Non-deductibility of the Cost of Raw Materials Imported Tax-Free by Tax-Exempt Industries

October 21, 1959 BIR RULING NO. 543-59 Mr. Philip K. Rice c/o Pioneer Insurance & Surety Corp. 212 Quisumbing Bldg. Dasmarias M a n i l a S i r : This is with reference to your letter dated February 27, 1958, wherein you requested us to issue a ruling on the following query: "Suppose Company A is a tax exempt industry (manufacturing concern). Company A imported raw materials in the year 1958 and therefore those raw materials paid no taxes. In the year 1959 Company A is no longer a tax exempt manufacturing concern and they used the raw materials imported in 1958. The question is, "Can Company A claim as deduction for percentage tax purpose the raw materials used (free of tax)?" 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 subsequently used by them in their manufacture on or after said date is not deductible, for purposes of the sales tax, from the gross selling price of the finished products, pursuant to the ruling of the Secretary of Finance. cdll Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue