Tax Liability of a Printer and at the Same Time Engaged in the Business of Importing Paper and Bags

July 1, 1960 BIR RULING NO. 359-60 Mr. Elisco C. Reyes Certified Public Accountant 1185 A. Mabini, Ermita M a n i l a S i r : Reference is made to your letter dated May 30, 1960, requesting information as follows: cdi "I have the honor to request information, on behalf of my clients, as to whether or not the cost of imported cellophane paper or cellophane bags could be deducted by a manufacturer of food products who purchase said cellophane papers or bags from the importer to be used by it as wrappers or containers for its products, under the following circumstances: "The Manufacturer of food products buys these imported cellophane papers or bags from a printer who is also the importer thereof, and who also does an additional job of printing the trade name of said manufacturer on the said cellophane papers or bags for which the printer charges the cost of the cellophane as well as the cost of printing against the manufacturer. Inasmuch as the cellophane papers or bags are already tax-paid when originally imported by the printer, may not the manufacturer be allowed to deduct the cost of said bags for the purpose of arriving at the net taxable sales? In answer thereto, I have the honor to inform you that if the case be that the printer is at the same time engaged in the business of importing those paper and bags, in which case the tax that must have been paid thereon before the release thereof from custom custody is the advance sales tax, then the costs of said articles, but exclusive of the cost of printing, are deductible from the gross selling price of the food products wrapped or contained therein. On the other hand, if the printer is engaged in the business of printing only, then the costs of the paper and bags are not deductible, because in that case what has been paid by him on these articles is only the compensating tax and not the advance sales tax. In this connection, it may be stated that in the first case abovementioned, two sets of sales or commercial invoices or receipts should be prepared and issued by the importer-printer, one for each sale of the paper and bags and another for each printing job done. Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue