10% VAT Impose Don Johnson Baby Oil

November 29, 1988 BIR RULING NO. 562-88 100 135-81 562-88 Gentlemen : This refers to your letter dated September 29, 1988 requesting in behalf of your client, Johnson & Johnson (Phils.), Inc. for a ruling to the effect that its product, Johnson's Baby Oil is subject to 10% sales tax prior to the effectivity of the VAT on January 1, 1988 and became subject to the 10% value-added tax after said date. It appears that in an unnumbered ruling dated January 23, 1974, this Office ruled that Johnson's Baby Oil was subject to 7% sales tax; and that in BIR Ruling No. 135-81, this Office issued a ruling to the effect that mineral oil, which is used as raw material in the manufacture of baby oil, is subject to 10% advance sales tax based on the landed cost plus 25% mark-up pursuant to Section 199 of the Tax Code of 1977 as amended. In reply, please be informed that the above 1974 ruling classified the aforesaid product as an ordinary article falling under "other articles", pursuant to then Section 186 of the Tax Code. As long as the product manufactured by your client as of January 1, 1988 is the same product which is the subject of the said ruling, said product shall be classified, for sales tax purposes, as an ordinary article during said period. However, under P.D. No. 1358 effective April 21, 1978, the rate of tax on said product was increased to 10% pursuant to then Section 199 of the Tax Code. Thereafter, P.D. No. 1991 effective January 1, 1986 increased the rate of sales tax to 20%. Although said Section 199 was later amended by P.D. Nos. 1994 and 2006 and later by Executive Order No. 36 renumbering it as Section 163, the rate of sales tax payable for "other articles" remained at 20%. In other words, your client's product, Johnson Baby Oil, is subject to 10% sales tax up to December 31, 1985 but became subject to 20% sales tax from January 1, 1986 up to December 31, 1987. cdtech Upon the effectivity of the VAT law on January 1, 1988 which replaced the sales tax provisions of the Tax Code, among others, said Johnson Baby Oil becomes subject to 10% value-added tax, pursuant to Section 100 thereof. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner