G.R. No. 200895 ; July 31, 2013
ROLANDO M. MENDIOLA, Petitioner, vs. COMMERZ TRADING INT’L., INC., Respondent.

FACTS

Petitioner Rolando M. Mendiola, an exclusive Philippine distributor for a foreign medical equipment company, entered into a Memorandum of Agreement (MOA) with respondent Commerz Trading Int’l., Inc. Under the MOA, respondent would facilitate the marketing and sale of the equipment for a fixed fee of ₱100,000 per complete set sold. Respondent successfully facilitated a sale to a hospital for ₱2,600,000. After deducting its ₱100,000 fee, respondent remitted only ₱2,430,000 to petitioner, withholding ₱70,000. Respondent claimed this amount represented a portion of the Expanded Value Added Tax (EVAT) due on the transaction, which it argued was its legal liability as the importer and seller of record.
Petitioner filed a collection suit for the unremitted ₱70,000. The Metropolitan Trial Court and the Regional Trial Court ruled in favor of petitioner, ordering respondent to pay the amount. They held the MOA was the law between the parties and did not authorize respondent to withhold any amount for taxes. The Court of Appeals reversed, ruling that respondent, as the VAT-registered entity that issued the official receipt for the sale, was the party statutorily liable to pay the output VAT to the Bureau of Internal Revenue.

ISSUE

Whether respondent had the right to withhold ₱70,000 from the sales proceeds as advance payment for the VAT liability on the transaction.

RULING

The Supreme Court denied the petition, upholding the Court of Appeals but modifying its disposition. The Court clarified that while the MOA governed the parties’ contractual relations, it could not alter statutory tax obligations. The National Internal Revenue Code mandates that the seller who issues the official receipt is the party liable for remitting the output VAT to the government. In this case, respondent, having issued the official receipt for the sale, bore the legal responsibility to pay the VAT, regardless of any private agreement shifting the economic burden to another party.
Consequently, the Court held that respondent could retain the ₱70,000, but strictly for the sole purpose of immediately remitting this amount to the Bureau of Internal Revenue as an estimated tax payment on the subject sale. The Court emphasized that respondent’s retention was justified not as a contractual right but as a necessary measure to ensure compliance with its statutory duty as the taxable person. The Court forwarded a copy of the decision to the BIR for appropriate action regarding the proper computation of the total VAT due.