Rate of Sales Tax Payable on Sale of Said Cartons/Boxes for Toilet Soaps and Toothpaste to Colgate-Palmolive

December 29, 1986 BIR RULING NO. 285-86 163 (2) 246-86 285-86 Gentlemen : This refers to your letter dated October 10, 1986, stating that the company manufactures individual cartons/boxes for various brands of toilet soaps and toothpaste; and that you want to know the rate of sales tax payable by you on your sale of said cartons/boxes for toilet soaps and toothpaste to Colgate-Palmolive and also the rate of advance sales tax on your importation of paperboard which will be used in the manufacture of said boxes/cartons. 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 [(Sec. 163(2), Tax Code, as amended by Executive Order No. 36)]; This Office has ruled that containers are considered raw materials of the manufactured articles. (BIR Ruling No. 66-027 dated June 29, 1966). Accordingly, since toilet soaps and toothpaste are classified as essential articles subject to 10% sales tax (Sec. 163(2)(i), Tax Code, as amended), the cartons/boxes which that company manufactures are subject to the same rate of 10% sales tax, provided that Colgate-Palmolive shall certify to you that such cartons/boxes shall be used exclusively as containers for such finished articles. (Sec. 163(2), Tax Code as amended; Sec. 6.II, Rev. Regs. No. 11-86). If the purchaser (Colgate Palmolive) fails to issue the certification, you will be subject to 20% sales tax. On the other hand, your importation of paperboard which will be used in the manufacture of cartons/boxes will be subject to advance sales tax at the same rate of 10% provided that you as manufacturer/importer shall certify to this Bureau that your said importation will be used exclusively in the manufacture of said cartons/boxes. If you fail to issue the certification, you will be subject to 20% advance sales tax. This will authorize the Bureau of Customs to release to your company your importation of paperboard upon payment of the corresponding 10% advance sales tax. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue