, at the time of promulgation of the regulations, the sales tax can be fixed and determined at the time of payment since the sales tax is billed separately in the invoice and the method of computing said sales tax is on cost deduction method. However, at present, with the amendments introduced by Presidential Decree No. 1358, the method of computing the sales tax due on manufactured products has been changed from the cost deduction method to tax deduction method. Under the latter method, the tax on the raw materials deducted from the sales tax due on the manufactured products, can be determined only after the manufacturer files his quarterly return for percentage tax purposes. Furthermore, the fact that the gross sales tax is billed separately in the sales invoice does not necessarily mean that said sales tax is due and payable to the government in view of the sales tax credit system introduced by P.D. No. 1358 wherein sales tax on materials is deducted from the gross sales tax. Such being the case, the sales tax on the manufactured product cannot be fixed, determined and ascertained at the time of payment and, therefore, the same is not subject to the withholding provisions of Republic Act No. 1051. cdtech Very truly yours, RUBEN B. ANCHETA Acting Commissioner