Publishing Batas Pambansa Blg. 5, Restoring the Specific Tax on Compounded Liquors and Thereby, Amending Section 146 of the National Internal Revenue Code of 1977, as amended

October 3, 1978 REVENUE MEMORANDUM CIRCULAR NO. 094-78 SUBJECT : Publishing Batas Pambansa B lg. 5, Restoring the Specific Tax on Compounded Liquors and Thereby, Amending Section 146 of the National Internal Revenue Co de of 1977, as amended TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, quoted hereunder is Ba tas Pambansa Bl g. 5: "BA TAS PAMBANSA BL G. 5 "AN ACT RESTORING THE SPECIFIC TAX ON COMPOUNDED LIQUORS AMENDING FURTHER, FOR THE PURPOSE, SECTION 146 OF THE NATIONAL INTERNAL REVENUE CO DE OF 19 77, AS AMENDED Be it enacted by the Batasang Pambansa in session assembled: "SECTION 1. Section 146 of the National Internal Revenue Code of 1977, as amended, is hereby further amended to read as follows: "Sec. 146. Specific tax on wines and compounded liquors . On wines, imitation wines and compounded liquors, there shall be collected, per liter of volume capacity, the following taxes: "(a) Sparkling wines, regardless of proof, twelve pesos; if imported, twenty-six pesos and forty centavos; "(b) Still wines containing fourteen per centum of alcohol or less (except those manufactured from locally grown raw materials), one peso; if imported, two pesos and twenty centavos; "(c) Still wines containing more than fourteen per centum of alcohol, two pesos; if imported, four pesos and forty centavos; "Imitation wines containing more than twenty-five per centum of alcohol shall be taxed as distilled spirits; "(d) Compounded liquors containing seventeen and one-half per centum of alcohol or less, forty-eight centavos; "(e) Compounded liquors containing more than seventeen and one-half per centum of alcohol, but not more than twenty-five per centum thereof, sixty-seven centavos; "(f) Compounded liquors containing more than twenty-five per centum of alcohol, but not more than thirty-two and one-half per centum thereof, eighty-six centavos; "(g) Compounded liquors containing more than thirty-two and one-half per centum of alcohol, but not more than forty per centum thereof, one peso and five centavos; and "(h) Compounded liquors containing more than forty per centum of alcohol, one peso and thirty-three centavos. "In computing the specific tax on compounded liquors as prescribed under subparagraphs (d), (e), (f), (g) and (h) of this Section, the amount of specific tax paid on the distilled spirits used in the compounding of such intoxicating beverage shall be credited against the tax due on the compounded liquors herein defined and the tax shall attach to compounded liquors as soon as they are in existence as such. "For the purpose of this Section, 'compounded liquors' shall include any intoxicating beverage whatever, concocted by or resulting from the mixture of or addition to distilled spirits, either before or after rectification, of any coloring matter, flavoring extract or essence or other kind of wine, liquor or other ingredient. "SEC. 2. This Act shall take effect upon its approval. "Approved, August 26, 1978." Features of the Amendment : Before the enactment and approval of Batas Pambansa Blg. 5, compounded liquors per se are not subject to specific tax in view of the long-standing provisions of Section 177, Tax Code 1977 (formerly Sec. 166, Tax Code of 1939) which since July 1, 1939, have required compounders to make use only of taxpaid spirits in the manufacture of any intoxicating beverage whatever. Obviously in 1939, it was the official BIR stand that taxing compounded liquors manufactured from taxpaid alcohol was a case of double taxation and hence, the implied exemption of compounded liquors from any tax even without any clear basis in law. cdt Batas Pambansa Blg. 5 has merely restored the specific tax on compounded liquors just as Act 1189 of the Philippine Commission so clearly provided at the very outset when the First Internal Revenue Law of 1904 officially created the BIR on August 1, 1904, and instituted the initial system of Philippine taxation under the American regime. Said Act imposed a tax of P0.10 per volume liter of compounded liquors, separate and distinct from the tax of P0.20 per proof liter of distilled spirits, the latter being the vital raw material for the manufacture of the former. Subject amendatory law has finally rationalized the taxation of all intoxicating beverages so as now to include compounded liquors. However, if only to avoid the double taxation effect under Act 1189 of 1904 and to place compounded liquors at comparable level with other consumer goods subject to the sales or manufacturing tax, Batas Pambansa Blg. 5 allows the crediting or deduction of specific tax paid on the distilled spirits used in the compounding of the intoxicating beverage from the specific tax prescribed for compounded liquors under the new law. In effect, compounded liquors, are subject only to a residual tax, after the specific tax paid on the alcohol or distilled spirits used has been deducted from the specific tax prescribed for the compounded liquors manufactured from such alcohol or distilled spirits. Pending promulgation and approval of necessary rules and regulations governing the collection of the compounded liquors tax restored under Batas Pambansa Blg. 5, the following initial guidelines are hereby issued for the guidance of compounders or manufacturers of compounded liquors and all internal revenue officers and others concerned: 1. Time of payment of the tax on compounded liquors . Specific taxes on compounded liquors produced domestically shall be paid by the compounder, producer, owner or person having possession of same and such taxes shall be paid immediately before removal from the place of production. 2. Computation of the tax . The specific tax shall be computed on each lot of packed compounded liquors covered by one and the same official tax receipt (OTR). In order to achieve maximum accuracy in the computation of the tax paid on alcohol used in the compounding of liquor and to be credited from the compounded liquors tax due, there shall be no dropping or taking up of the fractional parts in the gauge (volume) and proof liter contents of such alcohol used in the compounding process. At least three (3) to four (4) decimal places shall be considered in the computation of the tax to be credited in order to arrive at the amount of residual tax due on the compounded liquors. 3. Manner of payment . To avoid any delay in the removal of compounded liquor from the place of manufacture, each compounder must make advance payment of specific tax equal to or more than the specific tax due on removals it makes during any given day, against which the specific tax on compounded liquor removed shall be charged. No compounder shall remove compounded liquor without sufficient balance in his tax payment account. Accordingly, each compounder shall cause to be paid the specific tax through authorized banks under the "RTR" system of tax payment, wherein an authority to issue revenue tax receipt is prepared for each payment and the authorized bank issues for each payment a duly accomplished and validated revenue tax receipt. The taxpayer's copy of the RTR must be shown to the revenue inspector assigned in his compounding establishment who shall initial at the back thereof and enter the amount paid in his tax payment account. When a removal of compounded liquor is made, the corresponding amount in the tax payment account shall be applied and shall be indicated in the column headed "Amount of Tax" on the face of the official tax receipt, and at the back of each such official tax receipt issued shall be kept a running account of the tax payment as follows: cdt Balance Beginning Add: Tax Payment made (RTR No.) Total Tax Available Less: Tax Applied this OTR Balance of Tax Payment Certified Correct: ___________________________ Manager/representative ___________________________ Revenue Officer Effectivity Date : Although Batas Pambansa Bilang 5 was approved on August 26, 1978, it was only on September 8, 1978, when its approval was published in the newspapers. In fairness, therefore, to all concerned, the restored specific taxes on compounded liquors will be applied by this Office as of the date, on or after August 26 but prior to September 8, 1978, when any manufacturer of said articles increased his selling prices by reason of the restored specific tax on compounded liquors under the amendatory law. However, where a compounder or manufacturer of compounded liquors has not increased his selling price between August 25 and September 8, 1978, the restored specific tax shall be applied as of the latter date or September 8, 1978. All internal revenue officers and other personnel concerned are hereby enjoined to give this Revenue Memorandum Circular the widest publicity possible. cdt EFREN I. PLANA Acting Commissioner