Non-deductibility of Cost of Raw Materials Used in the Manufacture of "Heating Pads and Solutions"

July 29, 1959 BIR RULING NO. 359-59 Mr. Jerome Lim 11 Orchid Street Cebu City S i r : In reply to your letter dated May 11, 1959, I have the honor to inform you that the cost of raw materials such as copper sulphate, ammonia water, aluminum powder, potassium chlorate, diathomaceous earth and talcum powder used for the manufacture of "heating pads and solutions" are not deductible from the gross selling price of said manufactured articles, the reason being that said raw materials are ordinary items subject to 7% sales tax, pursuant to section 186 of the Tax Code, while the so-called "heating pads and solutions" are obviously beauty parlor equipments and accessories and therefore, subject to 50% sales tax, pursuant to section 184 of the same Tax Code. As a rule, it is stated that the cost of raw materials are deductible if they have been previously taxed at the same rate to which the articles manufactured therefrom are subject. Beauty parlor equipments and accessories are subject to 50% sales tax, pursuant to section 184(e) of the Tax Code. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue