Advance Sales Tax on Imported Jute Bags or Fiji Cloth

June 3, 1959 BIR RULING NO. 284-59 Mr. Carlos B. Hilado Attorney-at-Law 210 Ayala Bldg., Manila RE: Victorias Milling Co . , Inc . S i r : This is with reference to your letters, dated April 29 and May 11, 1959, requesting the reconsideration of BIR Ruling No. 116, series of 1959, subjecting to the advance sales tax imported jute bags or fiji cloth used as containers of sugar for domestic sale or consumption. You invoked BIR Rulings Nos. 105.012 dated July 1, 1948 and 105.02 dated February 29, 1952. Said rulings are reproduced as follows: " Imported Fiji cloth to be used as containers of sugar . Imported Fiji cloth to be used by sugar centrals as containers of sugar which is taxable under section 189 of the Tax Code is exempt from the compensating tax. (Ruling BIR 105.012 dated July 1, 1948)." [Cited in 190(53), page 373, Vol. II, Annotations & Jurisprudence on the National Internal Revenue Code, as amended, by Jose Araas.] ". . ., it appearing that the Fiji cloth imported by you are not for resale; that the same will not be used as raw material in the manufacture of articles subject to tax under sections 184, 185 and 186 of the National Internal Revenue Code; and, that the same will be used as containers, of sugar subject to tax under section 189 of the Tax Code, your request for exemption from the payment of the compensating tax on your shipment of 100 bales of Fiji cloth is hereby granted. "The said shipment is likewise not subject to the advance sales tax imposed under section 183(B) of the National Internal Revenue Code because said tax is intended to apply only to importers taxable under sections 184, 185 and 186 of the National Internal Revenue Code. Inasmuch as your business is taxable under section 189 of the Tax Code, your importation of Fiji cloth for use as containers of sugar is not subject to the advance sales tax prescribed in section 183(B) of the Tax Code." (Ruling, BIR File No. 105.02 dated February 29, 1952, addressed to the Victorias Milling Co., Inc.) Please be informed that the afore-cited rulings are deemed revoked by recent BIR Rulings Nos. 116 and 219, both series of 1959, which state that jute bags imported by manufacturers for use as containers of products subject to tax under Section 189 of the Tax Code are subject to the advance sales tax if said products are for domestic sale and consumption. You will note from the new rulings that imported articles used in the manufacture or preparation of articles for consignment abroad and are to form part thereof is not in question because the same are exempt from both the compensating and advance sales taxes. As a matter of fact, we have no controversy with you on this point. You contend that "there is no difference between the exemption from payment of compensating tax granted manufacturers for imported commodities used in domestic market and for imported articles used in the manufacture or preparation of articles for consignment abroad." We cannot subscribe to such contention. Precisely, the pertinent proviso of Section 190 of the Tax Code which states ". . .: Provided , however , That merchants, importers and manufacturers, who are subject to tax under sections one hundred eighty-four, one hundred eighty-five, one hundred eighty-six, or one hundred eighty-nine of this Title, shall not be required to pay the tax herein imposed where such commodities, wares, or merchandise purchased or received by them from without the Philippines are to be sold, resold, bartered, or exchanged or are to form part thereof: . . ." exempts the merchants, importers, and manufacturers from the compensating tax imposed in the same section because imported commodities or articles to be used in the manufacture or preparation of articles for sale, resale, barter or exchange, are subject to the advance sales tax prescribed by section 183(b) of the Tax Code, as amended. The "Central Azucarera Don Pedro vs. Central Bank of the Philippines" case, G.R. No. L-7731, Sept. 29, 1958, is not relevant to your case. This case involves importation which was re-exported. Naturally, the importation was exempted from the special import tax, pursuant to Republic Act No. 601. As a matter of fact, this Office has been exempting from the advance sales or compensating taxes imported containers used to contain sugar for export and actually exported abroad. In view of the foregoing, your request for reconsideration of BIR Ruling No. 116, series of 1959, has to be, as it is hereby, denied. cdtech Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue