Advance Sales Tax Imposable on Imported Synthetic Resins Used in Manufacture of Polyprophylene Bags and on Sale of Manufactured Polyprophylene Bags

November 6, 1987 BIR RULING NO. 353-87 163 (2) 012-87 353-87 Gentlemen : This refers to your letter dated October 14, 1987 stating that you import synthetic resins as raw material in the manufacture of polyprophylene bags and that the bags will be used as packaging for sugar and feeds; thus, you request confirmation of your opinion that your importation of synthetic resin is subject to 10% advance sales tax; whereas your sale of manufactured polyprophylene bags is subject to 10% sales tax. The users of your manufactured polyprophylene bags, viz: Victorias Milling Co., Inc., Vicmico, Negros Occidental and San Miguel Corporation/Manila B-Meg Feed Plant, 6766 Ayala Avenue, Makati, Metro Manila, have certified that the bags will be used exclusively as packaging for sugar and feeds. In reply, please be informed that animal feeds is subject to 10% percentage tax under Section 163 (2)(1) of the Tax Code. The same provision also states that any article subject to the original sales tax, when used as raw material in the manufacture or preparation of essential articles, shall be taxed at the same rate as the finished product except when such material is taxed at a lower rate under Section 163(3) of the same Code. This Office has ruled that containers are raw materials of manufactured articles. (BIR Ruling No. 66-027 dated June 29, 1966) Accordingly, since the animal feeds produced by San Miguel Corporation/Manila B-Meg Feed Plant are classified as essential articles subject to 10% sales tax, the packaging materials which your company manufactures are subject to the same rate of 10% sales tax provided said purchaser shall certify to you that the polyprophylene bags will be used exclusively as packaging for animal feeds. Such being the case, your importation of synthetic resins which are the raw materials in the manufacture of polyprophylene bags will also be subject to 10% advance sales tax provided that you as importer/manufacturer shall certify to this Bureau that the aforesaid importation shall be used exclusively in the manufacture of said packaging materials (Section 163(2), Tax Code. If you fail to secure the certification, the above importation will be subject to 20% advance sales tax. (BIR Ruling No. 246-86 dated November 12, 1986). However, with respect to certain products which are subject to the 3% miller's tax under Section 168 of the Tax Code, e.g., sugar, etc., the rule is that the importation of raw materials used in the manufacture of finished products on which miller's tax is imposed is subject to 20% advance sales tax. (BIR Ruling No. 163(c)-000-00-157-87) Such being the case, your importation of synthetic resin used as raw materials in the manufacture of polyprophylene container bags for sugar shall be subject to the 20% advance sales tax pursuant to Section 162(c) in relation to Section 163(4) of the Tax Code. When said manufactured packaging materials/containers are sold to Victorias Milling Corporation, you are subject to 20% sales tax. However, if the 20% sales tax is separately billed in the invoice to be issued by you it can be claimed by Victorias as tax credit against its miller's tax liability pursuant to Section 168 of the Tax Code, as amended by P.D. Nos. 1991 and 1994. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner