G.R. No. 45976 ; July 20, 1939
PACIFIC COMMERCIAL COMPANY, plaintiff-appellant, vs. ALFREDO L. YATCO, defendant-appellee.

FACTS

Pacific Commercial Company (PCC), a merchant corporation, sold refined sugar for the account of Victorias Milling Co. from April 1, 1934, to December 31, 1935, receiving commissions. Victorias Milling Co., as the manufacturer and owner, paid the merchant sales tax on these sales. Nevertheless, the Collector of Internal Revenue also collected the same tax from PCC on the same sales. The sales were made in two ways: (1) delivery ex-warehouse (where PCC took possession and stored the sugar in its warehouses before sale), and (2) delivery ex-ship (where PCC never took possession, merely acting as an intermediary handing over bills of lading). The trial court ordered a refund of the tax collected on the ex-ship sales but denied it for the ex-warehouse sales. Both parties appealed.

ISSUE

1. Whether collecting the merchant sales tax from both Victorias Milling Co. and PCC constitutes double taxation.
2. Whether PCC acted as a commission merchant regarding the ex-warehouse sales.
3. Whether PCC acted as a mere commercial broker regarding the ex-ship sales.

RULING

1. No double taxation. The tax is not on the property or product but on the occupation or industry. Each party (manufacturer and seller) is taxed based on their respective business activities, using the sale value merely as a tax base. This follows the doctrine in Gil Hermanos vs. Hord.
2. Yes, PCC acted as a commission merchant for ex-warehouse sales. A commission merchant has possession and control of the goods at their own risk until sale. Here, PCC received, stored, and assumed risk for the sugar in its warehouses, fulfilling that role.
3. Yes, PCC acted as a commercial broker for ex-ship sales. A broker is merely an intermediary without possession or custody of the goods. PCC never had possession of the sugar; it only handled documents to facilitate the sale.

The appealed decision was affirmed. PCC is liable for the tax on ex-warehouse sales (as a commission merchant) but not on ex-ship sales (as a broker).

Separate Opinion (Dissent):
Justice Moran dissented, arguing that collecting the tax from both entities on the same sale constitutes double taxation. He viewed the manufacturer and the selling agent as together forming a single vendor for the transaction. He cited Atkins, Kroll & Co. vs. Posadas and expressed concern that the majority’s ruling unfairly burdens local merchants.

AI Generated by Armztrong.