Cosmetic Products Regulations

June 5, 1984 REVENUE REGULATIONS NO. 08-84 SUBJECT : Cosmetic Products Regulations TO : All Internal Revenue Officers and Others Concerned SECTION 1 . Scope . Pursuant to Section 326, in relation to Section 4 of the National Internal Revenue Code, the following regulations relating to the sales tax payable by manufacturers and/or exporters of cosmetic products are hereby promulgated. These regulations shall be known as Revenue Regulations No. 8-84 or the Cosmetic Products Regulations. These regulations deal with the tax on cosmetic products imposed by Sections 194(b) and (e) and Section 326 of the National Internal Revenue Code, which provides as follows: Sec. 194. Percentage tax on sales of non-essential products . There shall be levied, assessed and collected once only on every original sale, barter, exchange, or similar transaction for nominal or valuable consideration intended to transfer ownership of, or title to, the articles hereinbelow enumerated a tax equivalent to fifty per centum of the gross value in money of the articles so sold, bartered, exchanged or transferred, such tax to be paid by the manufacturer or producer. xxx xxx xxx "(b) Perfumes, essences, extracts, toilet waters, cosmetics, hair dressings, hair dyes, hair restoratives, aromatic cachous, toilet powders, except tooth and mouth washes, dentifrices, tooth paste, talcum and medicated toilet powders, hair oils and pomades. acd xxx xxx xxx "(e) Similar or analogous articles, substances, or preparations to those enumerated above as determined by the Minister of Finance upon recommendation of the Commissioner of Internal Revenue based on the inherent essentiality of the product. "The authority of the Secretary (now Minister) of Finance to determine articles similar or analogous to those subject to a rate of sales tax under a certain category enumerated in Sections 194, 196 and 197 of this Code shall be without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including rulings on the classification of articles for sales tax and similar purposes." SECTION 2 . Articles taxable as cosmetic products . The articles defined as follows shall be taxable as cosmetic products: (a) Cosmetic products/toilet preparations include all preparations for external application intended to beautify and improve the complexion, skin or hair, such as perfumes, essences, extracts, toilet waters, hair dressings, hair dyes, hair restoratives, aromatic cachous, toilet powders, shampoo oils and liquids containing not more than 5% saponaceous matter. cdt (b) Perfumes are finished products consisting of fragrant materials such as concentrates (pasty essential oil) or absolutes (residual pleasantly odorous substance after extraction) dissolved in alcohol or in any other appropriate solvent with adjuvant and fixative (retardant to rate of evaporation of the pleasantly odorous constituents) as stabilizers. (c) Essences are either extracts or synthetic aromatic substances in dilute or concentrated solutions with extractive solvents including water and alcohol which affect the sense of smell. (d) Extracts are aromatic or non-aromatic substances which are obtained or recovered from distillation with steam, extractives or solvents; or by maceration or pressing. Aromatic recoveries are called essences or essential oils which affect the sense of smell. Example: flower of floral oils as essences or essential oils. (e) Toilet waters are scented alcoholic or non-alcoholic preparations primarily used as body fragrance containing essential oils i.e. more than 3% by weight. Examples: Lavander water, Eau de Cologne, Eau de Toilette. (f) Hair dressings are articles intended principally for good grooming, giving the hair a natural healthy appearance and giving luster without greasiness other than hair oils and pomades. (g) Hair dyes are preparations (solid, liquid, gel or any other form) applied to the hair primarily intended to restore and/or change the natural color of hair. (h) Hair restoratives are preparations (solid, liquid, or gel or any other form) applied to the hair or scalp primarily intended to stimulate and restore hair growth. (i) Aromatic cachous is an aromatic pill or pastilles made of licorice, various aromatics and gum used to sweeten the breath. Licorice means roots or inspissated juice of licorice plants, a kind of herb. (j) Toilet powders are preparations containing less than 70% talc in the manufactured article. Articles, substances or preparations which are similar or analogous to the above enumerated articles based on the inherent essentiality of the product shall, likewise, be classified as cosmetic products. The similar or analogous articles are those advertised or held out to be suitable for the same purposes mentioned above regardless of the name by which it may be known or distinguished. SECTION 3 . Articles not taxable as cosmetic products . (a) Tooth and mouth washes, dentifrices, tooth paste, talcum and medicated toilet powders, hair oils and pomades. Toilet powders shall be classified as talcum and medicated toilet powders if talc constitutes 70% or more of the manufactured article. (b) Shampoo oils and liquids containing more than 5% saponaceous matter. (c) Essences, flavors and flavoring extracts for food and drinks. (d) Talc or medicated toilet powders substantially based on the following formulas shall be classified as talcum or medicated toilet powders mentioned in Section 194(b) of the National Internal Revenue Code: (1) Talc 70% Zinc Oxide 17% Zinc Stearate 6% Osmo Kaolin 5% Boric Acid 2% Essential oil and coloring matters 2% ________________________________________________ 102% (2) Talc 73% Zinc Oxide 5% Zinc Stearate 2% Osmo Koalin 13% Boric Acid 2% Essential oil and coloring matters 2% ________________________________________________ 97% (3) Talc 80.5% Zinc Oxide 9.5% Zinc Stearate 2.5% Magnesium Carbonate 6.0% Essence 1.5% ________________________________________________ 100.0% (4) Pure Talc (Highest Grade) 85.0% Precipitated Cal. Carbonate 5.0% Magnesium Carbonate (Light) 2.5% Magnesium Stearate, U.S.P. 2.0% Titanium Dioxide 2.0% Zinc Oxide, U.S.P. 2.0% Oxyquinoline Sulfate 0.3% Hexachlorophene (C-11) 0.2% Complexion Extract 1.0% ________________________________________________ 100.0% The foregoing articles shall be taxed at the rate imposed under Section 199(a) of the National Internal Revenue Code, by virtue of the exemptions provided for in Section 194(b) of the same Code. SECTION 4 . Computation of the percentage tax on sales . (a) Imposition and payment of the sales tax . The percentage tax prescribed in Section 194 of the National Internal Revenue Code shall be imposed on the sale of articles enumerated and defined in Section 2 of this regulation. The tax is levied, assessed and collected once only on every original sale, barter, exchange or similar transaction for nominal or valuable consideration intended to transfer ownership of, or title to, the articles or products sold, bartered or exchanged, and it shall be paid by the manufacturer or producer of said articles or products. (b) Tax based on gross sales . The percentage tax on sales is computed by multiplying the gross selling price of the articles sold, bartered, exchanged or transferred by 50%. In computing the base of the tax, discounts may be allowed as a deduction from the gross selling price provided said discounts are given at the time of sale and are expressly indicated in the sales invoices. (c) Tax Credit . When the manufacturer pays the sales tax computed above after the end of the quarter he is given a tax credit for any percentage and specific tax paid under Titles IV and V of the National Internal Revenue Code, on domestically manufactured, processed or produced or imported raw materials, parts or accessories or other articles forming part of the finished product. However, the manufacturer can avail of the benefits of this tax credit only if the amount of the tax on the raw materials, parts, accessories or other articles used by him in producing his finished products is indicated as a separate item in the sales invoices of his suppliers. Whenever the finished products subject to sales tax is manufactured or produced out of any raw material, part, accessory, or other article which is manufactured or produced by a BOI - registered pioneer enterprise, hence exempt totally or partially, from tax, the manufacturer is given a tax credit equal to the amount deemed to have been paid by the said enterprise. The amount deemed to have been paid is the amount of sales tax that would have been paid by the exempt producer or manufacturer if he were not given tax exemption privileges. casia (d) Computation of sales tax when tax is billed as a separate item in the invoice . In the computation of the sales tax imposed in Section 194 of the National Internal Revenue Code, if a manufacturer, in fixing the gross selling price of an article sold by him, has included an amount intended to cover the sales tax shall be considered as part of gross selling price of the article sold, and deduction will not be allowed. SECTION 5 . Penal Provisions . Any person who shall fail to make a return and pay the percentage tax prescribed in Section 194 of the National Internal Revenue Code within the time prescribed in Section 193 of the same Code shall be punished under Section 221 of said Code by a fine not exceeding five thousand pesos and by imprisonment for a term not exceeding one year. Any person who shall make a false or fraudulent return, besides being liable to the surcharge prescribed in Section 193 of the National Internal Revenue Code, be punished under Section 221 of the same Code by a fine of not less than two thousand pesos but not more than ten thousand pesos and by imprisonment of not less than six (6) months but not more than six (6) years. Any person who shall violate any provision of these Regulations, for which violation the National Internal Revenue Code or any other law does not provide any specific penalty, shall be penalized under Section 337 of the aforesaid Code by a fine of not more than P300.00 or by imprisonment of not more than six (6) months, or both. SECTION 6 . Repealing Provisions . Revenue Regulations No. V-42, rulings or orders, or portions thereof which are inconsistent with the provisions of these Regulations are hereby revoked. SECTION 7 . Effectivity . These Regulations shall take effect thirty (30) days after publication in two (2) newspapers of general circulation. (SGD.) CESAR VIRATA Minister of Finance Recommended by: (SGD.) RUBEN B. ANCHETA Acting Commissioner