Percentage Tax Due on the Manufacture of Corn Oil

May 3, 1979 REVENUE MEMORANDUM CIRCULAR NO. 33-79 SUBJECT : Percentage Tax Due on the Manufacture of Corn Oil TO : All Internal Revenue Officers and others concerned In Revenue Memorandum Circular No. 19-77 dated August 8, 1977, this Office ruled that the extraction of corn oil "undergoes several stages of physical and chemical processes, before it becomes marketable either as crude oil or refined cooking oil, hence considered a manufactured product falling under the purview of Section 194(x) [now Section 187(x)] of the Tax Code." Subsequent investigation of millers revealed, however, that if the taxpayer owns the corn mill, buys the corn grain, mills it and later manufactures corn oil in one continuous manufacturing process, such miller/manufacturer pays, on the corn oil produced thereby, only a graduated fixed tax under Section 192(3)(mm) of the Tax Code, and no manufacturer's tax on the corn oil produced is made to accrue thereon. It should be pointed out, however, that the corn oil remains a manufactured product whether it is extracted from corn germ purchased by entities or individuals (who are not corn millers themselves) or, when extracted from corn germ produced out of the taxpayers corn grain, in a dry or wet milling operation, i.e. when taxpayer is also a miller. In both instances therefore, the corn oil is subject to the 10% sales tax imposed by Section 199 of the Tax Code, as amended. Accordingly, the coverage of Revenue Memorandum Circular No. 19-77 should not be limited to those entities and individuals engaged in the business of purchasing the corn germ for the purpose of extracting corn oil therefrom. The corn miller, therefore, as corn oil manufacturer, is subject to the annual fixed tax of P100 under Section 192(1), aside from the graduated fixed tax as operator of a corn mill. However, the corn miller is entitled to tax credit with respect to the 1% tax paid on the corn grain or kernel purchased as raw materials which corresponds to the corn germ out of which corn oil was manufactured, provided that said tax is billed as a separate item in the invoice covering the corn germ or kernel. This amends Revenue Memorandum Circular No. 19-77. It is desired that this Circular be given as wide a publicity as possible. aisa dc EFREN I. PLANA Acting Commissioner