Prescribing the rules governing the implementation of Section 122 of the Tax Code imposing an Ad Valorem Tax on compounded liquors

December 12, 1985 REVENUE REGULATIONS NO. 15-85 SUBJECT : Prescribing the Rules Governing the Implementation of Section 122 of the Tax Code Imposing an Ad Valorem Tax on Compounded Liquors TO : All Internal Revenue Officers and Others Concerned SECTION 1 . Scope . Pursuant to the provisions of Section 277 in relation to Section 122, Title IV of the National Internal Revenue Code, as amended, the following regulations are hereby promulgated to implement the provisions thereof. SECTION 2 . Words and phrases defined . For purposes of these regulations, the following words and phrases shall be taken in the sense and extension indicated below: casia (a) Ad valorem tax . The ad valorem tax on compounded liquors shall be equivalent to a specific percentage of the gross selling or wholesale price of each brand of compounded liquor removed from place of production. (b) Gross selling or wholesale price . The price at which the different brands of compounded liquors are sold in the factory or in the establishment of the compounder or thru the sales agents or through another establishment of which the compounder is the owner or in the profit of which he has an interest; Provided, however , that if the wholesale price is less than the cost of manufacture plus all expenses incurred until the compounded liquors are finally sold by the said compounder such cost plus expenses and a proportionate margin of profit of not less than 10% over and above such manufacturing cost and expense shall constitute the gross selling price. cd i (c) Sales agent . Refers to a sales representative of the compounder under an employee-employer relationship or of another establishment of which the compounder is the owner or has an interest in the profit thereof. SECTION 3 . Compounders declaration . Every compounder is required to file with the Commissioner on or before the last working day of January of each year and every six (6) months thereafter or as often as may be required by the Commissioner, a sworn statement showing among others the brand or brands of compound liquors manufactured, the proof of grade thereof, the quantity in gauge and proof liters per bottle, the gross selling or wholesale price and the cost of manufacture thereof which shall include the expenses incurred or to be incurred until the compounded liquors are finally sold. Provided, further , that said sworn statement shall be filed upon registration of any new brand of compounded liquor or whenever there is any change in the ad valorem tax rates, gross selling or wholesale price, the proof or grade thereof or the quantity in gauge or proof liter of any existing brand of such compounded liquors. SECTION 4 . Computation of ad valorem tax . The ad valorem tax of compounded liquors shall be computed by determining the gross selling or wholesale price of the liquors to be removed and on the said price there shall be levied, assessed and collected the ad valorem tax of four percent (4%); Provided, however , that where the ad valorem tax is billed separately, then the ad valorem tax will be computed on the basis of the selling price net of the ad valorem tax so billed separately, otherwise, the amount intended to cover selling price of the articles sold; Provided, further , that deposit for the return of the bottles or containers of compounded liquors shall not be considered as part of the taxable base in computing the ad valorem tax if such deposit is billed separately in the sales invoice. SECTION 5 . Payment of ad valorem tax . Every registered compounder of domestic compounded liquors shall pay before the removal of such liquors from the place of manufacture the ad valorem tax due thereon to the Commissioner thru the "Payment Order System" which payment could be made in cash or manager's check or by application of the ad valorem tax paid in advance to pay the tax due on daily removals. No removals shall be allowed unless the ad valorem tax is first paid thereof or unless there is a sufficient balance of the advance ad valorem tax payment to be applied thereon. SECTION 6 . Recording ad valorem tax payment . A special book shall be kept jointly by the compounder and the revenue inspector assigned in his compounding establishment wherein to record the advance ad valorem tax payments. cd Accordingly, the initial advance payment by the compounder for his ad valorem tax liability shall be the first debit entry in said book. A debit entry shall only be made in the prescribed special book, if and when the compounder has shown the original of the revenue tax receipt (RTR) and the banks confirmation receipt (CR) issued therefor to the revenue inspector assigned in his establishment who shall affix his signature legibly at the back thereof. The said revenue inspector shall always retain a xerox copy of every such revenue tax receipt and confirmation receipt to be submitted on a weekly basis either of the Chief, Alcohol Tax Division or the Chief, Field Operations Division thru the Chief, Excise Tax Area Concerned on the first working day following the week. The ad valorem tax application shall be deducted and constitute as a special credit entry for the special book. A balance of the advance payments, if any, shall be struck after every such application in order to keep a running account of the same. As evidence of payment or application of ad valorem tax on every removal of compounded liquors, the amount so paid shall be indicated in the official tax receipt (OTR) covering every such removal duly validated by the revenue inspector assigned in the establishment by affixing his signature therein. He shall prepare and submit an abstract of such official tax receipt on a weekly basis to either the Chief, Alcohol Tax Division or the Chief, Field Operations Division thru the Chief, Excise tax Area concerned on the first working day following the week. SECTION 7 . Affixture of internal revenue labels . An internal revenue auxiliary label shall first be firmly affixed to each and every primary container of bottles, flasks, kegs, jars or tins, by pasting it midway across the opening of the said container rendering it securely sealed thus preventing the removal of its contents without breaking the auxiliary label before domestic compounded liquors are packed in secondary containers such as cases, boxes, packages, cartons and the like. The internal revenue regular label shall be firmly affixed midway across the edge of the cover flap and the side of the boxes used as secondary containers hindering the removal of its contents without breaking the said label. However, if barrels, kegs, drums, jars, demijohns or tin cans are used as primary containers of domestic compounded liquors, only the regular labels shall be affixed to each and every container. aisa dc SECTION 8 . Affixture with adhesive or paste . The regular and auxiliary labels shall be affixed to the containers with an adhesive tape or paste, the preparation or chemical composition of which shall be in accordance with the formula approved by the Commissioner. No adhesive or paste which does not securely and firmly affix the said labels to the containers shall be used in the affixture of labels. SECTION 9 . Internal revenue labels broken when the container is opened and destroyed when emptied . Any compounder, wholesaler, retailer, consumer or person opening or emptying the container of domestic compounded liquor affixed with internal revenue labels shall break and/or destroy the said labels. (a) Break labels . Whenever the secondary container of domestic compounded liquors is opened, the internal revenue regular label affixed thereto shall be immediately broken in the middle. However, the broken parts of the said label attached on both sides of the secondary container shall be preserved until it is entirely emptied. When barrels, kegs, drums, jars, demijohns or tins are used as primary or original containers of domestic compounded liquors, the internal revenue labels affixed thereto shall also be broken partly until the entire contents are disposed of. (b) Destroy labels . When the secondary container is entirely emptied, the broken and remaining parts of the internal revenue regular label shall be completely destroyed. The broken parts of the internal revenue regular labels affixed to barrels, kegs, drums, jars, demijohns or tins used as primary containers shall be completely destroyed after the entire contents are disposed of. cd No person, unless authorized by the Commissioner, shall detach or cause to be detached internal revenue labels from the containers to which they are affixed nor shall he keep in his possession internal revenue regular auxiliary labels. No empty containers, without the internal revenue official labels affixed thereto having been completely destroyed shall be returned to any compounding establishment. SECTION 10 . Procurement of internal revenue labels . The procurement and issuance of internal revenue regular and auxiliary labels used by the manufacturers of domestic compounded liquors shall be under the responsibility of the Accountable Forms Division. SECTION 11 . Penalties . The penalties and liabilities prescribed under the provisions of Title XI of the Tax Code relative to the payment of excise taxes shall likewise apply in the case of ad valorem tax imposed herein. casia SECTION 12 . Repealing clause . All regulations, orders and other issuances or portions thereof not consistent with these regulations are hereby revoked and/or modified. SECTION 13 . Effectivity . These regulations shall take effect January 1, 1986. (SGD.) CESAR E.A. VIRATA Minister of Finance Recommending Approval: (SGD.) RUBEN B. ANCHETA Acting Commissioner