G.R. No. 27877 , December 6, 1927
W. F. STEVENSON & CO., LTD., plaintiff-appellant, vs. THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee.

FACTS

W.F. Stevenson & Co., Ltd. (Stevenson), a foreign corporation licensed to do business in the Philippines, acted as the agent of Forbes, Munn & Co., Ltd. (Forbes Munn). During 1924, 1925, and the first quarter of 1926, Stevenson sold Forbes Munn’s merchandise in Iloilo, amounting to P128,761.03. Stevenson, acting on behalf of Forbes Munn, filed the required returns and paid the merchant’s percentage tax due on these sales under the relevant provisions of the Administrative Code. Separately, Stevenson, believing itself to be acting as a commercial broker in these transactions, filed returns and paid the corresponding fixed and percentage taxes for a commercial broker.

Subsequently, the Collector of Internal Revenue assessed and demanded from Stevenson the sum of P2,183.73 as merchant’s percentage tax on the same sales, plus a surcharge. The Collector’s theory was that Stevenson, in making the sales, engaged in the business of a commission merchant and was thus subject to the merchant’s tax under the law, notwithstanding that Forbes Munn had already paid the merchant’s tax on the identical sales. Stevenson paid the amount under protest. After its protest was overruled, Stevenson filed this suit for recovery.

ISSUE

Whether Stevenson, acting as a sales agent for its disclosed principal (Forbes Munn), is liable for the merchant’s percentage tax on the sales, when the principal had already paid the said tax on the same transactions.

RULING

NO. The Supreme Court reversed the lower court’s decision and ordered the refund of the amount paid by Stevenson.

The case was submitted on a stipulation of facts, which was binding on the parties. The stipulated facts conclusively showed that there was only one sale of the merchandisethe sale made by Forbes Munn through its agent, Stevenson. Forbes Munn, as the owner-seller, had already paid the merchant’s percentage tax due on that single sale. There was no evidence that Stevenson sold the goods in its own name or as a merchant; it acted solely as an agent for a disclosed principal.

To require Stevenson to pay a second merchant’s tax on the same single sale would constitute double taxation. The Court held that since the tax was already paid by the principal on the transaction, the agent was not liable for the same tax. Stevenson’s proper role was that of an agent/broker, for which it had already paid the corresponding broker’s tax. Therefore, the assessment against Stevenson as a merchant was invalid.