Bureau of Local Government Finance Opinion

August 11, 2000 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. E. C. Alcantara Tax Division SGV & Co. 6760 Ayala Avenue 1226 Makati City Sir : This has reference to your letter dated May 26, 2000 requesting in behalf of your client, CALIFORNIA MANUFACTURING CO., INC. (CMC) confirmation that the products manufactured by the said Company such as pickles, sinigang powder, hot pot, spaghetti meat sauce, knorr cubes, chinese soups and cream soups and the variants of said products, fall under the category of "locally manufactured, processed or preserved food" and therefore should be considered as essential commodities for local tax purposes, pursuant to Section 143 (c) (2) of the Local Government Code of 1991 (LGC). Representations are made that CMC, a domestic corporation with main manufacturing plant located at South Superhighway, Paraaque City, is a leading producer of processed food ranging from pasta, instant soups and seasoning. It is represented further that all its products are locally manufactured and in the case of the products mentioned above, the raw materials or basic ingredients of such products are considered essential commodities under Section 143 (c) of the LGC. To support its claim, CMC explained in brief the processes undertaken on said products as follows: Pickles The manufacture of pickles involves the process of curing and pasteurizing cucumber in order to transform it into preserved form. After the cucumber has been processed and pasteurized, it is packed in glass jars, capped and stored for distribution. HTCISE Sinigang Powder Sinigang powder is processed first, by drying and pulverizing tamarind to convert it to powder form and second, by mixing the tamarind powder with other raw products, namely: pepper, shrimp powder, soy sauce and tomato powder. After the essential components are mixed, the product is packed and stored for delivery. Hot Pot The main ingredient in the manufacture of hot pot is rice. The following ingredients are then added to the rice to create the different hot pot variants: chicken flavor mix (for arrozcaldo); beef meat and beef flavor (goto) and champorado flavor mix (champorado). The resultant mixture for each variant is placed in individual cups, sealed, labeled, shrink wrapped and placed in cartons for delivery. Spaghetti Meat Sauce Spaghetti meat sauce is manufactured by combining and cooking beef meat, pork belly, tomato, sugar, starch, garlic, onions, salt, palm oil and cheese. The cooked preparation then goes through a process involving seaming, retorting and cooling, before the product is placed in tin can and packed for delivery. Knorr cubes The basic ingredients in the manufacture of knorr cubes are the following: onion, garlic, black pepper, soy sauce, yeast extract, cornstarch, salt, and sugar. The following ingredients are then added to the basic ingredients to create the different knorr cubes variants: chicken meat and flavor (for chicken cube); pork meat and flavor (pork cube); shrimp flavor (shrimp cube) and tamarind powder (tamarind cube). The resultant mixture is then processed into the familiar cube form. The cubes are then individually wrapped and placed in cartons for delivery. ACTESI Chinese Soups Chinese soups are manufactured using the following basic ingredients: corn kernels, palm oil, cornstarch, yeast extract, soy sauce, milk, onion and sesame oil. The following ingredients are then added to create the chinese soup variants: chicken meat and flavor (for Chicken & Corn); sliced mushrooms, pork meat and green peas (Pork & Mushroom); crabmeat and shrimp flavor (Crab & Corn); pork chicharon and chicken flavor (Nido Oriental); sliced mushrooms, seaweeds, tomato flakes and worcesterchire sauce (Hot & Sour). The ingredients are processed into powder form and final product placed in flexible pouches and then into carton for delivery. Cream Soups The basic ingredients for cream soup are the following: cornstarch, flour, yeast extract, milk powder, monosodium glutamate and palm fat. The following ingredients are then added to create the cream soup variants: chicken meat and flavor (for Cream of Chicken); corn kernels and flavor (Cream of Corn); asparagus tips and powder (Cream of Asparagus); sliced mushrooms (Cream of Mushroom). The ingredients are processed into powder form and the resultant product packed in flexible pouches and placed in shipping cartons for delivery. Section 143 (c) of the Local Government Code of 1991 states: "SEC. 143. Tax on Business. The municipality may impose taxes on the following businesses: "xxx xxx xxx. "(c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers of essential commodities enumerated hereunder at a rate not exceeding one-half (1/2) of the rates prescribed under subsections (a), (b) and (d) of this Section: "(1) . . . . "(2) Wheat or cassava flour, meat, dairy products, locally manufactured, processed or preserved food, sugar, salt and other agricultural, marine, and fresh water products, whether in their original state or not; "xxx xxx xxx." In view of the foregoing, it is clear that CMC's products, such as pickles, sinigang powder, hot pot, spaghetti meat sauce, knorr cubes, chinese soups and cream soups and other variant products may be considered as essential commodities falling within the contemplation of Section 143 (c) (2) of the LGC and therefore, shall be subject to business taxes at the rate of one-half (1/2) of the rates prescribed under Section 143 (a) of the same Code as implemented under a duly enacted tax ordinance of the City of Paraaque. It bears emphasis however, that if goods other than enumerated under Section 143 (c) are being manufactured by said company, the gross receipt therefore should be computed separately under the pertinent schedule of the same governing tax ordinance. THcEaS Very truly yours, (SGD.) ANGELINA M. MAGSINO Deputy Executive Director Officer-in-Charge <http://www.blgf.gov.ph/downloads/opinion/localtax/2000/a2000-0601.pdf> last visited on October 2, 2013.