Toilet Preparations Regulations

July 11, 1955 REVENUE REGULATIONS NO. V-42 SUBJECT : Toilet Preparations Regulations TO : All Internal Revenue Officers and Others Concerned SECTION 1. Scope of Regulations. Pursuant to the authority granted under section 338 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, the following regulations relating to the sales tax payable by manufacturers or importers of toilet preparations are hereby promulgated for the information and guidance of all concerned. These regulations shall be known as Revenue Regulations No. V-42 or the Toilet Preparations Regulations. These regulations deal with the tax on toilet preparations imposed by section 184 (c) of the National Internal Revenue Code, which provides as follows: "SEC. 184. Percentage tax on sales of jewelry, automobiles, toilet preparations, and others. There shall be levied, assessed and collected once only on every original sale, barter, exchange, or similar transaction for nominal or valuable considerations intended to transfer ownership of, or title to, the articles herein below 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: Provided, That where the articles are manufactured out of materials subject to tax under this section, the total cost of such materials, as duly established, shall be deductible from the gross selling price or gross value in money of the manufactured articles: xxx xxx xxx "(c) Perfumes, essences, extracts, toilet waters, cosmetics, petroleum jellies, hair oils, pomades, hair-dressings, hair restoratives, hair dyes, and any similar substance, article, or preparations, by whatsoever name known or distinguished, except tooth and mouth washes, dentifrices, tooth paste, and talcum or medicated toilet powders; and any of the above which are used or applied or intended to be used or applied for toilet purposes: Provided, That the tax herein imposed shall not apply to toilet preparations on which the specific tax established in section one hundred and twenty-seven has been paid;" xxx xxx xxx SECTION 2. Definition of Terms. In applying the provisions of the following sections of these regulations, words and phrases shall be taken in the sense and extension indicated below: (a) "Toilet preparations" includes perfumes, essences, extracts, lotions, toilet waters, cosmetics, hair oils, pomades, hair dressing, hair tonics, hair restoratives, hair dyes and any similar substance, articles or preparations by whatsoever name known or distinguished which are used or applied or intended to be used or applied for toilet purposes. Any article advertised or held out to be suitable for toilet purposes or for any purpose for which the articles enumerated in section 184 (c) are customarily used, will be subject to tax as toilet preparations, regardless of the name by which it may be known or distinguished. Shampoo oils and liquids containing 5% or less of saponaceous matter are taxable as toilet preparations. (b) "Cosmetics" comprises all toilet preparations for external application intended to beautify and improve the complexion, skin, or hair. (c) In any case where the taxability of a particular article under section 184 (c) of the National Internal Revenue Code is in question, a sample of the product or the manufacturer's quantitative formula, together with labels and other advertising matter showing the purposes for which it is to be used, should be submitted to the Collector of Internal Revenue for a ruling thereon. SECTION 3. Tax on Toilet Preparations Containing Alcohol. (a) Toilet preparations which contain alcohol as chief ingredient are taxable as distilled spirits under section 133 of the National Internal Revenue Code, in accordance with sections 127 and 184 (c) of the same Code. Alcohol shall be considered the chief ingredient to toilet preparations if, after excluding water, alcohol constitutes more than 50% of the preparation by volume. If the specific tax on the alcohol used as chief ingredient in the manufacture of toilet preparations had already been paid under section 133 of the National Internal Revenue Code, no further percentage or specific tax is due on the manufactured toilet preparations. (b) Toilet preparations which contain alcohol are subject to the sales tax prescribed in section 184 (c) of the National Internal Revenue Code if, after excluding water, alcohol constitutes 50% or less of the preparation by volume. SECTION 4. Tax on Toilet Preparations Not Containing Alcohol. All other toilet preparations which do not contain alcohol are subject to the sales tax imposed under section 184 (c) of the National Internal Revenue Code. SECTION 5. Tax Treatment of Materials Used in the Manufacture of Toilet Preparations. (a) Imported materials to be used by the importer himself in the manufacture or preparation of toilet articles subject to specific tax (Sec. 3-a of these regulations) and are to form part thereof are exempt from the advance sales tax and compensating tax imposed under sections 183 (b) and 190 of the National Internal Revenue Code, respectively. (b) Imported materials to be used by the importer himself in the manufacture of toilet articles subject to the sales tax (sec. 3-b and sec. 4 of these regulations) are subject to the advance sales tax imposed under section 183 (b) of the National Internal Revenue Code. However, the total landed cost of such imported materials plus the corresponding mark-up (exclusive of the advance sales tax) may be deducted from the gross selling price of the manufactured toilet articles for purposes of the sales tax due on the manufactured articles, regardless of whether such imported materials are taxed under sections 184, 185, or 186 of the National Internal Revenue Code. (c) Imported materials subject to specific tax under Title IV of the National Internal Revenue Code to be used by the importer himself in the manufacture of toilet articles shall be subject to the corresponding specific tax, regardless of whether the manufactured toilet articles are subject to the specific tax or to the sales tax. SECTION 6. Articles Not Taxable as Toilet Preparations. (a) Section 184 (c) of the National Internal Revenue Code expressly provides that tooth and mouth washes, dentifrices, tooth paste, and talcum or medicated toilet powders are not subject to the sales tax imposed therein. In other words, the above-mentioned articles are subject only to the sales tax imposed under section 186 of the National Internal Revenue Code. Likewise, shampoo oils and liquids intended solely for cleansing purposes containing more than 5% saponaceous matter are taxable at the rate prescribed in section 186 of the National Internal Revenue Code. (b) Talc or medicated toilet powders based on the following formulas shall be classified as talcum or medicated toilet powders mentioned in section 184 (c) of the National Revenue Code: Talc 70% Zinc Oxide 17% Zinc Stearate 6% Osmo Kaolin 5% Boric Acid 2% Essential oil and coloring matters 2% Talc 73% Zinc Oxide 5% Zinc Stearate 2% Osmo Kaolin 13% Boric Acid 2% Essential Oil and coloring matters 2% Talc 80.5% Zinc Oxide 9.5% Zinc Stearate 2.5% Magnesium Carbonate 6.0% Essence 1.5% Pure talc (highest grade) 85% Precipitated Cal. carbonate 5% Magnesium carbonate (light) 2.5% Magnesium stearate, U.S.P. 2% Titanium Dioxide 2% Zinc Oxide, U.S.P 2% Oxyquinoline sulphate 0.3% Hexachlorophene (G-11) 0.2% Complexion extract 1.0% Manufactured talc powders based on the above formulas shall be taxed at the rate imposed under section 186 of the National Internal Revenue Code, by virtue of the exception provided for in section 184 (c) of the National Internal Revenue Code. TEaADS As a general rule, manufactured toilet powder shall be classified as talcum or medicated toilet powder if talc and/or other chemicals which are used in medicinal preparations constitute 70% or more of the manufactured article. All other manufactured toilet powders in which talc and/or other chemicals which are used in medicinal preparations constitute less than 70% thereof shall be classified under the terms "cosmetics" and "any similar substance, article or preparations, by whatsoever name known or distinguished" and therefore taxable at the rate of tax imposed under section 184 (c) of the National Internal Revenue Code. SECTION 7. Penalty for Violation. Violation of any provisions of these regulations for which no specific penalty is provided by law is punishable under section 352 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, by a fine of not more than P300.00 or by imprisonment for not more than six months, or both. SECTION 8. Effective Date. These regulations shall take effect upon promulgation in the Official Gazette. DIcTEC (SGD.) JAIME HERNANDEZ Secretary of Finance Recommended by: (SGD.) SILVERIO BLAQUERA Collector of Internal Revenue