G.R. No. 27887 ; March 9, 1923
F. E. ZUELLIG, INC., plaintiff-appellee, vs. THE COLLECTOR OF INTERNAL REVENUE, defendant-appellant.

FACTS

F.E. Zuellig, Inc. (Zuellig) entered into an agreement with Neuss, Hesslein Corporation (Neuss Hesslein). Under this agreement, Zuellig secured the faithful performance of the managers of Neuss Hesslein’s branches in Cebu and Iloilo. In consideration, Neuss Hesslein agreed to pay Zuellig a percentage commission on merchandise sold by those branch managers. The Collector of Internal Revenue assessed and collected from Zuellig a percentage tax on the sales made in Cebu and Iloilo, treating Zuellig as a commission merchant. Zuellig paid the tax under protest and sued for a refund, arguing it was not a commission merchant in the transactions. The trial court ruled in favor of Zuellig. The Collector appealed.

ISSUE

Whether F.E. Zuellig, Inc. acted as a commission merchant in the sales transactions, making it liable for the percentage tax under the Administrative Code.

RULING

Yes. The Supreme Court reversed the trial court’s decision. Zuellig acted as a commission merchant under Section 1459 of the Administrative Code. The term “merchant” includes “commission merchants having establishments of their own for the keeping and disposal of goods of which sales or exchanges are effected.” The evidence showed that Zuellig had its own bodega (warehouse) in Cebu where the goods of Neuss Hesslein were received, stored, and from which they were delivered to purchasers. Zuellig’s agents, who were also agents for Neuss Hesslein, made the sales from this establishment, and Zuellig received a commission of 3% to 5% on these sales. Therefore, Zuellig had an establishment of its own for the keeping and disposal of goods and was a commission merchant liable for the tax.