FACTS
In 1922, Vegetable Oil Corporation (VOC), a foreign corporation engaged in the purchase of copra for the manufacture of coconut oil sold in the US, filed a refund claim for the merchants’ percentage taxes levied on consignments under section 1459 of Act No. 2711. VOC paid the tax dues under protest, all of which were overruled by the CIR.
The lower court ruled in favor of Vegetable Oil for the recovery of the payments made. CIR appealed the decision, stating, among others, that “the tax upon things consigned abroad shall be refunded upon satisfactory proof of the return thereof to the Philippine Islands unsold.”
RULING
The Supreme Court ruled in favor of the CIR.
The SC held that VOC is a merchant within the purview of the statute and is liable for the taxes levied. The tax on consignments is “a privilege tax pure and simple;” it is a tax on the business of consigning commodities abroad from these Islands.
The definition of the word “merchant” as a person who is engaged in the sale, barter, or exchange of personal property is merely descriptive of the persons who are required to pay the tax and does not mean that, in order to exact from them the payment of the consignment tax, the government must also be in position to impose taxes on their sales, barter, or exchange.
Finally, although the Philippine government cannot collect privilege taxes on sales taking place in foreign countries, it can nonetheless, with the approval of Congress, legally levy taxes on consignments from Philippine ports.
