Articles Deductible from the Gross Selling Price for Sales Tax Purposes

June 22, 1959 BIR RULING NO. 313-59 Ross Packing Company, Inc. Room 407, Trade & Commerce Bldg. Juan Luna, Manila Attention : Mr . Conrado Alabastro Gentlemen : Reference is made to your letter dated June 3, 1959, wherein you requested for a ruling as to which of the enumerated raw materials used in the manufacture of your products are deductible from the gross selling price for sales tax purposes. cdll In the letter it appears that the Rose Packing Company is a tax-exempt industry and duly authorized by the Secretary of Finance. It also appears that said Company was granted the privilege to import raw materials, free of tax, to be used exclusively in the manufacture of such products. Among the raw materials granted exemption are the following: 1. Spices 5. Small white beans 2. Powdered skim milk 6. Tomato Paste 3. Sodium salt 7. Prague Salt 4. sodium nitrate 8. Cowfores In reply thereto, I have the honor to inform you that the cost of raw materials imported tax-free by tax-exempt industries prior to January 1, 1959 and used in its manufacture on or after said date is not deductible from the gross selling price of the manufactured products; but those imported on or after said date are deductible. With respect to the following locally purchased raw materials, to wit: 1. Chicken 5. Pepper 2. Port 6. Vinegar 3. Ordinary salt 7. Local fruits 4. Onions the same are not deductible because they have not been taxpaid, they being agricultural products and therefore exempt from the sales tax pursuant to section 188(b) of the National Internal Revenue Code. The only items deductible are sugar and empty cans which are both locally purchased. The cost of sugar is deductible from the gross selling price of such manufactured products because the sugar used has already been taxed under section 189 of the Tax Code and considering that your products, as shown in the "Revised Schedule of Prices", are taxable under section 186 of said Code, the cost of the sugar is therefore deductible pursuant to the proviso thereof. The cost of empty cans are also deductible from the gross selling price of such manufactured products for the reason that both the raw material (empty cans) and the manufactured product are taxable under section 186 also in accordance with the proviso thereof. Generally, it may be stated that the cost of raw materials whether imported or locally purchased is deductible from the gross selling price of the articles manufactured therefrom if they had been previously taxed under the same section of the Tax Code to which the articles manufactured therefrom belong. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue