Imported Galvanized Iron Wire Used in the Production of Essential Articles is Subject to 10% Sales Tax

September 22, 1987 BIR RULING NO. 298-87 163 (2) 285-86 161-86 298-87 Gentlemen : This refers to your letter dated September 14, 1987 requesting a ruling as to whether galvanized iron wire can be classified as essential article subject to 10% sales tax since the same is used not only to tie the steel bar but also as a raw material in making "Lingueta" (roofing tire wire), roofing nails, flat head nails, rivets, etc. (samples attached) all of which are used in the construction of low cost houses. In reply, please be informed that under Section 163(2) of the Tax Code as amended by Executive Order No. 36, 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. Consequently, since galvanized iron wire is used in the production or manufacture of nails considered as essential articles [(Section 163(2)(k), Tax Code as amended)], the same shall be taxed at the same rate of 10% provided that the purchasers thereof shall certify to you as manufacturer that the said galvanized iron wire shall be used exclusively in the manufacture of nails. If the purchasers fail to issue the certification, the aforesaid material will be subject to 20% sales tax. adc Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner (Officer-In-Charge)